Form 990 - Instructions For Schedule J (Page 3 of 6) in pdf

rights, restricted stock, or phantom or

organization as a whole. Describe such

contract subject to the initial contract

shadow stock), or participated in or

arrangements in Part III.

exception described in Regulations

received payment from any equity

section 53.4958-4(a)(3). Describe such

Example. A, a listed person, is an

compensation plan or arrangement

arrangements in Part III. Fixed

employee of organization B. As part of

sponsored by the organization or a

payments made pursuant to an initial

A’s compensation package, A is to be

related organization, whether the

contract are not subject to section

paid a bonus equal to x% of B’s net

compensation is determined by

4958. An initial contract is a binding

earnings for a specified period of time.

reference to equity in a partnership,

written contract between the

This arrangement is a payment

limited liability company, or corporation.

organization and a person who was not

contingent on net earnings of the

Equity-based compensation does not

a disqualified person (within the

organization for line 6 purposes,

include compensation contingent on the

meaning of section 4958(f)(1)) with

regardless of whether the payment is

revenues or net earnings of the

respect to the organization immediately

contingent on achieving a certain net

organization, which are addressed by

prior to entering into the contract. See

earnings target. However, if instead the

lines 5 and 6 later.

the instructions for line 7 for the

bonus payment is a specific dollar

definition of fixed payments.

amount to be paid only if a net earnings

Example. A, a listed person, is an

target is achieved, the payment is not

employee of organization B. B owns an

Line 9. Answer “Yes” if the payments

contingent on the net earnings of the

interest in C, a for-profit subsidiary, that

described in line 8 above were made

organization for this purpose.

is a stock corporation. As part of A’s

pursuant to an initial contract that was

compensation package, B provides

reviewed and approved by the

Line 7. Answer “Yes” if the

restricted stock in C to A. This is an

organization following the rebuttable

organization provided any non-fixed

equity-based compensation

presumption procedure described in

payments, not described on lines 5 and

arrangement for purposes of line 4c.

Regulations section 53.4958-6(c). For

6, with respect to a listed person.

The same would be true if C were a

more information on the initial contract

Describe such arrangements in Part III.

partnership or limited liability company

exception and rebuttable presumption

A fixed payment is an amount of cash

and B provided A a profits interest or

procedure, see Appendix G, Section

or other property specified in the

capital interest in C.

4958 Excess Benefit Transactions, in

contract, or determined by a fixed

the Instructions for Form 990.

formula specified in the contract, which

Line 5. Answer “Yes” if the

is to be paid or transferred in exchange

organization paid or accrued with

Part II. Officers,

for the provision of specified services or

respect to a listed person any

property. A fixed formula can

compensation contingent upon and

Directors, Trustees, Key

incorporate an amount that depends

determined in whole or in part by the

upon future specified events or

Employees, and Highest

revenues (gross or net) of one or more

contingencies, provided that no person

activities of the organization or a

Compensated

exercises discretion when calculating

related organization, or by the

the amount of a payment or deciding

revenues (gross or net) of the

Employees

whether to make a payment, such as a

organization or a related organization

bonus. Amounts paid or accrued with

as a whole. For this purpose, net

Enter information for certain

respect to any listed person that are not

revenues means gross revenues less

individuals listed on Form 990, Part VII,

fixed amounts as defined above are

certain expenses, but does not mean

Section A, as described below. Report

non-fixed payments. For example, any

net income or net earnings. Describe

compensation for the calendar year

amount paid to a person under a

such arrangements in Part III.

ending with or within the organization’s

reimbursement arrangement where

tax year paid to or earned by the

discretion is exercised by any person

Example. A, a listed person, is a

following individuals.

with respect to the amount of expenses

physician employed by organization B.

•

Each of the organization’s former

incurred or reimbursed is a non-fixed

As part of A’s compensation package,

officers, former directors, former

payment. See Regulations section

A is to be paid a bonus equal to x% of

trustees, former key employees, and

53.4958-4(a)(3).

B’s net revenues from a particular

former five highest compensated

department operated by B for a

Exception. Amounts payable

employees listed on Form 990, Part

specified period of time. This

pursuant to a qualified pension,

VII, Section A.

arrangement is a payment contingent

profit-sharing, or stock bonus plan

•

Each of the organization’s current

on revenues of the organization, and

under section 401(a), or pursuant to an

officers, directors, trustees, key

must be reported on line 5, regardless

employee benefit program that is

employees, and five highest

of whether the payment is contingent

subject to and satisfies coverage and

compensated employees for whom the

on achieving a certain revenue target.

nondiscrimination rules under the

sum of Form 990, Part VII, Section A,

However, if instead the bonus payment

Internal Revenue Code (for example,

Columns (D), (E), and (F) is greater

is a specific dollar amount (for instance,

sections 127 and 137), other than

than $150,000.

$5,000) to be paid only if a gross

nondiscrimination rules under section

•

Each of the organization’s current

revenue or net revenue target of the

9802, are treated as fixed payments for

and former officers, directors, trustees,

department is achieved, the payment is

purposes of line 7, regardless of the

key employees, and five highest

not contingent on revenues of the

organization’s discretion with respect to

compensated employees who received

organization for this purpose.

the plan or program. The fact that a

or accrued compensation for services

person contracting with the organization

Line 6. Answer “Yes” if the

rendered to the organization from an

is expressly granted the choice to

organization paid or accrued with

unrelated organization, and who are

accept or reject any economic benefit is

respect to a listed person any

required to be reported on line 5 of

disregarded in determining whether the

compensation contingent upon and

Form 990, Part VII, Section A.

benefit constitutes a fixed payment for

determined in whole or in part by the

purposes of line 7.

All current key employees

net earnings of one or more activities of

the organization or a related

Line 8. Answer “Yes” if any amounts

listed on Form 990, Part VII,

TIP

organization, or by the net earnings of

from the organization reported on Form

Section A must also be reported

the organization or a related

990, Part VII, were paid pursuant to a

on Schedule J, Part II, because their

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Form 990 - Instructions For Schedule J Page 3

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