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Excess benefit transactions reported

entered into the transaction with the

Entity more than 35% owned by (1)

in Schedule L, Part I.

organization before X’s parent became a

Freda Jones, former director, and (2) Lisa

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Loans reported (or not required to be

director of the organization. The

Lee, President, or

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reported) in Schedule L, Part II.

organization must report all payments

Partnership more than 5% owned by

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Grants and other assistance reported

made during its tax year to the law firm for

Freda Jones, former director.

(or not required to be reported) in

the transaction.

Column (c). The dollar amount of the

Schedule L, Part III (however, this

Example 5. The facts are the same

transaction is the cash or fair market

exception does not apply to transactions

as in Example (3), except that X is the

value of other assets and services

covered by the business transaction

child of a former director listed in Form

provided by the organization during the

exception described in Part III

990, Part VII, Section A. The organization

tax year, net of reimbursement of

instructions, above; such transactions

is required to report the business

expenses.

may need to be reported in Part IV).

transaction, as family members of former

Column (d). Describe the transaction(s)

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Compensation reported in Form 990,

directors listed in Part VII are interested

by type, such as employment or

Part VII, Section A.

persons.

independent contractor arrangement,

Example 1. T, a family member of an

Example 6. The facts are the same

rental of property, or sale of assets.

officer of the organization, serves as an

as in Example (3), except that the

Column (e). State “Yes” if all or part of

employee of the organization and

organization pays $75,000 in total during

the consideration paid by the organization

receives during the organization’s tax

the organization’s tax year for 15

is based on a percentage of revenues of

year compensation of $15,000, which is

separate transactions to collect debts

the organization. For instance, state “Yes”

not more than 1% of the organization’s

owed to the organization. None of the

if a management fee is based on a

total revenue. The organization is

transactions involves payments to the law

percentage of revenues, or a legal fee

required to report T’s compensation as a

partnership in excess of $10,000. The

owed to outside attorneys by a public

business transaction in Schedule L, Part

organization is not required in this

interest law firm is a percentage of the

IV, because T’s compensation to a family

instance to report the business

amount collected.

member of an officer exceeds $10,000,

transaction, because the dollar amounts

Reasonable effort. The organization is

unless T’s compensation was already

do not exceed either the $10,000

not required to provide information about

reported in Form 990, Part VII.

transaction threshold or the $100,000

a business transaction with an interested

aggregate threshold.

Example 2. X, the child of a current

person if it is unable to secure the

director listed in Form 990, Part VII,

Example 7. The facts are the same

information regarding interested person

Section A, is a first-year associate at a

as in Example (6), except that the

status after making a reasonable effort to

law partnership that the organization pays

organization pays $105,000 instead of

obtain it. An example of a reasonable

$150,000 during the organization’s tax

$75,000. Because the aggregate

effort for Part IV is for the organization to

year. Given that X has no ownership

payments for the business transactions

distribute a questionnaire annually to

interest in the law firm and is not an

exceed $100,000, the organization must

each current or former officer, director,

officer, director, trustee, or key employee

report all the business transactions. The

trustee, and key employee listed on

of the firm, the organization is not

organization may report the transactions

Form 990, Part VII, Section A, that

required to report this business

on an aggregate basis or list them

includes the name, title, date, and

transaction in spite of X’s employment

separately.

signature of each person reporting

relationship to the law firm.

Column (a). Enter the name of the

information and contains the pertinent

Example 3. The facts are the same

interested person involved in the direct or

instructions and definitions for Schedule

as in Example (2), except that X is a

indirect business relationship with the

L, Part IV. The organization is not

partner of the law firm and has an

organization.

required to distribute such a questionnaire

ownership interest in the law firm of

to organizations or individuals with which

Column (b). State the relationship

5.25% of the profits. The organization

it does business, but who are not current

between the interested person and the

must report the business transaction due

or former officers, directors, trustees, or

organization. For example:

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to X’s greater than 5% ownership interest

key employees of the organization, in

Key employee of the organization,

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in the law firm and the dollar amount in

order to have made a reasonable effort

Family member of Freda Jones,

excess of the $100,000 aggregate

for this purpose.

former director,

threshold.

Example 4. The facts are the same

as in Example (3), except that the law firm

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Instructions For Schedule L (Form 990 Or 990-Ez) - Transactions With Interested Persons - 2008 Page 4

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