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entire amount transferred but the

Example 6. The facts are the same as

Column (d). Describe the transaction(s)

management fees or other service fees or

in Example (3), except that the

by type, such as employment or

carried interest (if any) of the interested

organization pays $75,000 in total during

independent contractor arrangement,

person.

the organization's tax year for 15 separate

rental of property, or sale of assets.

transactions to collect debts owed to the

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

organization. None of the transactions

the consideration paid by the organization

Example 1. T, a family member of an

involves payments to the law partnership

is based on a percentage of revenues of

officer of the organization, serves as an

in excess of $10,000. The organization is

the organization. For instance, state “Yes”

employee of the organization and

not required in this instance to report the

if a management fee is based on a

receives during the organization's tax

business transaction, because the dollar

percentage of revenues, or a legal fee

year compensation of $15,000, which is

amounts do not exceed either the $10,000

owed to outside attorneys by a public

not more than 1% of the organization's

transaction threshold or the $100,000

interest law firm is a percentage of the

total revenue. The organization is required

aggregate threshold.

amount collected.

to report T's compensation as a business

Example 7. The facts are the same as

transaction in Schedule L, Part IV,

Reasonable effort. The organization is

in Example (6), except that the

because the organization's compensation

not required to provide information about a

organization pays $105,000 instead of

to a family member of an officer exceeds

business transaction with an interested

$75,000. Because the aggregate

$10,000, whether or not T's compensation

person if it is unable to secure the

payments for the business transactions

is reported in Form 990, Part VII.

information regarding interested person

exceed $100,000, the organization must

Example 2. X, the child of a current

status after making a reasonable effort to

report all the business transactions. The

director listed in Form 990, Part VII,

obtain it. An example of a reasonable

organization can report the transactions

Section A, is a first-year associate at a law

effort for Part IV is for the organization to

on an aggregate basis or list them

partnership that the organization pays

distribute a questionnaire annually to each

separately.

$150,000 during the organization's tax

current or former officer, director,

Column (a). Enter the name of the

year. Given that X has no ownership

trustee, and key employee listed on

interested person involved in the direct or

interest in the law firm and is not an

Form 990, Part VII, Section A, that

indirect business relationship with the

officer, director, or trustee of the firm,

includes the name and title of each person

organization.

the organization is not required to report

reporting information, blank lines for the

this business transaction in spite of X's

person’s signature and signature date,

Column (b). Enter the relationship

employment relationship to the law firm.

and the pertinent instructions and

between the interested person and the

definitions for Schedule L, Part IV. The

organization. For example:

Example 3. The facts are the same as

organization is not required to distribute

Key employee of the organization,

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

such a questionnaire to organizations or

Family member of Freda Jones,

of the law firm and has an ownership

individuals with which it does business,

former director,

interest in the law firm of 5.25% of the

but who are not current or former officers,

Entity more than 35% owned by (1)

profits. The organization must report the

directors, trustees, or key employees of

Freda Jones, former director, and (2) Lisa

business transaction due to X's greater

the organization, in order to have made a

Lee, President, or

than 5% ownership interest in the law firm

reasonable effort for this purpose.

Partnership more than 5% owned by

and the dollar amount in excess of the

Freda Jones, former director.

$100,000 aggregate threshold.

Part V. Supplemental

Example 4. The facts are the same as

Column (c). The dollar amount of the

Information

in Example (3), except that the law firm

transaction is the cash or fair market

Use Part V if the organization needs

entered into the transaction with the

value of other assets and services

additional space to explain a transaction

organization before X's parent became a

provided by the organization during the

or provide additional information. In Part V,

director of the organization. The

tax year, net of reimbursement of

identify the specific part and line number

organization must report all payments

expenses. For joint ventures with

that each response supports, in the order

made during its tax year to the law firm for

interested persons, report the total amount

in which those parts and lines appear on

the transaction.

invested by the organization in the joint

Schedule L (Form 990 or 990-EZ). Part V

venture as of the end of the organization's

Example 5. The facts are the same as

can be duplicated if more space is

tax year, whether or not the organization

in Example (3), except that X is the child of

needed.

invested any part of the amount during the

a former director listed in Form 990, Part

tax year. In reporting compensation for

VII, Section A. The organization is

services, it is sufficient to report

required to report the business

compensation for the calendar year

transaction, as family members of former

ending with or within the organization's tax

directors listed in Part VII are interested

year.

persons.

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Instructions For Schedule L (Form 990 Or 990-Ez) - Transactions With Interested Persons - 2013 Page 5

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