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the case of a joint venture with an

5% (including ownership by a family

Aggregate all payments during the tax

interested person, the organization has

member) if the entity is treated as a

year between the parties under the same

invested $10,000 or more in the joint

partnership, or

contract or transaction. For instance, if a

venture, whether or not during the tax

director of the organization is a greater

5. a shareholder with a direct or

year.

than 5% partner of a law firm (or greater

indirect ownership interest in excess of

than 5% shareholder if the law firm is a

5% (including ownership by a family

See Reasonable effort later, applicable

professional corporation) and the

member) if the entity is a professional

to Part IV. Special rules permit individual

organization pays the law firm an amount

corporation.

or aggregate transaction reporting.

of more than 1% of the organization's total

Business transactions. Business

revenue during the organization's tax year

Certain management company trans-

transactions include but are not limited to

under a contract for a particular case or

actions with former officers, etc. A

contracts of sale, lease, license,

legal matter (if the amount exceeds

business transaction also includes a

insurance, and performance of services,

$10,000), treat all payments under such

transaction between the organization and

whether initiated during the organization's

arrangement as a single reportable

a management company of which a

tax year or ongoing from a prior year.

business transaction.

former officer, director, trustee, or key

Business transactions also include joint

employee of the organization (within the

Aggregate reporting. The organization

ventures, whether new or ongoing, in

last five tax years, even if not listed in

can aggregate multiple individual

which either the profits or capital interest

Form 990, Part VII, Section A because the

transactions between the same parties, or

of the organization and of the interested

individual did not receive any

list them separately. If aggregation is

person each exceeds 10%. The

compensation from the organization) is a

chosen, report the aggregate amount in

organization's charging of membership

direct or indirect 35% owner, or an officer,

column (c) and describe the various types

dues to its officers, directors, etc., are not

director, or trustee.

of transactions (for example, “consulting,”

considered business transactions for

“rental of real property”) in column (d).

Ownership. Ownership is measured by

purposes of Part IV.

stock ownership (voting power or value,

Exceptions. Do not report the following

Interested persons. An interested

whichever greater) of a corporation, profits

in Part IV:

person for purposes of Schedule L, Part

or capital interest (whichever greater) in a

Excess benefit transactions reported

IV, is a current or former officer, director,

partnership or limited liability company,

in Schedule L, Part I.

trustee, or key employee listed on Form

beneficial interest in a trust, or control of a

Loans reported (or not required to be

990, Part VII, Section A, or any of the

nonprofit organization. Ownership

reported) in Schedule L, Part II.

following:

includes indirect ownership (for example,

Grants and other assistance reported

A family member of a current or former

ownership in an entity that has ownership

(or not required to be reported) in

officer, director, trustee, or key employee

in the entity doing business with the

Schedule L, Part III (however, this

listed in Form 990, Part VII, Section A.

organization or ownership by a family

exception does not apply to transactions

An entity (other than a section 501(c)(3)

member); there may be ownership

covered by the business transaction

organization, a section 501(c) organization

through multiple tiers of entities. The

exception described in Part III instructions

of the same subsection as the filing

constructive ownership rules of section

earlier; such transactions may need to be

organization, or a governmental unit or

267(c) apply for purposes of Schedule L

reported in Part IV).

instrumentality) more than 35% owned or

(Form 990 or 990-EZ), Part IV, using the

Compensation reported in Form 990,

controlled, directly or indirectly,

definition of family member in the Glossary

Part VII, Section A, unless the

individually or collectively, by one or more

rather than in section 267(c)(4).

compensation was to a family member of

current or former officers, directors,

Accordingly, an individual is treated as

another person reported in Form 990, Part

trustees, or key employees listed on Form

owning stock owned by his or her family

VII, Section A.

990, Part VII, Section A, or their family

member.

Deposits into or withdrawals from a

members.

Reporting thresholds. In reporting

bank account (when the bank is an

For purposes of this Part IV, a nonprofit

transactions in Part IV, the organization is

interested person) in the ordinary course

organization is 'more than 35%' controlled

not required to report transactions with an

of business, on the same terms as the

when more than 35% of its directors or

individual or organization for a dollar

bank offers to the general public.

trustees either (a) consist of interested

amount that did not exceed the greater of

persons of the filing organization, or (b)

$10,000 or 1% of the organization's total

serve as directors or trustees subject to

revenue for the organization's tax year

Example 1. T, a family member of an

powers held by one or more interested

(the amount reported in Form 990, Part

officer of the organization, serves as an

persons of the filing organization to elect

employee of the organization and

VIII, line 12, column (A)), except in either

or appoint, or remove and replace, such

receives during the organization's tax

of the following cases.

directors or trustees or the members that

year compensation of $15,000, which is

1. Total payments for all transactions

elect or appoint them.

not more than 1% of the organization's

between the parties during the

An entity (other than a tax-exempt

total revenue. The organization is required

organization's tax year exceeded

organization under section 501(c) or a

to report T's compensation as a business

$100,000. In this case, report all

governmental unit or instrumentality) of

transaction in Schedule L, Part IV,

transactions between the parties

which a current or former officer, director,

because the organization's compensation

regardless of the individual amounts of

trustee, or key employee listed in Form

to a family member of an officer exceeds

such individual transactions.

990, Part VII, Section A, or any of their

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

2. The transaction was the

family members, was serving at the time

is reported in Form 990, Part VII.

organization's payment of compensation

of the transaction as:

Example 2. X, the child of a current

to a family member of a current officer,

1. an officer,

director listed in Form 990, Part VII,

director, trustee, or key employee of

2. a director,

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

the organization. In this case, payment of

partnership that the organization pays

reportable compensation must be

3. a trustee,

$150,000 during the organization's tax

reported if in excess of $10,000 for the

4. a partner or member with a direct or

year. Given that X has no ownership

organization's tax year.

indirect ownership interest in excess of

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Instructions For Schedule L (Form 990 Or 990-Ez) - Transactions With Interested Persons - 2012 Page 4

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