Instructions For Schedule J Form 990 Page 3
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6such as upon an involuntary separation
cash or other property specified in the
Line 5. Answer “Yes” if the organization
from service or under a separation or
contract, or determined by a fixed
paid or accrued with respect to a listed
termination agreement voluntarily
formula specified in the contract, which
person any compensation contingent
entered into by the parties. Payments
is to be paid or transferred in exchange
upon and determined in whole or in part
under a change-of-control arrangement
for the provision of specified services or
by the revenues (gross or net) of one or
are made in connection with a
property. A fixed formula can
more activities of the organization or a
termination or change in the terms of
incorporate an amount that depends
related organization, or by the
employment resulting from a change in
upon future specified events or
revenues (gross or net) of the
control of the organization. Treat as a
contingencies, provided that no person
organization or a related organization as
severance payment any payment to a
exercises discretion when calculating
a whole. For this purpose, net revenues
listed person by the organization or a
the amount of a payment or deciding
means gross revenues less certain
related organization in satisfaction or
whether to make a payment, such as a
expenses, but doesn't mean net income
settlement of a claim for wrongful
bonus. Amounts paid or accrued to any
or net earnings. Describe such
termination or demotion.
listed person that aren't fixed amounts
arrangements in Part III.
as defined earlier are non-fixed
Line 4b. Answer “Yes” if a listed
Example. A, a listed person, is a
payments. For example, any amount
person participated in or received
physician employed by organization B.
paid to a person under a reimbursement
payment from any supplemental
As part of A's compensation package, A
arrangement where discretion is
nonqualified retirement plan
is to be paid a bonus equal to x% of B's
exercised by any person as to the
established, sponsored, or maintained
net revenues from a particular
amount of expenses incurred or
by or for the organization or a related
department operated by B for a
reimbursed is a non-fixed payment. See
organization. A supplemental
specified period of time. This
Regulations section 53.4958-4(a)(3).
nonqualified retirement plan is a
arrangement is a payment contingent on
nonqualified retirement plan that isn't
Exception. Amounts payable under
revenues of the organization, and must
generally available to all employees but
a qualified pension, profit-sharing, or
be reported on line 5, regardless of
is available only to a certain class or
stock bonus plan under section 401(a)
whether the payment is contingent on
classes of management or highly
or under an employee benefit program
achieving a certain revenue target.
compensated employees. For this
that is subject to and satisfies coverage
However, if instead the bonus payment
purpose, include as a supplemental
and nondiscrimination rules under the
is a specific dollar amount (for instance,
nonqualified retirement plan a plan
Internal Revenue Code (for example,
$5,000) to be paid only if a gross
described in section 457(f) (but don't
sections 127 and 137), other than
revenue or net revenue target of the
include a plan described in section
nondiscrimination rules under section
department is achieved, the payment
457(b)) and a split-dollar life insurance
9802, are treated as fixed payments for
isn't contingent on revenues of the
plan.
purposes of line 7, regardless of the
organization for this purpose.
organization's discretion with respect to
Line 4c. Answer “Yes” if a listed
Line 6. Answer “Yes” if the organization
the plan or program. The fact that a
person participated in or received
paid or accrued with respect to a listed
person contracting with the organization
payment from the organization or a
person any compensation contingent
is expressly granted the choice to
related organization of any
upon and determined in whole or in part
accept or reject any economic benefit is
equity-based compensation (such as
by the net earnings of one or more
disregarded in determining whether the
stock, stock options, stock appreciation
activities of the organization or a
benefit constitutes a fixed payment for
rights, restricted stock, or phantom or
related organization, or by the net
purposes of line 7.
shadow stock), or participated in or
earnings of the organization or a related
Line 8. Answer “Yes” if any amounts
received payment from any equity
organization as a whole. Describe such
from the organization reported on Form
compensation plan or arrangement
arrangements in Part III.
990, Part VII, were paid under a contract
sponsored by the organization or a
Example. A, a listed person, is an
subject to the initial contract exception
related organization, whether the
employee of organization B. As part of
described in Regulations section
compensation is determined by
A's compensation package, A is to be
53.4958-4(a)(3). Describe such
reference to equity in a partnership,
paid a bonus equal to x% of B's net
arrangements in Part III. Fixed
limited liability company, or corporation.
earnings for a specified period of time.
payments made under an initial contract
Equity-based compensation doesn't
This arrangement is a payment
aren't subject to section 4958. An initial
include compensation contingent on the
contingent on net earnings of the
contract is a binding written contract
revenues or net earnings of the
organization for line 6 purposes,
between the organization and a person
organization, which are addressed by
regardless of whether the payment is
who wasn't a disqualified person (within
lines 5 and 6 later.
contingent on achieving a certain net
the meaning of section 4958(f)(1)) with
Example. A, a listed person, is an
earnings target. However, if instead the
respect to the organization immediately
employee of organization B. B owns an
bonus payment is a specific dollar
prior to entering into the contract. See
interest in C, a for-profit subsidiary that
amount to be paid only if a net earnings
the instructions for line 7 for the
is a stock corporation. As part of A's
target is achieved, the payment isn't
definition of fixed payments.
compensation package, B provides
contingent on the net earnings of the
restricted stock in C to A. This is an
organization for this purpose.
Line 9. Answer “Yes” if the payments
equity-based compensation
described in line 8 were made under an
Line 7. Answer “Yes” if the organization
arrangement for purposes of line 4c.
initial contract that was reviewed and
provided any non-fixed payments, not
The same would be true if C were a
approved by the organization following
described on lines 5 and 6, for a listed
partnership or limited liability company
the rebuttable presumption procedure
person. Describe such arrangements in
and B provided A a profits interest or
described in Regulations section
Part III. A fixed payment is an amount of
capital interest in C.
53.4958-6(c). For more information on
2016 Instructions for Schedule J (Form 990)
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