Schedule L is used to provide information on certain financial transactions or arrangements between the organization and disqualified persons under Section 4958 or other interested persons.
Who must file Schedule L?
The chart at the bottom of this page provides which organizations must complete all or a part of Schedule L and must attach Schedule L to Form 990 or 990-EZ.
|Type of filer||IF you answer “Yes” to ...||THEN you must complete ...|
|Section 501(c)(3), 501(c)(4), or 501(c)(29) organization||Form 990, Part IV, line 25a or 25b (regarding excess benefit transactions)||Schedule L, Part I.|
|Section 501(c)(3), 501(c)(4), or 501(c)(29) organization||Form 990-EZ, Part V, line 40b (regarding excess benefit transactions)||Schedule L, Part I.|
|All organizations||Form 990, Part IV, line 26 (regarding loans)||Schedule L, Part II.|
|All organizations||Form 990-EZ, Part V, line 38a (regarding loans)||Schedule L, Part II.|
|All organizations||Form 990, Part IV, line 27 (regarding grants)||Schedule L, Part III.|
|All organizations||Form 990, Part IV, line 28a, 28b, or 28c (regarding business transactions)||Schedule L, Part IV.|
What are excess benefit transactions?
An excess benefit transaction is a transaction in which an economic benefit is provided by a tax-exempt organization, directly or indirectly, to or for the use of any disqualified person, and the value of the economic benefit provided by the organization exceeds the value of the consideration (including the performance of services) received from the disqualified person for providing such benefit.
What is assistance benefiting interested persons?
Assistance benefiting interested persons would be offering excess benefits, such as scholarships, internships, prizes, awards, use of facilities, etc., to any disqualified person(s) or major potential donors.
What types of transactions are reportable on Schedule L?
Revenue-sharing transactions are potentially subject to liability under the general rules governing excess benefit transactions, but only to the extent that the value of the economic benefits provided to the disqualified person is shown to exceed the value of the services or other consideration received in return.
Benefit transactions are considered excessive if they do not fall under the category of "reasonable compensation." Reasonable compensation is the value of services that would ordinarily be paid for like services by like enterprises (whether taxable or tax-exempt) under like circumstances. Compensation, excessive and reasonable, is considered an "economic benefit."
Examples of economic benefits are:
- Salaries, bonuses, fees, severance payments, and deferred and non-cash payments.
- The payment of liability insurance premiums or reimbursement by the applicable tax-exempt organization, unless excludable from gross income as a de minimis fringe benefit.
- The economic benefit of a below-market loan.
- Loans to and from interested persons.
- Grants or assistance to interested persons.
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