Schedule L requires the reporting of excess benefit transactions, loans with interested parties, assistance to interested parties, and business relationships with interested parties.
Only 501(c)(3)s and 501(c)(4)s filing Form 990 or Form 990EZ are required to complete Part I if applicable. All organizations filing Form 990 or Form 990-EZ must complete Part II, if applicable. Only organizations filing Form 990 are required to complete Part III and IV if applicable.
Note that the definition of "interested parties" differs in various parts of the schedule. Refer to the instructions for the definition for each section. Generally, an interested party is a current or former officer, director, trustee, or key employee. Some sections also include major donors, substantial contributors, and/or related persons as interested parties.
Schedule L has four parts:
- Part I - Excess Benefit Transactions are transactions in which an organization directly or indirectly provides, to or for the use of a disqualified person, an economic benefit, the value of which exceeds the value received by the organization for providing such benefit, to or for the use of a disqualified person
- Part II - Loans to and from interested persons
- Part III - Grants or assistance benefiting interested persons includes the provision of goods, services, or use of facilities. Examples of grants are scholarships, fellowships, internships, prizes, and awards
- Part IV - Business transactions involving interested persons include, but are not limited to, contracts of sale, lease, license, and performance of services. This also includes joint ventures, whether new or ongoing, in which either the profits or capital interest of the organization, and of the interested person, each exceed 10 percent. The Form 990 instructions contain a number of examples for this section thatare helpful
Preparation for Schedule L will require additional information to be obtained from various parties to determine whether they are interested parties required to be reported in the sections of the schedule. This determination is a two-step process. First, identify the interested parties, and then ascertain whether the transaction meets the dollar threshold for disclosure. It is imperative that you start early to identify your filing requirements for Schedule L.
Your SS&G professional can assist you with determining whether your specific situations require disclosure.