Session 3 of Borenstein's Form 990 Foundational Series: Schedule L reports in two different directions – it typically reaches three categories of transactions with a filer's "Interested Persons": loans outstanding with them, grants or assistance being provided to them, and business transacted with them. The L also serves as a “turn them in†reporting obligation when an impermissible transaction (one thus subject to excise tax) has occurred: a “disqualified person†has been provided “excess benefitâ€. This session’s address of what the Schedule L requires in each direction is designed to help preparers not "lose their minds" over the schedule's inherent complexity. The materials and the author/instructor detail in Plain English who are the parties the 990 considers "Interested Persons" as well as when (and why) their intersections with the filer are the subject of this schedule's "sunlight". The two-fold goal is to not only further an understanding of what each of Schedule L's parts is looking for, but to also foster an appreciation of how to access data necessary to these parts' completion. NOTE: For those looking for a deeper dive into Schedule L's Parts II-IV reporting and issues, the author/instructor does have a Master Class, "'Insider' Dealings and Sunshine: Schedule L's Parts II-IV," bit it is on hiatus in the 2023-2024 CPE year. This event may be a rebroadcast of a live event and the instructor will be available to answer your questions during the event.
Learning Objectives
After attending this presentation you will be able to...
- Recognize hierarchy of Schedule L's Parts II, III and IV in reporting intersections with IPs
- Appreciate the far reach of the five uniform categories that are used to define baseline IPs for Parts II-IV reporting
- Distinguish when Part IV requires multiple business transactions with a particular IP to be reported either because of the amount of each individual transaction or based upon all transactions' aggregated amounts
- Identify the separate Part IV threshold that applies for reporting the fact of compensation being provided to a family member of an IP
- Have familiarity with identifying what constitutes a disclosable loan in Part II and the fact of a reportable grant or assistance in Part III
Major Topics
The major topics that will be covered in this class include:
- Reviewing both: (a) the methodology that Schedule L employs in Parts II - IV to cast sunlight on the fact that an "Interested Person" (IP) engaged with the filer in loan arrangements; or was the beneficiary of grants or assistance from the filer; or had business transactions with the filer that exceeded de minimis thresholds; and (b) the five categories by which IP status vests for purposes of these three parts
- Explanation of the dollar-amount thresholds applicable in Schedule L's Part IV when disclosing "business transactions", and preparation tips for applying these thresholds
- Summary of Schedule L's Part III instructions as to what constitutes the provision of grants or assistance to an IP, and overview of the special rule educational institutions have that allows them to not withhold the names of scholarship or fellowship recipients
- Schedule L's Part II reporting on loans outstanding with IPs, along with preparation tips
- Quick intro to the Code section 4958 excise tax scheme that 501(c)(3) and (c)(4) filers are subject to should they have conveyed "excess benefit" in any transaction with a disqualified person; and timing and disclosure considerations in play with Schedule L's Part I reporting
