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Applying for Exemption/Misc. Determination: Sample Questions

Compensation and Related Party Transactions

Applications for exemption and miscellaneous determination requests are assigned to Exempt Organizations specialists for review. If additional information is necessary to make a determination, a specialist will contact the organization for the information. Here’s a list of questions that might be asked on this topic.

Non-Fixed Compensation

1. You provide (or will provide) compensation through non-fixed payments. Please provide the following information:

a. Describe the non-fixed payment compensation arrangements you use or intend to use.

b. Specify who is eligible for your non-fixed payment compensation arrangements. 
    Explain how you determine the amount of non-fixed compensation and the process 
    used to approve such arrangements.

c. Describe the limits you place on total compensation.

d. Provide other information regarding these compensation arrangements, including 
    copies of any employment or compensation contracts or agreements.

.Related Party Compensation Decisions

2. You provide (or will provide) compensation to related parties. Please provide the following information:

a. Describe the compensation arrangements that you have (or will have) with related parties. 

b. Specify the related parties that are eligible for compensation and their relationship to 
    your organization.

c. Explain how you determine amounts of compensation and the approval process for 
   direct and indirect compensation for board members or other related employees.

d. Describe the limits you place on total compensation for related parties.

e.  Provide any other information regarding your related party compensation 
    arrangements, including  copies of any employment or compensation contracts 
    or agreements.  

Common Control

3. One or more members of your governing body receives (or will receive) compensation from an organization related to you through common control. Please provide the following information

a. Describe the compensation arrangements that members of your governing body have 
   (or will have) with organizations that are related to your organization through common 
   control.

b. Identify the individual(s) who are eligible to receive compensation from organizations that 
    are related to your organization through common control and describe how you and each 
    individual are related to those organizations.

c. Explain the process used to approve compensation arrangements with organizations that 
   are related to your organization through common control.

d. Describe the limits you place on compensation arrangements between individuals related 
    to your organization and organizations that are related to your organization through 
    common control.

e. Provide other information regarding these common control compensation arrangements, 
    including copies of any employment or compensation contracts or agreements.  

Leases, Contracts, Loans, and other similar agreements with Officers and Directors  

4. You have (or will have) leases, contracts, loans or other agreements with your directors or officers. Additionally, you have (or will have) leases, contracts, loans and other agreements with organizations in which one or more of your directors or officers has a financial interest. Please provide the following information:

a. Describe all leases, contracts, loans, and other similar agreements you made 
    (or intend to make) with your officers and directors.

b. Describe all leases, contracts, loans, and other similar agreements you made 
    (or intend to make) with organizations in which one or more of your directors or 
    officers has a financial interest.

c. Identify the parties with whom you have (or will have) such agreements.

d. Describe the process used to approve these leases, contracts, loans, or other 
    similar agreements.

e. Explain how you ensure that you pay no more than fair market value or that you are 
    paid at least fair market value with respect to agreements involving your officers and 
   directors.

f. Provide copies of all signed leases, contracts, loans, or other written agreements with 
   officers or directors. If you have leases, contracts, loans or other agreements with officers 
   or directors that are not in writing, provide copies of the board of directors’ minutes that 
   authorize any such agreements.  

Purchase or Sale of Goods, Services, and Assets to or from Officers or Directors

[Instruction: Use Option A or B (or both) as applicable with the rest of the question listed here.]

Option A

[5A. You purchased (or will purchase) goods, services and assets from one or more of your officers or directors.]  

Option B

[5B. You sold (or will sell) goods, services and assets to one or more of your officers or directors.]

Please provide the following information:

a. Describe all purchases and sales you made (or intend to make) with officers and 
   directors of your organization.

b. Identify the parties with whom you made (or will make) such sales or purchases.

c. Explain the process you use for negotiating and approving purchases and sales of 
    goods, services, and assets with your officers and directors.

d. Explain how you determine the price of the goods, services, or assets that you purchase 
    from or sell to your officers and directors, and how you determine that all transactions 
    are made at fair market value.

e. Submit copies of all contracts and other written documents relating to purchases and sales 
    of goods, services, and assets with officers and directors of your organization. If you 
    made purchases or sales with officers or directors without executing a written document, 
    provide copies of board of directors’ minutes that authorized any such transaction.

 

More information:

See the complete list of Applying for Exemption/Miscellaneous Determination Sample Questions by topic.

 

Page Last Reviewed or Updated: 21-Feb-2014