Table of Contents
Part I asks questions regarding certain compensation practices of the organization. Part I generally pertains to all officers, directors, trustees and employees of the organization listed on Form 990, Part VII, Section A, regardless of whether the organization answered “Yes” to line 23 of Part IV for all such individuals. However, only the organizations that are described in Who Must File must complete Part I. Part I, lines 1, 2, 3, 7, 8, and 9 require reporting on the compensation practices of the filing organization, but not of related organizations. Lines 4 through 6 require information regarding both the filing organization and its related organizations. Part I, lines 5 through 9, must be completed only by section 501(c)(3) and section 501(c)(4) organizations.
Part II requires detailed compensation information for individuals for whom the organization answered “Yes” on Form 990, Part IV, line 23. Not all persons listed on Form 990, Part VII, Section A, will necessarily be listed in Schedule J, Part II.
Part III is used to provide explanations of answers as required in Parts I or II.
Unless stated otherwise, all questions in this schedule pertain to activity during the calendar year ending with or within the organization's tax year.
For purposes of Part I, a listed person is a person listed on Form 990, Part VII, Section A.
Check the appropriate box(es) if the organization provided any of the listed benefits to any of the persons listed on Form 990, Part VII, Section A, regardless of whether such benefits are reported as compensation on Form W-2, Wage and Tax Statement, boxes 1 or 5, or Form 1099-MISC, Miscellaneous Income, box 7. For each of the listed benefits provided to or for a listed person, provide in Part III the following information:
The type of benefit.
The listed person who received the benefit, or a description of the types (for example, all directors) and number of listed persons that received the benefit.
Whether the benefit, or any part of it, was treated as taxable compensation to the listed person.
First-class travel refers to any travel on a passenger airplane, train, or boat with first-class seats or accommodations by a listed person or his or her companion if any portion of the cost above the lower-class fare is paid by the organization. First-class travel does not include intermediate classes between first class and coach, such as business class on commercial airlines. Bump-ups to first class free of charge or as a result of using frequent flyer benefits, or similar arrangements that are at no additional cost to the organization, can be disregarded.
Charter travel refers to travel on an airplane, train, or boat under a charter or rental arrangement. Charter travel also includes any travel on an airplane or boat that is owned or leased by the organization.
Travel for companions refers to any travel of a listed person's guest not traveling primarily for bona fide business purposes of the organization. It also refers to any travel of a listed person's family members, whether or not for bona fide business purposes.
Tax indemnification and gross-up payments refer to the organization's payment or reimbursement of any tax obligations of a listed person.
Discretionary spending account refers to an account or sum of money under the control of a listed person with respect to which he or she is not accountable to the organization under an accountable plan, whether or not actually used for any personal expenses. Accountable plans are discussed in the instructions for Part II.
Housing allowance or residence for personal use refers to any payment for, or provision of, housing by the organization for personal use by a listed person, including a ministerial housing or parsonage allowance.
Payments for business use of personal residence refers to any payment by the organization for the use of all or part of a listed person's residence for any purpose of the organization.
Health or social club dues or initiation fees refers to any payment of dues by the organization for the membership of a listed person in a health or fitness club or a social or recreational club, whether or not such clubs are tax-exempt. It does not include membership fees for an organization described in section 501(c)(3) or section 501(c)(6) unless such organization provides health, fitness, or recreational facilities available for the regular use of a listed person. Health club dues do not include provision by the organization of an on-premises athletic facility described in section 132(j)(4), or provision by a school of an athletic facility available for general use by its students, faculty, and employees. Dues include the entrance fee, periodic fees, and amounts paid for use of such facilities.
Personal services refers to any services for the personal benefit of a listed person or the family or friends of a listed person, whether provided regularly (on a full-time or part-time basis) or as needed, whether provided by an employee of the organization or independent contractor (and whether the independent contractor is an individual or an organization). They include, but are not limited to, services of a babysitter, bodyguard, butler, chauffeur, chef, concierge or other person who regularly runs nonincidental personal errands, escort, financial planner, handyman, landscaper, lawyer, maid, masseur/masseuse, nanny, personal trainer, personal advisor or counselor, pet sitter, physician or other medical specialist, tax preparer, and tutor for nonbusiness purposes. Personal services do not include services provided to all employees on a nondiscriminatory basis under a qualified employee benefit plan.
If the organization provided any of the benefits listed in line 1a, to one or more listed persons, answer “Yes” if the organization followed a written policy regarding the payment, provision, or reimbursement of all such benefits to listed persons. If the organization did not follow a written policy for payment, provision, or reimbursement of any listed benefits, explain in Part III who determined the organization would provide such benefits and the decision-making process.
Independent compensation consultant refers to a person outside the organization who advises the organization regarding the top management official's compensation package, holds himself or herself out to the public as a compensation consultant, performs valuations of nonprofit executive compensation on a regular basis, and is qualified to make valuations of the type of services provided. The consultant is independent if he or she does not have a family relationship or business relationship with the top management official, and if a majority of his or her appraisals are performed for persons other than the organization, even if the consultant's firm also provides tax, audit, and other professional services to the organization.
Form 990 of other organizations refers to compensation information reported on Form 990, 990-EZ, Short Form Return of Organization Exempt From Income Tax, or 990-PF, Return of Private Foundation of similarly situated organizations.
Written employment contract refers to one or more recent or current written employment agreements to which the top management official and another organization are or were parties, written employment agreements involving similarly situated top management officials with similarly situated organizations, or written employment offers to the top management official from other organizations dealing at arm's length.
Compensation survey or study refers to a study of top management official compensation or functionally comparable positions in similarly situated organizations.
Approval by board or compensation committee refers to the ultimate decision by the governing body or compensation committee on behalf of the organization regarding whether to enter into an employment agreement with the top management official, and the terms of such agreement.
Answer “Yes” if a listed person received a severance or change-of-control payment from the organization or a related organization. A severance payment is a payment made if the right to the payment is contingent solely upon the person's severance from service in specified circumstances, such as upon an involuntary separation from service. Payments under a change-of-control arrangement are made in connection with a termination or change in the terms of employment resulting from a change in control of the organization. Treat as a severance payment any payment to a listed person by the organization or a related organization in satisfaction or settlement of a claim for wrongful termination or demotion.
Answer “Yes” if a listed person participated in or received payment from any supplemental nonqualified retirement plan established, sponsored, or maintained by or for the organization or a related organization. A supplemental nonqualified retirement plan is a nonqualified retirement plan that is not generally available to all employees but is available only to a certain class or classes of management or highly compensated employees. For this purpose, include as a supplemental nonqualified retirement plan a plan described in section 457(f) (but do not include a plan described in section 457(b)) and a split-dollar life insurance plan.
Answer “Yes” if a listed person participated in or received payment from the organization or a related organization of any equity-based compensation (such as stock, stock options, stock appreciation rights, restricted stock, or phantom or shadow stock), or participated in or received payment from any equity compensation plan or arrangement sponsored by the organization or a related organization, whether the compensation is determined by reference to equity in a partnership, limited liability company, or corporation. Equity-based compensation does not include compensation contingent on the revenues or net earnings of the organization, which are addressed by lines 5 and 6 later.
A, a listed person, is an employee of organization B. B owns an interest in C, a for-profit subsidiary, that is a stock corporation. As part of A's compensation package, B provides restricted stock in C to A. This is an equity-based compensation arrangement for purposes of line 4c. The same would be true if C were a partnership or limited liability company and B provided A a profits interest or capital interest in C.
A, a listed person, is a physician employed by organization B. As part of A's compensation package, A is to be paid a bonus equal to x% of B's net revenues from a particular department operated by B for a specified period of time. This arrangement is a payment contingent on revenues of the organization, and must be reported on line 5, regardless of whether the payment is contingent on achieving a certain revenue target. However, if instead the bonus payment is a specific dollar amount (for instance, $5,000) to be paid only if a gross revenue or net revenue target of the department is achieved, the payment is not contingent on revenues of the organization for this purpose.
A, a listed person, is an employee of organization B. As part of A's compensation package, A is to be paid a bonus equal to x% of B's net earnings for a specified period of time. This arrangement is a payment contingent on net earnings of the organization for line 6 purposes, regardless of whether the payment is contingent on achieving a certain net earnings target. However, if instead the bonus payment is a specific dollar amount to be paid only if a net earnings target is achieved, the payment is not contingent on the net earnings of the organization for this purpose.
Amounts payable under a qualified pension, profit-sharing, or stock bonus plan under section 401(a) or under an employee benefit program that is subject to and satisfies coverage and nondiscrimination rules under the Internal Revenue Code (for example, sections 127 and 137), other than nondiscrimination rules under section 9802, are treated as fixed payments for purposes of line 7, regardless of the organization's discretion with respect to the plan or program. The fact that a person contracting with the organization is expressly granted the choice to accept or reject any economic benefit is disregarded in determining whether the benefit constitutes a fixed payment for purposes of line 7.
Enter information for certain individuals listed on Form 990, Part VII, Section A, as described below. Report compensation for the calendar year ending with or within the organization's tax year paid to or earned by the following individuals:
Each of the organization's former officers, former directors, former trustees, former key employees, and former five highest compensated employees listed on Form 990, Part VII, Section A.
Each of the organization's current officers, directors, trustees, key employees, and five highest compensated employees for whom the sum of Form 990, Part VII, Section A, Columns (D), (E), and (F) (disregarding any decreases in the actuarial value of defined benefit plans) is greater than $150,000.
Each of the organization's current and former officers, directors, trustees, key employees, and five highest compensated employees who received or accrued compensation from any unrelated organization or individual for services rendered to the filing organization, as reported on line 5 of Form 990, Part VII, Section A.
Enter the listed person's base compensation that was included in box 1 or box 5 of Form W-2 (whichever is greater) or box 7 of Form 1099-MISC, issued to the person. Base compensation means nondiscretionary payments to a person agreed upon in advance, contingent only on the payee's performance of agreed-upon services (such as salary or fees).
Enter the listed person's bonus and incentive compensation that is included in box 1 or box 5 of Form W-2 (whichever is greater) or box 7 of Form 1099-MISC, issued to the person. Examples include payments based on satisfaction of a performance target (other than mere longevity of service), and payments at the beginning of a contract before services are rendered (for example, signing bonus).
Enter all other payments to the listed person included in box 1 or box 5 of Form W-2 (whichever is greater) or box 7 of Form 1099-MISC issued to the person but not reflected in columns (B)(i) or (B)(ii). Examples include, but are not limited to, current-year payments of amounts earned in a prior year, payments under a severance plan, payments under an arrangement providing for payments upon the change in ownership or control of the organization or similar transaction, deferred amounts and earnings or losses in a nonqualified defined contribution plan subject to section 457(f) when they become substantially vested, and awards based on longevity of service.
The following examples illustrate when deferred compensation is considered earned or accrued, as well as when and how it is to be reported. In these examples, assume that the amounts deferred are not reported on Form W-2, box 1 or 5, prior to the year during which the amounts are paid.
An executive participates in Organization A's nonqualified deferred compensation plan. Under the terms of the plan beginning January 1 of calendar year 1, she earns for each year of service an amount equal to 2% of her base salary of $100,000 for that year. These additional amounts are deferred and are not vested until the executive has completed 3 years of service with Organization A. In year 4 the deferred amounts for years 1 through 3 are paid to the executive. For each of the years 1 through 3, Organization A enters $2,000 of deferred compensation for the executive in column (C). For year 4, Organization A enters $6,000 in column (B)(iii) and $6,000 in column (F).
Under the terms of his employment contract with Organization B beginning July 1 of calendar year 1, an executive is entitled to receive $50,000 of additional compensation after he has completed five years of service with the organization. The compensation is contingent only on the longevity of service. The $50,000 is treated as accrued or earned ratably over the course of the five years of service, even though it is not funded or vested until the executive has completed the 5 years. Organization B makes payment of $50,000 to the executive in calendar year 6. Organization B enters $5,000 of deferred compensation in column (C) for calendar year 1 and $10,000 for each of calendar years 2 through 5. For calendar year 6, Organization B enters $50,000 in column (B)(iii) and $45,000 in column (F).
An executive participates in Organization C's incentive compensation plan. The plan covers calendar years 1 through 5. Under the terms of the plan, the executive is entitled to earn 1% of Organization C's total productivity savings for each year during which Organization C's total productivity savings exceed $100,000. Earnings under the incentive compensation plan will be payable in year 6, to the extent funds are available in a certain “incentive compensation pool.” For years 1 and 2, Organization C's total productivity savings are $95,000. For each of years 3, 4, and 5, Organization C's total productivity savings are $120,000. Accordingly, the executive earns $1,200 of incentive compensation in each of years 3, 4, and 5. She does not earn anything under the incentive compensation plan in years 1 and 2 because the relevant performance criteria were not met in those years. Although the amounts earned under the plan for years 3, 4, and 5, are dependent upon there being a sufficient incentive compensation pool from which to make the payment, Organization C enters $1,200 of deferred compensation in column (C) in years 3, 4, and 5. In year 6, Organization C pays $3,600 attributable to years 3, 4, and 5, and enters $3,600 in column (B)(ii) and $3,600 in column (F).
A new executive participates in Organization D's nonqualified defined benefit plan, under which she will receive a fixed dollar amount per year for a fixed number of years beginning with the first anniversary of her retirement. The benefits do not vest until she serves for 15 years with Organization B. Because the benefits should be treated as accruing ratably over the 15 years, for year 1 the actuarial value of 1/15th of the benefits is reported as deferred compensation in column (C). For year 2, the actuarial value of 2/15ths of the benefits minus last year's value of 1/15th is reported as deferred compensation in column (C). For year 3, the actuarial value of 3/15ths of the benefits minus last year's value of 2/15ths is reported, and so on.
Value of housing provided by the employer, except to the extent such value is a working condition fringe.
Medical reimbursement programs.
Long-term care insurance.
Dependent care assistance.
Payment or reimbursement by the organization of (or payment of liability insurance premiums for) any penalty, tax, or expense of correction owed under chapter 42 of the Internal Revenue Code, any expense not reasonably incurred by the person in connection with a civil judicial or civil administrative proceeding arising out of the person's performance of services on behalf of the organization, or any expense resulting from an act or failure to act with respect to which the person has acted willfully and without reasonable cause.
The list above is not all-inclusive.
No-additional cost service.
Qualified employee discount.
De minimis fringe.
Reimbursements pursuant to an accountable plan.
Working condition fringe.
Qualified transportation fringe.
Qualified moving expense reimbursement.
Qualified retirement planning services.
Qualified military base realignment and closure fringe.
A “de minimis fringe” is a property or service the value of which, after taking into account the frequency with which similar fringes are provided by the employer to the employees, is so small as to make accounting for it unreasonable or administratively impractical.
A working condition fringe is any property or service provided to an employee to the extent that, if the employee paid for the property or service, the payment would be deductible by the employee under section 162 (ordinary and necessary business expense) or section 167 (depreciation).
In some cases, property provided to employees may be used partly for business and partly for personal purposes, such as automobiles. In that case, the value of the personal use of such property is taxable compensation, and the value of the use for business purposes properly accounted for is a working condition fringe benefit. Cell phones provided to employees primarily for business purposes (other than compensation) are a working condition fringe benefit; in such case, the employee's personal use is a de minimis fringe. See Notice 2011-72, 2011-38 I.R.B. 407. See Pub. 587, Business Use of Your Home, for special rules regarding deductibility of home expenses for business use.
An accountable plan is a reimbursement or other expense allowance arrangement that meets each of the following rules:
The expenses covered under the plan must be reasonable employee business expenses that are deductible under section 162 or other provisions of the Code.
The employee must adequately account to the employer for the expenses within a reasonable period of time.
The employee must return any excess allowance or reimbursement within a reasonable period of time. See Regulations section 1.62-2 and Pub. 535, Business Expenses, for explanations of accountable plans.
The method by which benefits under an accountable plan are provided (whether reimbursement, cash advances with follow-up accounting, or charge by the employee on company credit card) is not material. Payments that do not qualify under the accountable plan rules, such as payments for which the employee did not adequately account to the organization, or allowances that were more than the payee spent on serving the organization, are compensation.
Directors and trustees are treated as employees for purposes of the working condition fringe provisions of section 132. Therefore, treat cash payments to directors or trustees made under circumstances substantially identical to the accountable plan provisions as a section 132 working condition fringe.
See Pub. 15-B, Employer's Tax Guide to Fringe Benefits, Pub. 521, Moving Expenses, and Unreimbursed Employee Expenses in Pub. 529, Miscellaneous Deductions, for further explanation of section 132 fringe benefits and for determining whether a given section 132 fringe benefit is available to nonemployees, such as directors and trustees, or to persons who no longer work for the organization.
Use Part III to provide narrative information, explanations, or descriptions required for Part I, lines 1a, 1b, 3, 4a, 4b, 4c, 5a, 5b, 6a, 6b, 7, and 8, and for Part II. Also use Part III to provide other narrative explanations and descriptions, as applicable. Identify the specific part and line(s) that the response supports.
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