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Form 990 Schedule L: Reporting Transactions With Interested Persons

Sherman Hsieh

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Last updated: October 9, 2026 · Independent guide · We do not sell rankings or coverage.

Form 990 Schedule L is the schedule where a tax-exempt organization discloses excess benefit transactions, loans, grants and business transactions involving “interested persons,” such as officers, directors, key employees, substantial contributors, their family members and the businesses they control. You complete only the parts triggered by Form 990, Part IV, lines 25 to 28, and Part IV of the schedule applies only above set dollar thresholds. Because the schedule is public, you need reliable data behind it rather than a list assembled from memory.

What Schedule L requires, part by part

The IRS instructions (page last reviewed April 30, 2026) apply from tax year 2024 until replaced. Each part has its own trigger and its own definition of who counts.

Part I: Excess benefit transactions

Only section 501(c)(3), 501(c)(4) and 501(c)(29) organizations complete Part I. You report every excess benefit transaction with a disqualified person, regardless of amount, with the person, relationship, description and whether it has been corrected. Line 2 asks for the section 4958 excise tax incurred, whether or not assessed. The IRS intermediate sanctions page (last reviewed June 28, 2026) sets that tax at 25% of the excess benefit for the disqualified person, an additional 200% if the transaction is not corrected, and 10% for organization managers who knowingly participated, capped at $20,000 per transaction.

Part II: Loans to and from interested persons

Part II lists each loan, advance or other receivable or payable with an interested person outstanding at year end, regardless of amount, with its balance, default status and board approval. The total of amounts owed to the organization must match Form 990, Part X, column (B), lines 5 and 6, and amounts owed by the organization must match line 22.

Part III: Grants or assistance benefiting interested persons

Part III covers grants and assistance of any amount, including scholarships, prizes, discounts and free use of facilities. Grants to 501(c)(3) organizations and assistance given to a charitable class on the same terms as other members are excluded.

Part IV: Business transactions involving interested persons

Part IV covers contracts for sales, leases, licenses, insurance and services, plus joint ventures, whether the contract is new or ongoing. You report the amount as cash or fair market value, net of expense reimbursements.

The Part IV dollar thresholds

A business transaction is reportable in Part IV only if it meets at least one of these tests from the Schedule L instructions:

The instructions give an example of how aggregation works: fifteen transactions with one interested person totaling $75,000 are not reportable, but if the total reaches $105,000, all of them are. The instructions also state that the “ordinary course of business” exception used for Form 990, Part VI, line 2 does not apply to Schedule L.

Illustration (our numbers, not from the IRS): a nonprofit with $4.2 million of total revenue has a single-transaction threshold of $42,000, because 1% of revenue exceeds $10,000. It pays an IT firm 40% owned by a director $38,000 across three invoices, so no single transaction exceeds $42,000 and the yearly total is under $100,000; nothing is reported for that firm. The same nonprofit employs the sister of its executive director, who is listed as an officer in Part VII, at $52,000, which exceeds the $10,000 family compensation test and must be reported in Part IV.

Who counts as an interested person

For Parts II through IV, the instructions list these interested persons:

• Current and former officers, directors, trustees and key employees listed in Form 990, Part VII, Section A. For management company transactions, former ones from the past five tax years count even if no longer listed.
• The organization’s creator or founder.
• Substantial contributors, meaning persons who gave $5,000 or more during the tax year and are reportable on Schedule B.
• Family members of any of the above.
• 35% controlled entities of any of the above.
• For Part III only, grant selection committee members.

Section 501(c)(3) organizations and governmental units are not interested persons. For Part I, the instructions point to the section 4958 definition of a disqualified person, which uses a five-year lookback. Under 26 CFR 53.4958-3 (eCFR, current as of October 7, 2026), family means a spouse, siblings and their spouses, ancestors, and children, grandchildren and great-grandchildren and their spouses. A 35% controlled entity is a corporation, partnership, trust or estate in which those persons own more than 35% of the voting power, profits interest or beneficial interest.

Who is exempt and what is excluded

Schedule L is attached only to Form 990 and Form 990-EZ, and Form 990-EZ filers complete only Parts I and II. Within Part IV, the instructions exclude transactions already reported in Parts I to III, compensation reported in Part VII unless paid to a family member of another listed person, ordinary bank deposits on public terms, membership dues, and ordinary-course purchases from publicly traded companies on terms at least as favorable as the public receives. When an interested person acts as an investment agent, only their fees count.

Deadlines, penalties and public disclosure

Schedule L is due with Form 990 by the 15th day of the 5th month after your year ends, and Form 8868 gives an automatic extension, according to the 2025 Instructions for Form 990. Those instructions set the failure-to-file penalty at $25 a day, up to the lesser of $13,000 or 5% of gross receipts, rising to $130 a day and a $65,000 maximum for organizations with gross receipts over $1,309,500. A separate $10 a day penalty, up to $6,500, can apply to the persons responsible.

Schedule L is part of the public return. The IRS public disclosure page (last reviewed June 28, 2026) says the return must be available with “all schedules, attachments, and supporting documents.” The donor exception for public charities covers contributor names and addresses only.

A director involved in a reportable Schedule L transaction, directly or through a family member, generally cannot be counted as independent on Form 990, Part VI, line 1b, a point the IRS made in its Schedule L tips document (November 2009).

Records you must keep

You do not have to report a transaction if, after a reasonable effort, you cannot obtain enough information to conclude it is reportable. The instructions give an annual questionnaire as an example of a reasonable effort, and you may rely on a signed written answer. Keep:

• Signed annual questionnaires from everyone listed in Part VII.
• Board minutes approving loans and related-party contracts, with any comparability data.
• Loan schedules that reconcile to Form 990, Part X, lines 5, 6 and 22.
• Payment histories for each flagged party, with the threshold calculation.
• Your conflict of interest policy and evidence of monitoring, since Form 990, Part VI, line 12c asks whether you “regularly and consistently monitor and enforce compliance.”

What to set up in your systems so Schedule L is not built from memory

Governance staff know who sits on the board, and finance staff know who gets paid. Schedule L needs both in one place. Carry questionnaire answers into the records your accounting system already uses.

1. Turn the questionnaire into structured data

Ask each person to list businesses in which they or a family member hold more than 35%, family members paid by the organization, and any loans, grants or discounts received. Ask for legal names and employer identification numbers, which match vendor records better than trade names. BoardEffect publishes a sample conflict of interest questionnaire (October 19, 2020; BoardEffect sells board software) that you can adapt to the Schedule L categories.

Board portals can collect these answers. OnBoard announced D&O questionnaires (post dated January 4, 2021, updated March 23, 2022) with prior-year answers carried forward and e-signature, as an add-on with no published price. Govenda (no date shown) describes prefilled questionnaires, reminders and change logs, also without published pricing. Neither mentions Form 990, so you map answers to Schedule L yourself. Our guide to board management software for nonprofits covers the wider category.

2. Flag interested persons in the vendor master

Add custom fields to the vendor record: an interested-person flag, the linked individual, the relationship type and the questionnaire year supporting it. In NetSuite, Oracle’s documentation on custom entity fields (no date shown) confirms these can be added to vendor records under Customization > Lists, Records, & Fields > Entity Fields. In Sage Intacct, custom fields (page last modified October 8, 2026) require a Platform Services or Customization Services subscription and are created under Platform Services > All > Object customization. Simpler tools can use a vendor type reserved for related parties.

3. Add the question to vendor onboarding

New vendors appear all year. Add a required “Is this vendor owned or managed by a board member, officer, key employee or their family?” field to your new vendor request, and route a “Yes” to the controller or board secretary for approval under your conflict of interest policy.

4. Cover payroll, loans, grants and donors

Flag relatives of listed persons in payroll so the $10,000 test runs from a report. Use separate ledger subaccounts for loans to interested persons so Part II reconciles to Part X. Tag grants to interested persons for Part III, and check your Schedule B list of $5,000 donors against the vendor master.

5. Build one year-end report

With flags in place, one saved report can show total payments and the largest single transaction by interested person against both thresholds. Our reviews of nonprofit accounting software and accounting controls for preventing errors and fraud compare systems you can configure this way.

How we researched this

We read the Schedule L instructions, the 2025 Form 990 and its instructions, 26 CFR 53.4958-3 and related IRS pages, all checked on October 9, 2026. We compared top-ranking CPA firm and filing-vendor explainers and checked board portal and ERP documentation. No vendor paid for inclusion.

Related guides

• Form 990 Schedule A: The Public Support Test Explained
• Nonprofit Statement of Financial Position: Template
• Form 990-T: Filing Rules and Pulling UBTI From the Ledger

Frequently asked questions

Do I have to report a board member’s company if we paid it less than $100,000?

Possibly. Even below $100,000 for the year, you must report it if any single transaction exceeded the greater of $10,000 or 1% of your total revenue. The company counts only if it is an interested person, usually because the board member or relatives own more than 35% of it.

Is a board member’s family member on payroll reportable on Schedule L?

Yes, if their compensation for the year exceeds $10,000 and they are a family member of a current or former officer, director, trustee or key employee listed in Part VII.

What counts as a reasonable effort to find interested-person transactions?

The IRS instructions describe an annual questionnaire sent to people who may be interested persons as a reasonable effort. You can rely on a written answer that no reportable relationship exists, even if it later proves wrong.

Is Schedule L public?

Yes. Schedule L is part of the Form 990 you must make available for public inspection. The contributor-name exception for public charities covers donor names and addresses, not the names on Schedule L.

Sources

• IRS, Instructions for Schedule L (Form 990), revised December 2024, page last reviewed April 30, 2026. irs.gov
• IRS, 2025 Instructions for Form 990 (filing thresholds, due date, failure-to-file penalties), checked October 9, 2026. irs.gov
• IRS, Form 990 (2025), Part IV lines 25 to 28 and Part VI lines 1b, 2 and 12. irs.gov
• eCFR, 26 CFR 53.4958-3, Definition of disqualified person, current as of October 7, 2026. ecfr.gov
• IRS, Intermediate sanctions: excise taxes, last reviewed June 28, 2026. irs.gov
• IRS, Public disclosure and availability of exempt organizations returns and applications, last reviewed June 28, 2026. irs.gov
• IRS, Schedule L FAQs and tips, November 2009. irs.gov
• BoardEffect (sells board management software), Sample conflict of interest questionnaires for nonprofit boards, October 19, 2020. boardeffect.com
• OnBoard (vendor), New OnBoard capabilities for D&O questionnaires, January 4, 2021, updated March 23, 2022. onboardmeetings.com
• Govenda (vendor), D&O Suite, no date shown. govenda.com
• Oracle NetSuite, Creating custom entity fields, no date shown. docs.oracle.com
• Sage Intacct, Define custom fields for business-specific data, last modified October 8, 2026. intacct.com

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Sherman Hsieh

CEO & Editor-in-Chief, Business-Software.com
Independent analysis of enterprise software — ERP, CRM and more

Sherman Hsieh is the founder, CEO, and editor-in-chief of Business-Software.com. He leads the site's independent, buyer-focused coverage of ERP, CRM, and other business systems, including vendor-neutral comparisons, pricing analysis, and implementation guidance. Before founding Business-Software.com, Sherman was an executive at Siebel ...