Form 990 Schedule L Instructions: Transactions With Interested Persons (2026 Guide)

Form 990 Schedule L is where a tax-exempt organization reports certain financial transactions with interested persons, such as officers, directors, key employees, substantial contributors, and their family members. It covers excess benefit transactions, loans, grants, and business transactions. The IRS uses Schedule L to spot conflicts of interest and private benefit, so getting it right protects both your filing and your reputation.

This guide explains who must file Schedule L, who counts as an interested person, and how to complete each part, with plain-English examples and the current reporting thresholds.

Key takeaways

• Schedule L is required when you answer “Yes” to certain questions in Form 990, Part IV (lines 25–28) or Form 990-EZ, Part V (lines 38a or 40b).

• Parts I, II, and III have no dollar threshold. Every reportable transaction must be listed.

• Part IV applies only when payments cross specific thresholds, such as more than $100,000 in a year.

• Each transaction is reported in only one part of Schedule L.

What Is Form 990 Schedule L?

Schedule L, titled Transactions With Interested Persons, is a supporting schedule for Form 990 and Form 990-EZ. If you’re looking for clear Schedule L Form 990 instructions, start here: it gives the IRS and the public a clear view of money or benefits flowing between your organization and people who have influence over it.

The information also helps your organization decide whether board members are independent for Form 990, Part VI, line 1b. A board member with a reportable Schedule L transaction may not qualify as independent.

Who Must File Schedule L?

You don’t decide on your own whether to file Schedule L. Your answers on the main return trigger it:

• Form 990, Part IV, line 25a or 25b (excess benefit transactions) → Part I

• Form 990, Part IV, line 26 (loans) → Part II

• Form 990, Part IV, line 27 (grants or assistance) → Part III

• Form 990, Part IV, lines 28a, 28b, or 28c (business transactions) → Part IV

• Form 990-EZ, Part V, line 40b (excess benefit transactions) → Part I

• Form 990-EZ, Part V, line 38a (loans) → Part II

Form 990-EZ filers only complete Parts I and II. Form 990-N filers don’t file Schedule L.

Who Is an “Interested Person”?

The definition depends on the part you’re completing.

For Part I, an interested person is a disqualified person under Internal Revenue Code section 4958. This generally means someone in a position to exercise substantial influence over the organization, now or within the past five years.

For Parts II–IV, an interested person includes:

1. A current or former officer, director, trustee, or key employee listed on Form 990, Part VII

2. The organization’s creator or founder

3. A substantial contributor: someone whose contributions during the tax year total at least $5,000 and are reportable on Schedule B

4. A family member of any person above

5. A 35% controlled entity of any person above, such as a company a board member owns more than 35% of

6. For Part III only: a grant selection committee member, and in certain cases an employee (or an employee’s child) of a substantial contributor

Important exclusion: 501(c)(3) organizations, organizations with the same exempt status as yours, and government units are not interested persons for Parts II–IV.

Tip: The IRS accepts a “reasonable effort” to identify interested persons. An annual conflict-of-interest questionnaire for board members and key staff is the most common way to meet this standard.

How to Complete Schedule L: Part-by-Part Instructions

Part I: Excess Benefit Transactions

An excess benefit transaction happens when an organization gives a disqualified person an economic benefit worth more than what the organization receives in return. Common examples include unreasonable compensation, buying property above fair market value, or paying someone’s personal expenses.

For each transaction, report:

• The disqualified person’s name

• Their relationship to the organization

• A description of the transaction

• Whether the transaction has been corrected

On line 2, enter any section 4958 excise tax incurred by disqualified persons during the year. The excise tax itself is reported and paid separately on Form 4720.

Part II: Loans to and From Interested Persons

Report each loan outstanding at the end of the tax year, whether the organization lent money or borrowed it. This includes salary advances, certain split-dollar life insurance arrangements, and other receivables. There is no minimum amount.

You’ll also report the loan’s purpose, original amount, balance due, whether it’s in default, whether the board approved it, and whether there’s a written agreement or promissory note.

Not reported in Part II: advances under an accountable expense plan, pledges receivable, accrued but unpaid compensation, and ordinary-course receivables offered on the same terms as the general public.

Accuracy check: The balance due in Part II must match the related amounts on Form 990, Part X (Balance Sheet).

Part III: Grants or Assistance Benefiting Interested Persons

Report any grant or assistance, of any amount, given to an interested person. This includes scholarships, discounts, internships, prizes, awards, and free use of facilities.

Not reported in Part III: compensation already listed on Form 990, Part VII; business transactions with no gift element; grants to 501(c)(3) organizations; and assistance given to members of a charitable class on the same terms as everyone else.

Part IV: Business Transactions Involving Interested Persons

This is the part most organizations need to complete. Report a business transaction if, during the tax year, any of these thresholds is met:

1. All payments between the organization and the interested person total more than $100,000

2. Payments from a single transaction exceed the greater of $10,000 or 1% of total revenue

3. Compensation to a family member of a current or former officer, director, trustee, or key employee exceeds $10,000

4. A joint venture where the organization invested $10,000 or more and both parties’ share of profits or capital exceeds 10%

Not reported in Part IV: ordinary-course banking transactions, membership dues, and ordinary-course transactions with publicly traded companies on the same terms offered to the public.

Part V: Supplemental Information

Use Part V to explain any entry in Parts I–IV, such as the details of a correction, the terms of a loan, or the business purpose of a transaction. Always list the part and line number each explanation relates to. For Part I, use this section to identify any organization managers who knowingly participated in an excess benefit transaction.

Schedule L Examples

Example 1: A board member’s company (Part IV)
A board member owns 50% of a cleaning company. The nonprofit pays the company $42,000 during the year, and its total revenue is $800,000. One percent of revenue is $8,000, so the single-transaction threshold is $10,000. Because $42,000 is more than $10,000, the nonprofit reports this transaction in Part IV.

Example 2: A family member on staff (Part IV)
The executive director’s daughter works for the organization and earns $15,000. Because family-member compensation exceeds $10,000, it’s reported in Part IV.

Example 3: A salary advance (Part II)
The CFO received a $3,000 salary advance that is still unpaid at year-end. Loans have no minimum threshold, so it’s reported in Part II, unless it qualifies as an accountable-plan advance.

Common Schedule L Mistakes to Avoid

• Skipping Parts I–III because the amount is small. These parts have no threshold.

• Reporting the same transaction twice. Each transaction goes in only one part.

• Forgetting former officers and family members. Both can be interested persons.

• Loan balances that don’t match Part X of the balance sheet.

• No written conflict-of-interest process, which makes it harder to show a “reasonable effort.”

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