990 Schedule J Instructions for Schedule J (Form 990)

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2021

Instructions for Schedule J
(Form 990)

Department of the Treasury
Internal Revenue Service

DRAFT AS OF
November 8, 2021

Compensation Information
Section references are to the Internal Revenue
Code unless otherwise noted.

Future Developments

For the latest information about
developments related to Schedule J
(Form 990) and its instructions, such as
legislation enacted after they were
published, go to IRS.gov/Form990.

Reminder
Form 1099-NEC and nonemployee
compensation reporting. Beginning
with tax year 2020, Form 1099-NEC,
Nonemployee Compensation, is used to
report nonemployee compensation.
Accordingly, where the Form 990
references reporting amounts of
compensation from Form 1099-MISC,
Miscellaneous Income, be sure to
include nonemployee compensation
from box 1 of Form 1099-NEC. See the
instructions for additional information.

General Instructions

Note. Terms in bold are defined in the
Glossary of the Instructions for Form
990, Return of Organization Exempt
From Income Tax.

Purpose of Schedule

Schedule J (Form 990) is used by an
organization that files Form 990 to
report compensation information for
certain officers, directors, individual
trustees, key employees, and
highest compensated employees,
and information on certain
compensation practices of the
organization.

Who Must File

An organization that answered “Yes” on
Form 990, Part IV, line 23, must
complete Schedule J. Do not file
Schedule J for institutional trustees.
If an organization isn't required to file
Form 990 but chooses to do so, it must
file a complete return and provide all of
the information requested, including the
required schedules.

Apr 15, 2021

Specific Instructions

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 Form 990,
Part IV, for all such individuals.
However, only the organizations that are
described in Who Must File, earlier,
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), section 501(c)(4), and
section 501(c)(29) 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 Part 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.

Part I. Questions
Regarding Compensation

For purposes of Part I, a listed person is
a person listed on Form 990, Part VII,
Section A.

Line 1. Report information regarding
certain benefits (if any) provided to
persons listed on Form 990, Part VII,
Section A, line 1a.
Line 1a. 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
Cat. No. 51525Q

benefits are reported as compensation
in box 1 or box 5 of Form W-2, Wage
and Tax Statement; box 6 of Form
1099-MISC; or box 1 of Form
1099-NEC. 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 doesn't 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 isn't
accountable to the organization under
an accountable plan, whether or not

actually used for any personal
expenses. Accountable plans are
discussed in Accountable plan
amounts, later (under the Part II, column
(D), instructions).
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
doesn't 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 don't 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 aren't 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 don't include services
provided to all employees on a
nondiscriminatory basis under a
qualified employee benefit plan.

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 didn't 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 doesn't 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.

DRAFT AS OF
November 8, 2021

Line 1b. If the organization provided
any of the benefits listed in line 1a to

Line 2. Answer “Yes” if the organization
required substantiation of all expenses
or benefits listed on line 1a, in
accordance with the rules for
accountable plans discussed in
Accountable plan amounts, later (under
the Part II, column (D), instructions),
before reimbursing or allowing all such
expenses incurred by any directors,
trustees, and officers, including the
organization's top management
official (all referred to as “top
management official”). An organization
can answer “Yes” if it checked the
“Discretionary spending account” box
on line 1a and required substantiation of
expenses under the rules for
accountable plans for all listed benefits
on line 1a other than for discretionary
spending accounts.
Line 3. Check the appropriate box(es)
to indicate which methods, if any, the
organization used to establish the
compensation of the organization's
top management official. If the
organization relied on a compensation
consultant that used a method
described in line 3 to help determine
compensation for the top management
official, the organization may check the
box for that method in line 3. Do not
check any box(es) for methods used by
a related organization to establish the
filing organization's compensation of the
filing organization's top management
official. Explain in Part III if the
organization relied on a related
organization that used one or more of
the methods described next to establish
the top management official's
compensation.
Compensation committee refers to a
committee of the organization's
governing body responsible for
determining the top management
official's compensation package,
whether or not the committee has been
delegated the authority to make an
employment agreement with the top
management official on behalf of the
organization. The compensation
committee can also have other duties.

-2-

Form 990 of other organizations
refers to compensation information
reported on a Form 990 series return of
similarly situated organizations, and
includes Forms 990; 990-EZ, Short
Form Return of Organization Exempt
From Income Tax; and 990-PF, Return
of Private Foundation.
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.
Line 4. List in Part III the names of
listed persons paid amounts during the
year by the filing organization or a
related organization under any
arrangement described in lines 4a
through 4c, and report the amounts paid
during the year to each such listed
person. Also describe in Part III the
terms and conditions of any
arrangement described in lines 4a

2021 Instructions for Schedule J (Form 990)

through 4c in which one or more listed
persons participated during the year,
regardless of whether any payments to
the listed person were made during the
year.
Line 4a. 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 upon the person's severance
from service in specified circumstances,
such as upon an involuntary separation
from service or under a separation or
termination agreement voluntarily
entered into by the parties. 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.

organization, which are addressed by
lines 5 and 6 later.
Example. 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.

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 isn't
contingent on the net earnings of the
organization for this purpose.

DRAFT AS OF
November 8, 2021

Line 4b. 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 isn't
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 don't
include a plan described in section
457(b)) and a split-dollar life insurance
plan.
Line 4c. 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 doesn't
include compensation contingent on the
revenues or net earnings of the

Line 5. Answer “Yes” if the organization
paid or accrued with respect to a listed
person any compensation contingent
upon and determined in whole or in part
by the revenues (gross or net) of one or
more activities of the organization or a
related organization, or by the
revenues (gross or net) of the
organization or a related organization as
a whole. For this purpose, net revenues
means gross revenues less certain
expenses, but doesn't mean net income
or net earnings. Describe such
arrangements in Part III.

Example. 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
isn't contingent on revenues of the
organization for this purpose.
Line 6. Answer “Yes” if the organization
paid or accrued with respect to a listed
person any compensation contingent
upon and determined in whole or in part
by the net earnings of one or more
activities of the organization or a
related organization, or by the net
earnings of the organization or a related
organization as a whole. Describe such
arrangements in Part III.
Example. 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

2021 Instructions for Schedule J (Form 990)

-3-

Line 7. Answer “Yes” if the organization
provided any non-fixed payments, not
described on lines 5 and 6, for a listed
person. Describe such arrangements in
Part III. A fixed payment is an amount of
cash or other property specified in the
contract, or determined by a fixed
formula specified in the contract, which
is to be paid or transferred in exchange
for the provision of specified services or
property. A fixed formula can
incorporate an amount that depends
upon future specified events or
contingencies, provided that no person
exercises discretion when calculating
the amount of a payment or deciding
whether to make a payment, such as a
bonus. Amounts paid or accrued to any
listed person that aren't fixed amounts
as defined earlier are non-fixed
payments. For example, any amount
paid to a person under a reimbursement
arrangement where discretion is
exercised by any person as to the
amount of expenses incurred or
reimbursed is a non-fixed payment. See
Regulations section 53.4958-4(a)(3).
Exception. 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.
Line 8. Answer “Yes” if any amounts
from the organization reported on Form
990, Part VII, were paid under a contract
subject to the initial contract exception
described in Regulations section
53.4958-4(a)(3). Describe such
arrangements in Part III. Fixed
payments made under an initial contract
aren't subject to section 4958. An initial
contract is a binding written contract

between the organization and a person
who wasn't a disqualified person (within
the meaning of section 4958(f)(1)) with
respect to the organization immediately
prior to entering into the contract. See
the instructions for line 7 for the
definition of fixed payments.
Line 9. Answer “Yes” if the payments
described in line 8 were made under an
initial contract that was reviewed and
approved by the organization following
the rebuttable presumption procedure
described in Regulations section
53.4958-6(c). For more information on
the initial contract exception and
rebuttable presumption procedure, see
Appendix G. Section 4958 Excess
Benefit Transactions in the Instructions
for Form 990.

All current key employees

For certain kinds of employees,

TIP listed on Form 990, Part VII,

Section A, must also be
reported on Schedule J, Part II, because
their reportable compensation, by
definition, exceeds $150,000.
Do not list any individuals in
Schedule J, Part II, that aren't listed on
Form 990, Part VII, Section A. Do not list
in Part II management companies or
other organizations providing services
to the organization. Do not list highest
compensated independent
contractors reported on Form 990, Part
VII, Section B.

TIP such as certain members of the

clergy and religious workers
who aren't subject to social security and
Medicare taxes as employees, the
amount in box 5 of Form W-2 may be
blank or less than the amount in box 1 of
Form W-2. In this case, the amount
required to be reported in box 1 of Form
W-2 for the listed persons must be
reported, as appropriate, in columns (B)
(i), (B)(ii), and (B)(iii).

DRAFT AS OF
November 8, 2021

Part II. Officers, Directors,
Trustees, Key Employees,
and Highest Compensated
Employees

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. List in
Part III the name of each unrelated
organization that provided
compensation to such persons, the type
and amount of compensation it paid or
accrued, and the person receiving or
accruing such compensation, as
explained in the instructions for Form
990, Part VII, Section A, line 5.

For each individual listed, enter
compensation from the organization on
row (i), and compensation from all
related organizations on row (ii).
Related organizations are explained in
the Glossary in the Instructions for Form
990. Any type and amount of reportable
compensation from related
organizations that was excluded from
Form 990, Part VII, Section A,
column (E), under the
$10,000-per-related-organization
exception, must be included on
Schedule J, Part II, columns (B)(i),
(B)(ii), and (B)(iii). If there is no
compensation to report in a particular
column, enter “-0-.”
If the organization answered “Yes” to
Form 990, Part VII, Section A, line 5,
report such compensation from the
unrelated organization as if it were
received from the organization, and
enter the name of the unrelated
organization in Part III.
For a table showing how and where
to report certain types of compensation
on Schedule J, see the instructions for
line 1 of Form 990, Part VII, Section A.
Any type and amount of other
compensation that was excluded from
Form 990, Part VII, Section A, under the
$10,000-per-item exception for certain
other compensation items, must be
included in Schedule J, Part II, column
(C) or (D).
For purposes of Part II, a listed
person is a person required to be listed
in Part II.

Column (A). Enter the name and title
of each person who must be listed in
Part II.
Column (B). Amounts reported on
Form 990, Part VII, Section A, columns
(D) and (E), must be broken out
between columns (B)(i), (B)(ii), and
(B)(iii).
-4-

Column (B)(i). Enter the listed
person's base compensation included in
box 1 or box 5 (whichever is greater) of
Form W-2, box 6 of Form 1099-MISC, or
box 1 of Form 1099-NEC 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).
Column (B)(ii). Enter the listed
person's bonus and incentive
compensation included in box 1 or
box 5 (whichever is greater) of Form
W-2, box 6 of Form 1099-MISC, or
box 1 of Form 1099-NEC 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).
Column (B)(iii). Enter all other
payments issued to the listed person
and included in box 1 or box 5
(whichever is greater) of Form W-2,
box 6 of Form 1099-MISC, or box 1 of
Form 1099-NEC but not reflected in
column (B)(i) or (B)(ii). Examples
include, but aren't 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.
Column (C). Enter all current-year
deferrals of compensation for the listed
person under any retirement or other
deferred compensation plan, whether
qualified or nonqualified, that is
established, sponsored, or maintained
by or for the organization or a related
organization. Report as deferred
compensation the annual increase or

2021 Instructions for Schedule J (Form 990)

decrease in actuarial value, if any, of a
defined benefit plan, but don't report
earnings or losses accrued on deferred
amounts in a defined contribution plan.
Do not enter in column (C) any
payments of compensation included in
box 1 or box 5 (whichever is greater) of
Form W-2, box 6 of Form 1099-MISC, or
box 1 of Form 1099-NEC issued to the
listed person for the calendar year
ending with or within the organization's
tax year. Enter a reasonable estimate if
actual numbers aren't readily available.
For this purpose, deferred
compensation is compensation that is
earned or accrued in, or is attributable
to, 1 year and deferred for any reason to
a future year, whether or not funded,
vested, or subject to a substantial risk of
forfeiture. This includes earned but
unpaid incentive compensation deferred
under a deferred compensation plan.
But don't report in column (C) a deferral
of compensation that causes an amount
to be deferred from the calendar year
ending with or within the tax year to a
date that isn't more than 21/2 months
after the end of the calendar year
ending with or within the tax year. Note
that different rules can apply for
determining whether an arrangement
provides for deferred compensation for
purposes of Internal Revenue Code
provisions such as section 83, 409A,
457(f), or 3121(v).
Do not report deferred compensation
in column (C) before it is earned or
accrued under the principles described.
For this purpose, deferred
compensation is generally treated as
earned or accrued in the year that
services are rendered, except when
entitlement to payment is contingent on
satisfaction of specified organizational
goals or performance criteria (other than
mere longevity of service) under the
deferred compensation plan. If the
payment of an amount of deferred
compensation requires the employee to
perform services for a period of time,
the amount is treated as accrued or
earned ratably over the course of the
service period, even though the amount
isn't funded and may be subject to a
substantial risk of forfeiture until the
service period is completed.
Report deferred compensation for
each listed person regardless of
whether such compensation is deferred
as part of a deferred compensation plan
that is administered by a separate trust,
as long as the plan is established,
sponsored, or maintained by or for the
organization or a related organization
for the benefit of the listed person.

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 aren't reported in
box 1 or box 5 of Form W-2, prior to the
year during which the amounts are paid.

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 doesn't
earn anything under the incentive
compensation plan in years 1 and 2
because the relevant performance
criteria weren't 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).

DRAFT AS OF
November 8, 2021
Example 1. 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% (0.02) of her base
salary of $100,000 for that year. These
additional amounts are deferred and
aren't 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).
Example 2. 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 5 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 5 years of
service, even though it isn't 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).
Example 3. 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% (0.01) 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

2021 Instructions for Schedule J (Form 990)

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Example 4. 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 don't vest until she serves for
15 years with Organization D. 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.
Column (D). Nontaxable benefits are
benefits specifically excluded from
taxation under the Internal Revenue
Code. Report the value of all nontaxable
benefits provided to or for the benefit of
the listed person, other than benefits
disregarded for purposes of section
4958 under Regulations section
53.4958-4(a)(4). Common nontaxable
and section 4958 disregarded benefits,
referred to as fringe benefits below, are
discussed in detail beginning on this
page.
Depending on the type of benefit,
fringe benefits can be provided only to
employees or also to persons other than
employees, such as directors,
trustees, and independent
contractors. Fringe benefits can be
entirely personal in nature or can
combine personal and business
elements.

The taxability of a benefit can depend
upon the form in which it is provided.
For example, a cash housing allowance
is ordinarily reportable in box 5 of Form
W-2. Under section 119, housing
provided for the convenience of the
employer can be excludable, and the
fair rental value of in-kind housing
provided to certain school employees
can be part taxable and part excludable,
depending on facts and circumstances.
Taxable benefits must be reported on
Form W-2.
The following benefits provided for a
listed person must be reported in
column (D) to the extent not reported as
taxable compensation in box 1 or box 5
of Form W-2, box 6 of Form 1099-MISC,
or box 1 of Form 1099-NEC.
• Value of housing provided by the
employer, except to the extent such
value is a working condition fringe.
• Educational assistance.
• Health insurance.
• Medical reimbursement programs.
• Life insurance.
• Disability benefits.
• Long-term care insurance.
• Dependent care assistance.
• Adoption 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.

• Qualified retirement planning
services.
• Qualified military base realignment
and closure fringe.
De minimis 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.

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) isn't material. Payments that
don't qualify under the accountable plan
rules, such as payments for which the
employee didn't 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.

DRAFT AS OF
November 8, 2021

Disregarded benefits. Disregarded
benefits under Regulations section
53.4958-4(a)(4) need not be reported in
column (D). Disregarded benefits
generally include fringe benefits
excluded from gross income under
section 132. These benefits include the
following.
• No-additional cost service.
• Qualified employee discount.
• De minimis fringe.
• Reimbursements under an
accountable plan.
• Working condition fringe.
• Qualified transportation fringe.
• Qualified moving expense
reimbursement.

Working condition fringe. 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.
Accountable plan amounts. An
accountable plan is a reimbursement or
other expense allowance arrangement
that meets each of the following rules.
1. The expenses covered under the
plan must be reasonable employee
business expenses that are deductible
under section 162 or other provisions of
the Code.
2. The employee must adequately
account to the employer for the
expenses within a reasonable period of
time.
3. 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.

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Column (F). Enter in column (F) any
payment reported in this year's column
(B) to the extent such payment was
already reported as deferred
compensation to the listed person on a
prior Form 990, 990-EZ, or 990-PF. For
this purpose, the amount must have
been reported as compensation
specifically for the listed person on the
prior form.

Part III. Supplemental
Information

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. List in Part III the name
of each unrelated organization that
provided compensation to persons
listed in Form 990, Part VII, Section A;
the type and amount of compensation
the unrelated organization paid or
accrued; and the person receiving or
accruing such compensation. Also use
Part III to provide other narrative
explanations and descriptions, as
applicable. Identify the specific part and
line(s) that the response supports.

2021 Instructions for Schedule J (Form 990)