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CAUTION

You can't sponsor a donor-advised fund if you're a private foundation.

• You and the recipient organization operated in a coordinated manner with

Instructions for Form 1023 9

Example. An organization could compensate a director as follows:

Make sure the information you provide in Part V is consistent with the information you enter in Part VI. Financial Data.

Line 1. Compensation. Check “Yes,” if you do or you will compensate your officers, directors, or trustees. Also, check “Yes,” if you will or you do have highest compensated employees or highest compensated independent contractors.

For purposes of this form, “highest compensated” employees or independent contractors are persons to whom you pay over $100,000 of compensation, including compensation from related organizations.

For information on determining if an individual is an employee or an independent contractor, see Pub. 15-A, Employer’s Supplemental Tax Guide.

Line 1e. “ Similarly situated organizations” means tax-exempt or taxable organizations of comparable size, purpose, and resources. Adjustments due to geographic area and other specified conditions are appropriate, but you should document the adjustments. You should document the sources(s) of comparable compensation data, both taxable and non-taxable, and retain copies in your permanent records.

Line 1g. “Reasonable compensation” is the amount that would ordinarily be paid for like services by like organizations under like circumstance as of the date the compensation arrangement is made. Establishing and documenting your decisions about compensation is important because excess compensation (including cash and other benefits that aren’t accounted for as reasonable compensation for services) may result in excise taxes on both the individual and you, and may jeopardize your tax exemption.

Line 2. A conflict of interest arises when a person in a position of authority over an organization, such as a director, officer, or manager, may benefit personally from a decision they could make. A sample Conflict of Interest Policy is included as Appendix A. This sample conflict of

activity of a museum, historical society, or church.

If you're a nursery or pre-school

TIP that doesn't meet the description

of a school, answer “No,” to line 12.

If you’re a nursery, pre-school, or

TIP child care organization that

doesn’t meet the description of a school, you may still further an educational purpose if substantially all the care you provide is for the purpose of enabling individuals to be gainfully employed and your services are available to the general public (section 501(k)).

If you’re a school, or if you operate a school as an activity (even if it is a secondary activity), complete Schedule B. See Pub. 557 for additional information.

Wages Director

Compensation . . .

$2,500

Salary as Chief Executive Officer . . . . . . . . . . . . . . . 40,000 Deferred retirement . . . . . . 2,000 Health insurance policy . . . 5,000 Use of a vehicle . . . . . . . . 5,000 Total Compensation $54,500

Line 13. “Hospital” or “medical care” includes the treatment of any physical or mental disability or condition, whether as an inpatient or outpatient. A hospital includes the following.

• Hospitals and rehabilitation institutions, outpatient clinics, or community mental health or drug treatment centers if the principal purpose or function is the providing of medical or hospital care or medical education or research.

• Medical research organizations if the principal purpose or function is the continuous active conduct of medical research in conjunction with a hospital.

If you provide “hospital or medical care,” or you’re a medical research organization, complete Schedule C.

See Pub. 557 for additional information.

Line 14. “Low-income housing” refers to rental or ownership housing provided to persons based on financial need. If you provide low-income housing, complete Schedule F.

Line 15. Answer “Yes,” if you pay money to an individual as a scholarship, fellowship, or education loan; for travel, study, or other similar purposes. Also, answer “Yes,” if you pay such amounts on behalf of an individual to a school or a tuition or educational savings program. Complete Schedule H—Section I.

Travel, study, or other similar purposes include payments made to enhance a literary, artistic, musical, scientific, teaching or other similar capacity, skill, or talent of the individual recipient. These payments include, for example, amounts paid to:

Educational grants don’t include amounts you pay to an individual as compensation, such as payments made to a consultant for personal services or to produce a report for you.

Educational grants don’t include amounts paid to another organization that distributes your funds as a scholarship to an individual if you have no role in the selection process.

If you're a “private foundation”