For the sake of simplicity, the term sheet music will refer to any physical or digital notation of the musical arrangement of the composition(s).
A Custom Arrangement License is permission from a composition's copyright owner (typically the publisher) to make changes to that composition and to make sheet music, digital or physical of the arrangement of the composition. Here are some of the top reasons you may need a Custom Arrangement License to make sheet music for your ensemble:

      1. Altering Music to Create Sheet Music: Whenever music is altered from its original form and one desires to make sheet music of the arrangement , it becomes a derivative work. Creating sheet music of a derivative work requires the permission of the publisher via a Custom Arrangement License.
        • Example: "Yesterday" (McCartney / Lennon) was written for guitar and vocals. If you wanted to make a marching band arrangement of this work, you would add your marching band instrumentation and create the sheet music parts for that instrumentation. Making these additions qualifies as creating a derivative work, and requires the publishers' permission.
      2. Creating A Medley: A medley is defined as a collection of songs or other musical items performed as a continuous piece. Creating a medley of copyrighted compositions and making sheet music of that arrangement requires the publishers' permission via a Custom Arrangement license, even if you're not making any changes to the music itself and just creating sheet music of the arrangement of the compositions that just run together.
        • Example: If you wanted to have your marching band play two copyrighted musical compositions and you wanted to create sheet music of this arrangement reflecting that there was no pause between them (i.e., play them continuously), you would need the permission of each composition's publishers. Even if one of the two compositions is in the Public Domain, you would need the permission of the other composition's publishers to create sheet music of the arrangement with the Public Domain composition.
        • Example: If you wanted to create sheet music of an arrangement of Pentatonix's Daft Punk mash up, you would need to get permission of each original Daft Punk composition's publishers.
      3. Using Small Snippets: Similar to number 2. above, creating sheet music that uses a small snippet of a composition within a medley (e.g., 'less than 20 seconds', 'less than eight bars') still requires permission from that composition's publishers, even if you're using an unchanged snippet from a published stock arrangement. There's no minimum threshold where licensing kicks in - any recognizable snippet triggers the need for a Custom Arrangement license for the creation f  the sheet music.
        • Example: If you wanted to borrow the first 12 notes from the opening of "Layla" (Clapton) and insert it into your medley, you would need the permission of this song's publisher.
      4. Re-Voicing: Changing the voicing of a published choral arrangement requires the permission of the publishers.
        • Example: If you had purchased a choral arrangement that is published as an SSA arrangement, and wanted to re-voice it and create sheet music of the arrangement as a TTBB arrangement, you would need the publisher's permission.
      5. Lyric Changes: Lyric changes of any kind require the publisher's permission via a Custom Arrangement license.
      6. Re-typing / Transcribing: If you are re-typing sheet music arrangements into Finale (etc.), and then handing out these re-typed sheet music arrangements to your ensemble, you will need a Custom Arrangement license as this constitutes a duplication of copyrighted material.
        • This includes taking another ensemble's sheet music embodying the licensed custom arrangement and using it with your ensemble. Likewise, if you lend another ensemble your sheet music of a custom arrangement, that ensemble will need to acquire a separate custom arrangement license to use it.
        • This also includes making and distributing a photocopy of the sheet music, even if the original sheet music is licensed properly.
      7. Re-combining Stock Sheet Music Arrangements: Similar to some of the points above, using pieces of stock sheet music arrangements that are combined (i.e. cut out and pasted selections of stock sheet music) constitutes the need for a custom arrangement license for all of the compositions used. 
As a rule of thumb, keep in mind that changes you consider to be minor may actually be major changes in the artist's eyes. It's important to ask for permission before making any of the above changes in order to avoid potential copyright issues down the road. While publishers typically charge for this permission, copyright infringement penalties can be as high as $150,000 per infringed song, and are usually at least several multiples of the original license cost. Copyright owners overwhelmingly win these types of disputes.