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5227, Part VI-B, question 78a or b.

part in making the investments listed in

that are not functionally integrated with

Report each investment separately.

Part I. See Initial taxes on foundation

its supported organizations; or

Paying tax and filing a Form 4720 are

managers above.

5. For any purpose other than

required for each year or part of a year

religious, charitable, scientific, literary,

If more than one foundation

in the taxable period that applies to the

educational, or public purposes, or the

manager is listed in column (a), each is

investments that jeopardize the

prevention of cruelty to children or

individually liable for the entire amount

foundation’s charitable purpose.

animals.

of tax in connection with the

Generally, the taxable period begins

investment. However, the foundation

with the date of the investment and

Exceptions. Section 4945(d)(4)(B)

managers who are liable for the tax

ends with the date corrective action is

provides an exception to taxable

may prorate payment among

completed, a notice of deficiency is

expenditures that applies to certain

themselves. Enter in column (c) the tax

mailed, or the initial tax is assessed,

grants to organizations when the

each foundation manager will pay.

whichever comes first. Therefore, in

granting foundation exercises

addition to investments made in 2009,

Carry the total amount in column (d)

expenditure responsibility described in

include all investments subject to tax

for each foundation manager to page 1,

section 4945(h). Additional information

that were made before 2009 if those

Part II-A, column (d).

on special rules and exceptions to the

investments were not removed from

definition of taxable expenditures given

jeopardy before 2009 and the initial tax

above can be found at

was not assessed before 2009.

gov/irm/part7/irm_07-027-019.html.

Schedule E—Initial

Taxable investments. An investment

Taxes on Taxable

Initial tax on foundation. An initial

to be taxed on this schedule is an

tax of 20% is imposed on each taxable

investment by a private foundation that

Expenditures (Section

expenditure of the foundation.

jeopardizes the carrying out of its

4945)

exempt purposes (for example, if it is

Initial tax on foundation managers.

determined that the foundation

When a tax is imposed on a taxable

managers, in making the investment,

General Instructions

expenditure of the foundation, a tax of

did not exercise ordinary business care

5% of the expenditure will be imposed

Requirement. Complete Schedule E if

and prudence, under prevailing facts

on any foundation manager who

you answered “Yes” to Form 990-PF,

and circumstances, in providing for the

agreed to the expenditure and who

Part VII-B, question 5b, or Form 5227,

long- and short-term financial needs of

knew that it was a taxable expenditure.

Part VI-B, question 79b. Complete

the foundation to carry out its exempt

Foundation managers whose

Parts I and II of Schedule E only for

purposes). See Regulations section

participation was not willful and was

expenditures that are subject to tax.

53.4944-1(a)(2). An investment is not

due to reasonable cause are not liable

taxed on this schedule if it is a

Note. Also, see Schedule F, Initial

for the tax. Any foundation manager

program-related investment; that is, one

Taxes on Political Expenditures.

who took part in the expenditure and is

whose primary purpose is one or more

liable for the tax must pay the tax. The

of those described in section

Taxable expenditures. With certain

maximum total amount of tax on all

170(c)(2)(B) (religious, charitable,

exceptions, this means any amount a

foundation managers for any one

educational, etc.). A significant purpose

private foundation pays or incurs:

taxable expenditure is $10,000. If more

of such an investment cannot be the

1. To carry on propaganda or

than one foundation manager is liable

production of income or the

otherwise influence any legislation

for tax on a taxable expenditure, all

appreciation of property. See section

through:

those foundation managers are jointly

4944(c) and Regulations section

and severally liable for the tax.

a. An attempt to influence general

53.4944-3.

public opinion or any segment of it, and

Initial taxes on foundation. The

Specific Instructions

b. Communication with any member

initial tax is 10% of the amount invested

or employee of a legislative body, or

Part I. Complete this part for all

for each year or part of a year in the

with any other government official or

taxable expenditures. Enter in column

taxable period.

employee who may take part in

(f) the number designation from Form

formulating legislation;

Initial taxes on foundation managers.

990-PF, Part VII-B, question 5a, or

2. To influence the outcome of any

When a tax is imposed on a jeopardy

Form 5227, Part VI-B, question 79a,

specific public election, or to conduct,

investment of the foundation, the tax

that applies to the act; for example,

directly or indirectly, any voter

will be 10% of the investment for each

“5a(1).”

registration drive;

year or part of a year in the taxable

3. As a grant to an individual for

period, up to $10,000 for any one

Part II. Enter in column (a) the names

travel, study, or other purposes;

investment. It is imposed on all

of all foundation managers who agreed

4. As a grant to an organization not

foundation managers who took part in

to make the taxable expenditure. See

described in section 509(a)(1), (2), or

the act, knowing that it was such an

Initial tax on foundation managers

(3) or that is not an exempt operating

act, except for foundation managers

above. If more than one foundation

foundation (as defined in section

whose participation was not willful and

manager is listed in column (a), each is

4940(d)(2)). This includes grants to:

was due to reasonable cause. Any

individually liable for the entire tax in

a. Type I, Type II, and Type III

foundation manager who took part in

connection with the expenditure.

functionally integrated supporting

making the investment must pay the

However, the foundation managers who

organizations (as described in section

tax.

are liable for the tax may prorate the

4942(g)(4)(B)) if a disqualified person of

payment among themselves. Enter in

Specific Instructions

the foundation controls such supporting

column (c) the tax each foundation

organization or the supported

manager will pay.

Part I. Complete this part for all

organizations of such supporting

taxable investments.

organizations, and

Carry the total amount in column (d)

Part II. Enter in column (a) the names

b. Type III supporting organizations

for each foundation manager to page 1,

of all foundation managers who took

(as described in section 4943(f)(5)(B))

Part II-A, column (e).

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Form 4720 Instructions

Instructions For Form 4720 - Return Of Certain Excise Taxes On Charities And Other Persons - Department Of The Treasury - 2009 Page 10

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