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cash method, the entity may use the

responsibility with respect to such

Tax on fund manager. If a tax is

cash method to determine the amount

distribution in accordance with section

imposed on a taxable distribution of the

of the net income and proceeds

4945(h).

sponsoring organization, a tax of 5% of

attributable to a prohibited tax shelter

the distribution will be imposed on any

However, a taxable distribution does

transaction.

fund manager who agreed to the

not include a distribution from a donor

distribution knowing that it was a

Specific Instructions

advised fund to:

taxable distribution. Any fund manager

who took part in the distribution and is

1. any organization described in

Part I. Complete this part for each

liable for the tax must pay the tax. The

section 170(b)(1)(A) (other than a

transaction if during the tax year, the

maximum amount of tax on all fund

disqualified supporting organization),

entity received proceeds from or has

managers for any one taxable

2. the sponsoring organization of

net income attributable to a PTST.

distribution is $10,000. If more than one

such donor advised fund, or

Figure the tax for each transaction

fund manager is liable for tax on a

3. any other donor advised fund.

as follows:

taxable distribution, all such managers

•

If column (e) was answered “Yes,”

Sponsoring organization. A

are jointly and severally liable for the

then enter the larger of the column (f)

sponsoring organization is a section

tax.

or column (g) amount in column (h).

170(c) organization that is not a

•

If column e was answered “No,” then

Specific Instructions

government organization (as referred to

multiply the larger of the amount in

in section 170(c)(1) and (2)(A)) or a

Part I. Complete this part for all

column (f) or column (g) by 35% (.35)

private foundation and maintains one or

and enter the result in column (h).

taxable distributions.

more donor advised funds.

After the tax has been figured for all

Part II. Enter in column (a) the names

Donor advised fund. A donor

PTSTs entered on Schedule J, then

of all fund managers who agreed to

advised fund is a fund or account:

total column (h) and enter the amount

make the taxable distribution. If more

1. Which is separately identified by

on the Total line and on line 9 of Part I,

than one fund manager is listed in

reference to contributions of a donor or

page 1.

column (a) for one distribution, each is

donors,

individually liable for the entire tax in

Part II. Enter in column (a) the names

2. Which is owned and controlled by

connection with that distribution.

of all entity managers who approved

a sponsoring organization, and

However, the fund managers who are

the entity as (or otherwise caused the

3. For which the donor (or any

liable for the tax may prorate the

entity to be) a party to a PTST at any

person appointed or designated by the

payment among themselves. Enter in

time during the tax year and who knew

donor) has or expects to have advisory

column (c) the tax each manager will

or had reason to know that the

privileges concerning the distribution or

pay for each distribution for which such

transaction is a PTST.

investment of the funds held in the

manager owes a tax.

Carry the total amount in column (d)

donor advised funds or accounts

for each manager to page 1, Part II-A,

because of the donor’s status as a

Carry the total amount in column (d)

column (i).

donor.

for each fund manager to page 1, Part

II-A, column (j).

Exception. A donor advised fund

Schedule K—Taxes on

does not include:

1. A fund or account that makes

Schedule L—Taxes on

Taxable Distributions of

distributions only to a single identified

Prohibited Benefits

Sponsoring

organization or governmental entity, or

2. Any fund or account for a person

Distributed From Donor

Organizations

described in 3 above that gives advice

about which individuals receive grants

Advised Funds (Section

Maintaining Donor

for travel, study, or similar purposes, if;

4967)

Advised Funds (Section

a. The person’s advisory privileges

are performed exclusively by such

4966)

General Instructions

person in their capacity as a committee

member of which all the committee

Requirement. A sponsoring

General Instructions

members are appointed by the

organization of donor advised funds

sponsoring organization.

Requirement. Complete Schedule K if

that answered “Yes” to Form 990, Part

b. No combination of persons with

you answered “Yes” to question 9a in

V, line 9b, or that otherwise distributed

advisory privileges, described in 3

Part V of Form 990, or if you are a fund

prohibited benefits under section 4967,

above, or persons related to those in 3

manager of a sponsoring organization

must complete Schedule L. Report

above, directly or indirectly control the

who agreed to the making of a taxable

each taxable distribution separately.

committee, and

distribution knowing that it was a

Complete Parts I, II, and III of Schedule

c. All grants from the fund or

taxable distribution. Report each

L only in connection with distributions

account are awarded on an objective

taxable distribution separately. These

made by a sponsoring organization

and nondiscriminatory basis according

terms are discussed below.

from a donor advised fund which results

to a procedure approved in advance by

in a prohibited benefit. (See instructions

Taxable distribution. A taxable

the board of directors of the sponsoring

to Schedule K for definitions of the

distribution is any distribution from a

organization. The procedure must be

terms sponsoring organization and

donor advised fund to any natural

designed to ensure that all grants meet

donor advised fund).

person or to any other person if:

the requirements of section 4945(g)(1),

1. the distribution is for any purpose

Prohibited benefit. If any donor,

(2), or (3).

other than one specified in section

donor advisor, or related party advises

170(c)(2)(B), or

Tax on sponsoring organization. A

the sponsoring organization about

2. the sponsoring organization

tax of 20% of the amount of each

making a distribution which results in a

maintaining the donor advised fund

taxable distribution is imposed on the

donor, donor advisor, or related party

does not exercise expenditure

sponsoring organization.

receiving (either directly or indirectly) a

-14-

Form 4720 Instructions

Instructions For Form 4720 - Return Of Certain Excise Taxes On Charities And Other Persons - Department Of The Treasury - 2009 Page 14

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