Looking for a Form 4720 Templates? Download it for free!

Taxable investments. An investment

above can be found at

Schedule E—Initial

gov/irm/part7/ch12s16.html.

to be taxed on this schedule is an

investment by a private foundation that

Initial tax on foundation. An initial

Taxes on Taxable

jeopardizes the carrying out of its

tax of 20% is imposed on each taxable

exempt purposes (for example, if it is

Expenditures (Section

expenditure of the foundation.

determined that the foundation

Initial tax on foundation managers.

4945)

managers, in making the investment,

When a tax is imposed on a taxable

did not exercise ordinary business care

expenditure of the foundation, a tax of

and prudence, under prevailing facts

General Instructions

5% of the expenditure will be imposed

and circumstances, in providing for the

Requirement. Complete Schedule E if

on any foundation manager who

long- and short-term financial needs of

you answered “Yes” to Form 990-PF,

agreed to the expenditure and who

the foundation to carry out its exempt

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

knew that it was a taxable expenditure.

purposes). See Regulations section

Foundation managers whose

Part VI-B, question 79b. Complete

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

participation was not willful and was

Parts I and II of Schedule E only for

taxed on this schedule if it is a

due to reasonable cause are not liable

expenditures that are subject to tax.

program-related investment; that is, one

for the tax. Any foundation manager

whose primary purpose is one or more

Note. Also, see Schedule F, Initial

who took part in the expenditure and is

of those described in section

Taxes on Political Expenditures.

liable for the tax must pay the tax. The

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

maximum total amount of tax on all

Taxable expenditures. With certain

educational, etc.). A significant purpose

foundation managers for any one

exceptions, this means any amount a

of such an investment cannot be the

taxable expenditure is $10,000. If more

private foundation pays or incurs:

production of income or the

than one foundation manager is liable

1. To carry on propaganda or

appreciation of property. See section

for tax on a taxable expenditure, all

otherwise influence any legislation

4944(c) and Regulations section

those foundation managers are jointly

through:

53.4944-3.

and severally liable for the tax.

a. An attempt to influence general

Initial taxes on foundation. The

Specific Instructions

public opinion or any segment of it, and

initial tax is 10% of the amount invested

b. Communication with any member

Part I. Complete this part for all

for each year or part of a year in the

or employee of a legislative body, or

taxable expenditures. Enter in column

taxable period.

with any other government official or

(f) the number designation from Form

employee who may take part in

Initial taxes on foundation managers.

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

formulating legislation;

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

When a tax is imposed on a jeopardy

2. To influence the outcome of any

that applies to the act; for example,

investment of the foundation, the tax

specific public election, or to conduct,

“5a(1).”

will be 10% of the investment for each

directly or indirectly, any voter

year or part of a year in the taxable

registration drive;

Part II. Enter in column (a) the names

period, up to $10,000 for any one

3. As a grant to an individual for

of all foundation managers who agreed

investment. It is imposed on all

to make the taxable expenditure. See

travel, study, or other purposes;

foundation managers who took part in

Initial tax on foundation managers

4. As a grant to an organization not

the act, knowing that it was such an

above. If more than one foundation

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

act, except for foundation managers

manager is listed in column (a), each is

(3) or that is not an exempt operating

whose participation was not willful and

individually liable for the entire tax in

foundation (as defined in section

was due to reasonable cause. Any

connection with the expenditure.

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

foundation manager who took part in

However, the foundation managers who

a. Type I, Type II, and Type III

making the investment must pay the

are liable for the tax may prorate the

functionally integrated supporting

tax.

payment among themselves. Enter in

organizations (as described in section

column (c) the tax each foundation

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

Specific Instructions

manager will pay.

the foundation controls such supporting

organization or the supported

Carry the total amount in column (d)

Part I. Complete this part for all

organizations of such supporting

for each foundation manager to page 1,

taxable investments.

organizations, and

Part II-A, column (e).

b. Type III supporting organizations

Part II. Enter in column (a) the names

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

of all foundation managers who took

that are not functionally integrated with

part in making the investments listed in

Schedule F—Initial

its supported organizations; or

Part I. See Initial taxes on foundation

Taxes on Political

5. For any purpose other than

managers above.

religious, charitable, scientific, literary,

Expenditures (Section

If more than one foundation

educational, or public purposes, or the

manager is listed in column (a), each is

prevention of cruelty to children or

4955)

animals.

individually liable for the entire amount

of tax in connection with the

General Instructions

investment. However, the foundation

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

managers who are liable for the tax

provides an exception to taxable

Requirement. Complete Schedule F if

may prorate payment among

expenditures that applies to certain

you answered “Yes” to question 5a(2)

themselves. Enter in column (c) the tax

grants to organizations when the

and 5b of Form 990-PF, Part VII-B.

granting foundation exercises

Complete Schedule F if you entered an

each foundation manager will pay.

expenditure responsibility described in

amount of political expenditure in

Carry the total amount in column (d)

section 4945(h). Additional information

question 81a, Part VI, of Form 990, or

for each foundation manager to page 1,

on special rules and exceptions to the

in question 37a, Part V, of Form

Part II-A, column (d).

definition of taxable expenditures given

990-EZ.

-10-

Form 4720 Instructions

Instructions For Form 4720 - Return Of Certain Excise Taxes On Charities And Other Persons - Department Of The Treasury - 2007 Page 10

Related Articles

Related forms

Related Categories