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

transaction occurs and ending on the

However, an economic benefit will

Schedule I—Initial Taxes

earlier of:

not be treated as compensation for

services unless the applicable

1. The date a notice of deficiency

on Excess Benefit

organization clearly indicates its intent

was mailed to the disqualified person

to treat the economic benefit (when

Transactions (Section

for the initial tax on the excess benefit

paid) as compensation for a disqualified

transaction, or

4958)

person’s services. See Regulations

2. The date on which the initial tax

section 53.4958-4(c) for more

on the excess benefit transaction for

information.

General Instructions

the disqualified person is assessed.

Exception. Generally, section 4958

Requirement. Complete Schedule I

Excess benefit transaction. An

does not apply to any fixed payment

for any Excess benefit transaction in

excess benefit transaction is any

made to a person under an initial

which an Applicable organization

transaction in which:

contract. See Regulations section

provides an Excess benefit to a

1. An excess benefit is provided by

53.4958-4(a)(3) for details.

Disqualified person. These terms are

the organization, directly or indirectly to,

Special rule. The initial and additional

discussed below.

or for the use of, any disqualified

taxes of this section do not apply if the

Applicable organization. In

person, or

transaction described in 1 under

general, an applicable organization is

2. The amount of any economic

Excess benefit transaction, was

any section 501(c)(3) (except a private

benefit provided to, or for the use of, a

pursuant to a written contract in effect

foundation) or any 501(c)(4)

disqualified person is determined in

on September 13, 1995, and at all

organization.

whole or in part by the revenues of the

times after that date until the time that

organization and violates the private

Also, an applicable organization

the transaction occurs.

inurement prohibition rules (to the

includes any organization that was a

However, if a written contract is

extent provided in regulations).

501(c)(3) (except a private foundation)

materially modified, it is treated as a

or 501(c)(4) organization at any time

new contract entered into as of the date

Until final regulations are issued

during a five-year period ending on the

of the material modification. A material

regarding the special rules for

date of an excess benefit transaction

modification includes amending the

revenue sharing transactions

(the lookback period).

CAUTION

contract to extend its term or to

described in 2 above, these

Initial taxes. Excise taxes are

increase the compensation payable to a

transactions will only be subject to

imposed under section 4958 on each

disqualified person.

section 4958 liability under the general

excess benefit transaction. If a

rule described in 1 above.

Disqualified person. For purposes of

manager receives an excess benefit

this Schedule I, a disqualified person

Supporting organization

from an excess benefit transaction, the

means:

transactions occurring after July 25,

manager may be liable for the tax on

2006. For any supporting organization,

1. Any person (at any time during

disqualified persons and the tax on the

as defined in section 509(a)(3), any

the 5-year period ending on the date of

organization manager. See Abatement

grant, loan, compensation, or other

the transaction) in a position to exercise

on page 4 for information on

similar payment provided to a

substantial influence over the affairs of

abatement, refund, or relief from this

substantial contributor (defined later),

the organization,

tax.

family member, or 35% controlled entity

2. A family member of an individual

Tax on disqualified persons. The

will be considered an excess benefit

described in 1, 2, or 3, and

tax is 25% of the excess benefit and is

transaction. The amount of the excess

3. A 35% controlled entity.

paid by any disqualified person who

benefit is the amount of such grant,

improperly benefited from the excess

Family members. Family members

loan, compensation, or other similar

benefit transaction.

of an individual (described in 1 above)

payment. Also, any loan provided to a

Tax on organization managers. If

include a disqualified person’s spouse,

disqualified person that is not an

tax is imposed on a disqualified person

ancestors, children, grandchildren,

organization described in section

for any excess benefit transaction, then

great grandchildren, and brothers and

509(a)(1), (2), or (4) or a supported

tax is also imposed on any manager

sisters (whether by whole- or

organization of the supporting

who knowingly participated in the

half-blood). It also includes the spouse

organization exempt under section

excess benefit transaction. The tax is

of the children, grandchildren, great

501(c)(4), (5), (6) and described in the

10% of the excess, not to exceed

grandchildren, brothers, or sisters

last sentence of section 509(a) is

$20,000 for each transaction.

(whether by whole- or half-blood).

considered an excess benefit

Additional tax on the disqualified

transaction.

35% controlled entity. The term

person. If the initial tax is imposed on

35% controlled entity means:

Donor advised fund transactions

•

an excess benefit transaction and the

A corporation in which a person

occurring after August 17, 2006.

transaction is not corrected within the

described in 1 through 5 under

Any grant, loan, compensation, or other

taxable period, then any disqualified

Disqualified person owns more than

similar payment from any donor

person involved shall be liable for an

35% of the total combined voting

advised fund to a donor, family

additional tax equal to 200% of the

power,

member, or 35% controlled entity is an

•

excess benefit.

A partnership in which such persons

excess benefit transaction. The amount

own more than 35% of the profits

This additional tax is abated

of the excess benefit is the amount of

interest, or

(refunded if collected) if the excess

such grant, loan, compensation, or

•

A trust or estate in which such

benefit transaction is corrected within

other similar payment.

persons own more than 35% of the

the correction period (defined in

Excess benefit. Excess benefit

beneficial interest.

Question B, under Specific Instructions

means the excess of the economic

for Page 1 on page 4).

benefit received from the applicable

In determining the holdings of a

Taxable period. Taxable period

organization over the consideration

business enterprise, any stock or other

means the period beginning with the

given (including services) by a

interest owned directly or indirectly shall

date on which the excess benefit

disqualified person.

apply.

-12-

Form 4720 Instructions

Instructions For Form 4720 - Return Of Certain Excise Taxes On Charities And Other Persons - Department Of The Treasury - 2007 Page 12

Related Articles

Related forms

Related Categories