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For donor advised funds,

Part II. Enter in column (a) the names

Managers of tax favored

sponsoring organizations, and

of all disqualified persons who took part

TIP

retirement plans, individual

certain supporting organization

retirement arrangements, and

in the excess benefit transactions. If

transactions occurring after August

savings arrangements described in

more than one disqualified person took

17, 2006. The following persons will

sections 401(a), 403(a), 403(b), 529,

part in an excess benefit transaction,

be considered disqualified persons

457(b), 408(a), 220(d), 408(b), 530, or

each is individually liable for the entire

along with certain family members and

223(d) must report and pay tax due

tax on the transaction. But the

35% controlled entities associated with

under 4965(a)(2) on Form 5330.

disqualified persons who are liable for

them:

the tax may prorate the payment

Prohibited tax shelter transaction.

•

among themselves. Enter in column (c)

Donors of donor advised funds,

In general, a prohibited tax shelter

•

the tax to be paid by each disqualified

Investment advisors of sponsoring

transaction means any listed

person.

organizations; and

transaction (including a subsequently

•

Disqualified persons of a section

listed transaction) and any prohibited

Carry the total amount in column (d)

509(a)(3) supporting organization for

reportable transaction.

for each disqualified person to page 1,

the organizations that organization

Part II-A, column (h).

Listed transaction. A listed

supports.

transaction includes any transaction

For certain supporting

Part III. Enter in column (a) the names

that is the same as or substantially

organization transactions occurring

of all managers who knowingly took

similar to one of the types of

after July 25, 2006. Substantial

part in the excess benefit transactions

transactions that the IRS has

contributors to supporting organizations

listed in Part I. If more than one

determined to be a tax avoidance

will also be considered disqualified

manager knowingly took part in an

transaction. These transactions are

persons along with their family

excess benefit transaction, each is

identified by notice, regulation, or other

members and 35% controlled entities.

individually liable for the entire tax in

form of published guidance as a listed

Donor advised fund. See the

connection with the transaction. But the

transaction. For existing guidance see:

•

Schedule K instructions for a definition

managers liable for the tax may prorate

Notice 2004-67, 2004-41 I.R.B. 600

•

of donor advised fund.

the payment among themselves. Enter

Notice 2005-13, 2005-9 I.R.B. 630.

•

in column (c) the tax to be paid by each

Notice 2007-57, 2007-29 I.R.B. 87

Investment advisor. Investment

organization manager.

For updates to this list go to the IRS

advisor means for any sponsoring

web page at

organization, any person compensated

Carry the total amount in column (d)

corporations and click on Abusive Tax

by such organization (but not an

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

Shelters and Transactions. The listed

employee of such organization) for

column (h).

transactions in the above notices and

managing the investment of, or

rulings will also be periodically updated

providing investment advice for assets

in future issues of the Internal Revenue

maintained in donor advised funds

Bulletin.

maintained by such sponsoring

Schedule J—Taxes on

organization.

Subsequently listed transaction

Being a Party to

Sponsoring organization. See the

A subsequently listed transaction is a

Schedule K instructions for a definition

transaction that is identified in

Prohibited Tax Shelter

of sponsoring organization.

published guidance as a listed

Transactions (Section

transaction after the entity has entered

Substantial contributor. In

into the transaction and that was not a

general, a substantial contributor

4965)

confidential transaction or transaction

means any person who contributed or

with contractual protection at the time

bequeathed an aggregate of more than

General Instructions

the entity entered into the transaction.

$5,000 to the organization, if that

amount is more than 2% of the total

Prohibited reportable transaction.

Requirement.

contributions and bequests received by

A prohibited reportable transaction is

1. Complete Schedule J if you are

the organization before the end of the

any confidential transaction or any

an entity described in section 501(c),

tax year of the organization in which the

transaction with contractual protection

501(d), or 170(c) (other than the United

contribution or bequest is received by

that is a reportable transaction. See

States) or an Indian tribal government

the organization from such person. A

Regulations sections 1.6011-4(b)(3)

(within the meaning of section

substantial contributor includes the

and (4), and the Instructions for Form

7701(a)(40)) and you received

grantor of a trust.

8886-T, Disclosure by Tax-Exempt

proceeds from or have net income

Entity Regarding Prohibited Tax Shelter

attributable to a prohibited tax shelter

Transaction for more information.

transaction (PTST).

Specific Instructions

2. Complete Schedule J if you are

Allocation of net income and

Part I. List each excess benefit

an entity manager of such an entity

proceeds to a tax year. The net

transaction in Part I, column (c). Enter

who approved the entity as (or

income and proceeds attributable to a

the date of the transaction in column (b)

otherwise caused the entity to be) a

prohibited tax shelter transaction must

and the amount of the excess benefit in

party to a PTST at any time during the

be allocated to a particular tax year in a

column (d). Compute the tax on the

tax year and who knew (or had reason

manner consistent with the entity’s

excess benefit for disqualified persons

to know) that the transaction is a PTST.

established method of accounting for

and enter it in column (e). Compute any

federal income tax purposes. If an

tax on the excess benefit for

entity has not established a method of

See the following guidance and any

organization managers and enter the

accounting for federal income tax

future guidance for details.

amount in column (f).

purposes, the entity must use the cash

•

Notice 2006-65, 2006-31 I.R.B. 102

For organization managers, the tax

receipts and disbursements method to

•

Notice 2007-18, 2007-9 I.R.B. 608

is the lesser of 10% of the excess

determine the amount and timing of net

•

T.D. 9334, 2007-34 I.R.B. 382

benefit or $20,000. This tax is

income and proceeds attributable to a

•

T.D. 9335, 2007-34 I.R.B. 380

computed on each transaction.

prohibited tax shelter transaction.

-13-

Form 4720 Instructions

Instructions For Form 4720 - Return Of Certain Excise Taxes On Charities And Other Persons - Department Of The Treasury - 2007 Page 13

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