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Managers and self-dealers should pay

excess business holdings, complete

Initial Tax Liability

taxes imposed on them with their own

Schedule C for each enterprise.

check or money order.

If you pay an initial tax on self-dealing

Before completing Schedule D,

or on investments that jeopardize

Disqualified persons and entity

determine whether the investment was

charitable purpose (figured on

managers should pay taxes on excess

program related. If not, complete

Schedules A and D of Form 4720,

benefit transactions that are imposed

Schedule D for each investment for

respectively) for tax year 2007, the

on them with their own check or money

which you answered “Yes” to Form

payment may not satisfy the entire tax

order. Any reimbursement of a

990-PF, Part VII-B, question 4a or b, or

liability for an act of self-dealing or a

disqualified person’s tax liability from

Form 5227, Part VI-B, question 78a or

jeopardy investment. (For the definition

excess benefit transactions by the

of self-dealing, see the instructions for

organization will be treated as an

Schedule A of this form; for the

excess benefit transaction subject to

definition of jeopardy investment, see

the tax unless the organization included

Specific Instructions for

the instructions for Schedule D of this

the reimbursement in the disqualified

form.) Paying the tax and filing a Form

Page 1

person’s compensation and the

4720 are required for each year or part

disqualified person’s total

of a year in the taxable period that

Question B. To avoid additional taxes

compensation was reasonable. See the

applies to the act or investment.

and penalties under sections 4941

instructions to Schedule I on page 12

Generally, the taxable period begins

through 4945, 4955, and 4958, and in

for information on excess benefit

with the date of the act or investment

some cases further initial taxes on the

transactions.

and ends with the date corrective action

foundation, organization, and related

is completed, a notice of deficiency is

persons, a foundation, organization,

Rounding Off to Whole

mailed, or the tax is assessed,

disqualified person, or manager must

whichever comes first.

correct the taxable event within the

Dollars

correction period. The taxable event is

Similar rules apply for the initial tax

You may round off cents to whole

the act, failure to act, or transaction that

liability resulting from failing to distribute

dollars on your return and schedules. If

resulted in the liability for initial taxes

income (Schedule B) and from

you do round to whole dollars, you

under these provisions.

acquiring excess business holdings

must round all amounts. To round, drop

(Schedule C). Thus, the initial tax

amounts under 50 cents and increase

Generally, the correction period

liability for those taxes continues to

amounts from 50 to 99 cents to the next

begins on the date the event occurs

accrue until the date a notice of

dollar. For example, $1.39 becomes $1

and ends 90 days after the mailing date

deficiency is mailed, the violation is

and $2.50 becomes $3.

of a notice of deficiency, under section

corrected, or the tax is assessed,

6212, in connection with the second tier

If you have to add two or more

whichever comes first.

tax imposed on that taxable event. That

amounts to figure the amount to enter

time is extended by:

on a line, include cents when adding

•

Completing the

Any period in which a deficiency

the amounts and round off only the

cannot be assessed under section

total.

Schedules

6213(a) because a petition to the Tax

Court for redetermination of the

Before completing any of the schedules

Penalties and Interest

deficiency is pending, not extended by

in this return, read the applicable

any supplemental proceeding by the

instructions. If any completed schedule

There are penalties for failure to file or

Tax Court under section 4961(b),

shows taxes owed, enter them on page

to pay tax. There are also penalties for

regarding whether correction was

1 of this return.

willful failure to file, supply information

made, and

or pay tax, and for filing fraudulent

•

The instructions for Schedules A

Any other period the IRS determines

returns and statements, that apply to

through L describe acts or transactions

is reasonable and necessary to correct

public charities, private foundations,

subject to tax under Chapter 42. Also,

the taxable event.

managers, donors, donor advisors,

go to

related persons, and self-dealers who

The taxable event will be treated as

index.html for a list of exceptions that

are required to file this return. See

occurring:

eliminate any tax liability that would

•

sections 6651, 7203, 7206, and 7207.

For the tax on failure to distribute

otherwise be shown on Schedules A

Also, see section 6684 for penalties

income, on the first day of the tax year

and E. Do not complete Schedules A

that relate to tax liability under Chapter

for which there was a failure to

and E if exceptions apply to all the acts

42.

distribute income,

or transactions. In general, question A

•

For the tax on excess business

Interest at the underpayment rate

on page 1 and Schedules A, B, C, D,

holdings, on the first day on which there

established under section 6621 is

and E do not apply to public charities.

were excess business holdings, or

charged for any unpaid tax. The

However, Schedule C does apply to

•

In any other case, on the date the

interest on underpayments is in addition

some public charities including donor

event occurred.

to any penalties.

advised funds and certain supporting

organizations that are treated as private

Generally, the term “correction” has

foundations for purposes of section

Abatement

the following meanings.

4943. See the instructions for Schedule

See section 4962 for rules on

1. Section 4941 (Schedule A) —

C for a description of the public

abatement, refund, or relief from

Undoing the transaction to the extent

charities to which section 4943 applies.

payment of first tier taxes under

possible, but in any case placing the

sections 4942 through 4945, 4955,

Before completing Schedule C,

private foundation in a financial position

4958, 4966, and 4967. To request

determine whether the organization or

not worse than that in which it would be

abatement, refund, or relief under

donor advised fund has excess

if the disqualified person were dealing

section 4962, write “Request for

holdings in any business enterprise. If

under the highest fiduciary standards.

Abatement Under Section 4962” in the

the organization or donor advised fund

2. Section 4942 (Schedule B) —

top margin of Form 4720, page 1.

has holdings subject to the tax on

Making sufficient qualifying distributions

-4-

Form 4720 Instructions

Instructions For Form 4720 - Return Of Certain Excise Taxes On Charities And Other Persons - Department Of The Treasury - 2007 Page 4

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