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year or part of a year in the taxable

directly or indirectly, any voter

Schedule D—Initial

period, up to $10,000 ($5,000 for

registration drive;

investments made in a tax year

3. As a grant to an individual for

Taxes on Investments

beginning before August 18, 2006) for

travel, study, or other purposes;

any one investment. It is imposed on all

That Jeopardize

4. As a grant to an organization not

foundation managers who took part in

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

Charitable Purpose

the act, knowing that it was such an

(3) or that is not an exempt operating

act, except for foundation managers

foundation (as defined in section

(Section 4944)

whose participation was not willful and

4940(d)(2)). After August 17, 2006, this

was due to reasonable cause. Any

includes grants to:

General Instructions

foundation manager who took part in

a. Type I, Type II, and Type III

making the investment must pay the

Requirement. Complete Schedule D if

functionally integrated supporting

tax.

you answered “Yes” to Form 990-PF,

organizations (as described in section

Part VII-B, question 4a or b, or Form

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

Specific Instructions

5227, Part VI-B, question 4a or b.

the foundation controls such supporting

Part I. Complete this part for all taxable

Report each investment separately.

organization or the supported

investments.

Paying tax and filing a Form 4720 are

organizations of such supporting

required for each year or part of a year

organizations, and

Part II. Enter in column (a) the names

in the taxable period that applies to the

b. Type III supporting organizations

of all foundation managers who took

investments that jeopardize the

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

part in making the investments listed in

foundation’s charitable purpose.

Part I. See Initial taxes on foundation

that are not functionally integrated with

Generally, the taxable period begins

managers above.

its supported organizations; or

with the date of the investment and

5. For any purpose other than

If more than one foundation

ends with the date corrective action is

religious, charitable, scientific, literary,

manager is listed in column (a), each is

completed, a notice of deficiency is

educational, or public purposes, or the

individually liable for the entire amount

mailed, or the initial tax is assessed,

prevention of cruelty to children or

of tax in connection with the

whichever comes first. Therefore, in

animals.

investment. However, the foundation

addition to investments made in 2006,

managers who are liable for the tax

include all investments subject to tax

may prorate payment among

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

that were made before 2006 if those

themselves. Enter in column (c) the tax

provides an exception to taxable

investments were not removed from

each foundation manager will pay.

expenditures that applies to certain

jeopardy before 2006 and the initial tax

grants to organizations when the

was not assessed before 2006.

Carry the total amount in column (d)

granting foundation exercises

Taxable investments. An investment

for each foundation manager to page 1,

expenditure responsibility described in

to be taxed on this schedule is an

Part II-A, column (d).

section 4945(h). Additional information

investment by a private foundation that

on special rules and exceptions to the

jeopardizes the carrying out of its

definition of taxable expenditures given

exempt purposes (for example, if it is

Schedule E—Initial

above can be found at

determined that the foundation

charities/foundations/index.html.

Taxes on Taxable

managers, in making the investment,

did not exercise ordinary business care

Expenditures (Section

Initial tax on foundation. An initial tax

and prudence, under prevailing facts

of 20% (10% for expenditures made in

and circumstances, in providing for the

4945)

a tax year beginning before August 18,

long- and short-term financial needs of

2006) of each taxable expenditure is

the foundation to carry out its exempt

General Instructions

imposed on the foundation.

purposes). See Regulations section

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

Requirement. Complete Schedule E if

Initial tax on foundation managers.

taxed on this schedule if it is a

you answered “Yes” to Form 990-PF,

When a tax is imposed on a taxable

program-related investment; that is, one

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

expenditure of the foundation, a tax of

whose primary purpose is one or more

Part VI-B, question 5b. Complete Parts

5% (2

% for expenditures made in a

of those described in section

I and II of Schedule E only for

tax year beginning before August 18,

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

expenditures that are subject to tax.

2006) of the expenditure will be

educational, etc.). A significant purpose

imposed on any foundation manager

Note. Also, see Schedule F, Initial

of such an investment cannot be the

who agreed to the expenditure and who

Taxes on Political Expenditures.

production of income or the

knew that it was a taxable expenditure.

appreciation of property. See section

Taxable expenditures. With certain

Foundation managers whose

4944(c) and Regulations section

exceptions, this means any amount a

participation was not willful and was

53.4944-3.

private foundation pays or incurs:

due to reasonable cause are not liable

Initial taxes on foundation. The initial

1. To carry on propaganda or

for the tax. Any foundation manager

tax is 10% (5% for investments made in

otherwise influence any legislation

who took part in the expenditure and is

a tax year beginning before August 18,

through:

liable for the tax must pay the tax. The

2006) of the amount invested for each

maximum total amount of tax on all

a. An attempt to influence general

year or part of a year in the taxable

foundation managers for any one

public opinion or any segment of it, and

period.

taxable expenditure is $10,000 ($5,000

b. Communication with any member

for expenditures made in a tax year

Initial taxes on foundation managers.

or employee of a legislative body, or

beginning before August 18, 2006). If

When a tax is imposed on a jeopardy

with any other government official or

more than one foundation manager is

investment of the foundation, the tax

employee who may take part in

liable for tax on a taxable expenditure,

will be10% (5% for investments made

formulating legislation;

in a tax year beginning before August

2. To influence the outcome of any

all those foundation managers are

18, 2006) of the investment for each

specific public election, or to conduct,

jointly and severally liable for the tax.

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Form 4720 Instructions

Instructions For Form 4720 - Return Of Certain Excise Taxes On Charities And Other Persons - Department Of The Treasury - 2006 Page 10

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