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

There is no limit on the amount of

improperly benefited from the excess

transaction. The amount of the excess

this tax that may be imposed against

benefit transaction.

benefit is the amount of such grant,

either the organization or its managers.

loan, compensation, or other similar

Tax on organization managers. If

Any organization manager who agreed

payment. Also, any loan provided to a

tax is imposed on a disqualified person

to the expenditure must pay the tax.

disqualified person that is not an

for any excess benefit transaction, then

organization described in 509(a)(1), (2),

tax is also imposed on any manager

Specific Instructions

or (4) is considered an excess benefit

who knowingly participated in the

transaction as well.

excess benefit transaction. The tax is

Part I. Complete this part for all

10% of the excess, not to exceed

Donor advised fund transactions

disqualifying lobbying expenditures.

$20,000 ($10,000 for transactions

occurring after August 17, 2006. Any

Part II. Enter in column (a) the names

entered in a tax year beginning before

grant, loan, compensation, or other

of all organization managers who took

August 18, 2006) for each transaction.

similar payment from any donor

part in making disqualifying lobbying

advised fund to a donor, family

Additional tax on the disqualified

expenditures listed in Part I. See Tax

member, or 35% controlled entity is an

person. If the initial tax is imposed on

on organization managers above.

excess benefit transaction. The amount

an excess benefit transaction and the

If more than one organization

of the excess benefit is the amount of

transaction is not corrected within the

manager is listed in column (a), each is

such grant, loan, compensation, or

taxable period, then any disqualified

individually liable for the entire amount

other similar payment.

person involved shall be liable for an

of tax in connection with the

additional tax equal to 200% of the

Excess benefit. Excess benefit

expenditure. However, the managers

excess benefit.

means the excess of the economic

who are liable for the tax may prorate

benefit received from the applicable

This additional tax is abated

payment among themselves. Enter in

organization over the consideration

(refunded if collected) if the excess

column (c) the tax each manager will

given (including services) by a

benefit transaction is corrected within

pay.

disqualified person.

the correction period (defined in

Carry the total amount in column (d)

Question B, under Specific Instructions

However, an economic benefit will

for Page 1 on page 3).

for each organization manager to page

not be treated as compensation for

1, Part II-A, column (g).

Taxable period. Taxable period

services unless the applicable

means the period beginning with the

organization clearly indicates its intent

date on which the excess benefit

to treat the economic benefit (when

Schedule I—Initial Taxes

transaction occurs and ending on the

paid) as compensation for a disqualified

earlier of:

person’s services. See Regulations

on Excess Benefit

section 53.4958-4(c) for more

1. The date a notice of deficiency

information.

Transactions (Section

was mailed to the disqualified person

for the initial tax on the excess benefit

Exception. Generally, section 4958

4958)

transaction, or

does not apply to any fixed payment

2. The date on which the initial tax

made to a person under an initial

General Instructions

on the excess benefit transaction for

contract. See Regulations section

the disqualified person is assessed.

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

Requirement. Complete Schedule I for

Special rule. The initial and additional

any Excess benefit transaction in which

Excess benefit transaction. An

taxes of this section do not apply if the

an Applicable organization provides an

excess benefit transaction is any

transaction described in 1 under

Excess benefit to a Disqualified person.

transaction in which:

Excess benefit transaction was

These terms are discussed below.

1. An excess benefit is provided by

pursuant to a written contract in effect

Applicable organization. In

the organization, directly or indirectly to,

on September 13, 1995, and at all

general, an applicable organization is

or for the use of, any disqualified

times after that date until the time that

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

person, or

the transaction occurs.

foundation) or any 501(c)(4)

2. The amount of any economic

However, if a written contract is

organization.

benefit provided to, or for the use of, a

materially modified, it is treated as a

disqualified person is determined in

Also, an applicable organization

new contract entered into as of the date

whole or in part by the revenues of the

includes any organization that was a

of the material modification. A material

organization and violates the private

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

modification includes amending the

inurement prohibition rules (to the

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

contract to extend its term or to

extent provided in regulations).

during a five-year period ending on the

increase the compensation payable to a

date of an excess benefit transaction

disqualified person.

Until final regulations are issued

(the lookback period).

regarding the special rules for

Disqualified person. For purposes of

Initial taxes. Excise taxes are imposed

revenue sharing transactions

this Schedule I, a disqualified person

CAUTION

under section 4958 on each excess

described in 2 above, these

means:

benefit transaction. If a manager

transactions will only be subject to

1. Any person (at any time during

receives an excess benefit from an

section 4958 liability under the general

the 5-year period ending on the date of

excess benefit transaction, the

rule described in 1 above.

the transaction) in a position to exercise

manager may be liable for the tax on

Supporting organization

substantial influence over the affairs of

disqualified persons and the tax on the

transactions occurring after July 25,

the organization,

organization manager. See Abatement

2006. For any supporting organization,

2. A family member of an individual

on page 4 for information on

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

described in 1, 2, or 3, and

abatement, refund, or relief from this

grant, loan, compensation, or other

3. A 35% controlled entity.

tax.

similar payment provided to a

Tax on disqualified persons. The

substantial contributor (defined later),

Family members. Family members

tax is 25% of the excess benefit and is

family member, or 35% controlled entity

of an individual (described in 1 above)

paid by any disqualified person who

will be considered an excess benefit

include a disqualified person’s spouse,

-12-

Form 4720 Instructions

Instructions For Form 4720 - Return Of Certain Excise Taxes On Charities And Other Persons - Department Of The Treasury - 2006 Page 12

Related Articles

Related forms

Related Categories