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Carry the total amount in column (d)

Taxable period. Taxable period

given (including services) by a

for each organization manager to page

means the period beginning with the

disqualified person.

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

date on which the excess benefit

However, an economic benefit will

transaction occurs and ending on the

not be treated as compensation for

earlier of:

services unless the applicable

Schedule I—Initial Taxes

1. The date a notice of deficiency

organization clearly indicates its intent

was mailed to the disqualified person

to treat the economic benefit (when

on Excess Benefit

for the initial tax on the excess benefit

paid) as compensation for a disqualified

Transactions (Section

transaction, or

person’s services. See Regulations

2. The date on which the initial tax

section 53.4958-4(c) for more

4958)

on the excess benefit transaction for

information.

the disqualified person is assessed.

Exception. Generally, section 4958

General Instructions

does not apply to any fixed payment

Excess benefit transaction. An

made to a person under an initial

Requirement. Complete Schedule I

excess benefit transaction is any

contract. See Regulations section

for any Excess benefit transaction in

transaction in which:

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

which an Applicable organization

1. An excess benefit is provided by

Special rule. The initial and additional

provides an Excess benefit to a

the organization, directly or indirectly to,

taxes of this section do not apply if the

Disqualified person. These terms are

or for the use of, any disqualified

discussed below.

transaction described in 1 under

person, or

Excess benefit transaction was

Applicable organization. In

2. The amount of any economic

pursuant to a written contract in effect

general, an applicable organization is

benefit provided to, or for the use of, a

on September 13, 1995, and at all

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

disqualified person is determined in

times after that date until the time that

foundation), any 501(c)(4), or any

whole or in part by the revenues of the

the transaction occurs.

501(c)(29) organization.

organization and violates the private

However, if a written contract is

inurement prohibition rules (to the

Also, an applicable organization

materially modified, it is treated as a

extent provided in regulations).

includes any organization that was a

new contract entered into as of the date

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

of the material modification. A material

Until final regulations are issued

foundation), 501(c)(4) or 501(c)(29)

modification includes amending the

regarding the special rules for

organization at any time during a

contract to extend its term or to

revenue sharing transactions

five-year period ending on the date of

CAUTION

increase the compensation payable to a

described in 2 above, these

an excess benefit transaction (the

disqualified person.

transactions will only be subject to

lookback period).

section 4958 liability under the general

Disqualified person. For purposes of

Initial taxes. Excise taxes are

rule described in 1 above.

this Schedule I, a disqualified person

imposed under section 4958 on each

means:

Supporting organization

excess benefit transaction. If a

transactions occurring after July 25,

1. Any person (at any time during

manager receives an excess benefit

2006. For any supporting organization,

the 5-year period ending on the date of

from an excess benefit transaction, the

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

the transaction) in a position to exercise

manager may be liable for the tax on

grant, loan, compensation, or other

substantial influence over the affairs of

disqualified persons and the tax on the

similar payment provided to a

the organization,

organization manager. See Abatement

substantial contributor (defined later),

2. A family member of an individual

on page 4 for information on

family member, or 35% controlled entity

described in 1 above, and

abatement, refund, or relief from this

will be considered an excess benefit

3. A 35% controlled entity of a

tax.

transaction. The amount of the excess

person described in 1 or 2 above.

Tax on disqualified persons. The

benefit is the amount of such grant,

tax is 25% of the excess benefit and is

Family members. Family members

loan, compensation, or other similar

paid by any disqualified person who

of a disqualified person described in 1

payment. Also, any loan provided to a

improperly benefited from the excess

above include a disqualified person’s

disqualified person that is not an

benefit transaction.

spouse, ancestors, children,

organization described in section

Tax on organization managers. If

grandchildren, great grandchildren, and

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

tax is imposed on a disqualified person

brothers and sisters (whether by whole-

organization of the supporting

for any excess benefit transaction, then

or half-blood). It also includes the

organization exempt under section

tax is also imposed on any manager

spouse of the children, grandchildren,

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

who knowingly participated in the

great grandchildren, brothers, or sisters

last sentence of section 509(a) is

excess benefit transaction. The tax is

(whether by whole- or half-blood).

considered an excess benefit

10% of the excess, not to exceed

transaction.

35% controlled entity. The term

$20,000 for each transaction.

35% controlled entity means:

Donor advised fund transactions

•

Additional tax on the disqualified

A corporation in which a disqualified

occurring after August 17, 2006.

person. If the initial tax is imposed on

person described in 1 or 2 above owns

Any grant, loan, compensation, or other

an excess benefit transaction and the

more than 35% of the total combined

similar payment from any donor

transaction is not corrected within the

voting power,

advised fund to a donor, donor advisor,

•

taxable period, then any disqualified

A partnership in which such persons

family member, or 35% controlled entity

person involved shall be liable for an

own more than 35% of the profits

is an excess benefit transaction. The

additional tax equal to 200% of the

interest, or

amount of the excess benefit is the

•

excess benefit.

A trust or estate in which such

amount of such grant, loan,

persons own more than 35% of the

compensation, or other similar

This additional tax is abated

beneficial interest.

payment.

(refunded if collected) if the excess

Excess benefit. Excess benefit

benefit transaction is corrected within

In determining the holdings of a

the correction period (defined in

means the excess of the economic

business enterprise, any stock or other

Question B, under Specific Instructions

benefit received from the applicable

interest owned directly or indirectly shall

for Page 1 on page 4).

organization over the consideration

apply.

-12-

Form 4720 Instructions

Instructions For Form 4720 - Instructions For Return Of Certain Excise Taxes - Department Of The Treasury - 2010 Page 12

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