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Interest at the underpayment rate

must correct the taxable event within the

give the following information separately for

established under section 6621 is charged for

correction period. The taxable event is the act,

each correction:

•

any unpaid tax. The interest on underpayments

failure to act, or transaction that resulted in the

Schedule and item number of the act or

is in addition to any penalties.

liability for initial taxes under these provisions.

transaction that has been corrected,

•

A description of the act or transaction that

Generally, the correction period begins on

Abatement

resulted in the tax,

the date the event occurs and ends 90 days

•

A detailed description of the correction

after the mailing date of a notice of deficiency,

See section 4962 for rules on abatement,

made,

under section 6212, in connection with the

refund, or relief from payment of first tier taxes

•

The amount of any political expenditure

second tier tax imposed on that taxable event.

under sections 4942 through 4945, 4955, and

recovered,

That time is extended by:

4958. To request abatement, refund, or relief

•

Description of safeguards to prevent future

Any period in which a deficiency cannot be

under section 4962, write “Request for

political expenditures, and

assessed under section 6213(a) because a

Abatement Under Section 4962” in the top

•

The date of correction.

petition to the Tax Court for redetermination of

margin of Form 4720, page 1.

the deficiency is pending, not extended by any

For any acts or transactions the foundation,

supplemental proceeding by the Tax Court

Initial Tax Liability

organization, managers, disqualified persons,

under section 4961(b), regarding whether

or self-dealers have not corrected, give the

If you pay an initial tax on self-dealing or on

correction was made, and

following information separately for each act:

•

investments that jeopardize charitable purpose

•

Any other period the IRS determines is

Schedule and item number of the act or

(figured on Schedules A and D of Form 4720,

reasonable and necessary to correct the

transaction that has not been corrected,

respectively) for tax year 2004, the payment

•

taxable event.

A description of the act or transaction, and

may not satisfy the entire tax liability for an act

•

A detailed explanation of why correction has

The taxable event will be treated as

of self-dealing or a jeopardy investment. (For

not been made and what steps are being taken

occurring:

the definition of self-dealing, see the

•

to make the correction.

For the tax on failure to distribute income, on

instructions for Schedule A of this form; for the

the first day of the tax year for which there was

If you are correcting deficient distributions

definition of jeopardy investment, see the

a failure to distribute income,

under section 4942 where an election under

instructions for Schedule D of this form.)

•

For the tax on excess business holdings, on

section 4942(h)(2) was filed with the IRS,

Paying the tax and filing a Form 4720 are

the first day on which there were excess

provide a copy of the election. See the

required for each year or part of a year in the

business holdings, or

instructions for Form 990-PF, Part XIII, lines 4b

taxable period that applies to the act or

•

In any other case, on the date the event

and 4c for more information.

investment. Generally, the taxable period

occurred.

begins with the date of the act or investment

Part I

Generally, the term “correction” has the

and ends with the date corrective action is

following meanings.

completed, a notice of deficiency is mailed, or

Line 8

the tax is assessed, whichever comes first.

1. Section 4941 (Schedule A) — Undoing

If the organization has an entry on this

the transaction to the extent possible, but in

Similar rules apply for the initial tax liability

TIP

line, it must also file Form 8870.

any case placing the private foundation in a

resulting from failing to distribute income

financial position not worse than that in which it

(Schedule B) and from acquiring excess

would be if the disqualified person were

business holdings (Schedule C). Thus, the

Enter the total of all premiums paid by the

dealing under the highest fiduciary standards.

initial tax liability for those taxes continues to

organization on any personal benefit contract if

2. Section 4942 (Schedule B) — Making

accrue until the date a notice of deficiency is

the payment of premiums is in connection with

sufficient qualifying distributions to compensate

mailed, the violation is corrected, or the tax is

a transfer for which a deduction is not allowed

for deficient qualifying distributions for a prior

assessed, whichever comes first.

under section 170(f)(10)(A). Also, if there is an

tax year.

understanding or expectation that any person

Completing the Schedules

3. Section 4943 (Schedule C) — Action that

will directly or indirectly pay any premium on a

results in the foundation no longer having

personal benefit contract for the transferor,

Before completing any of the schedules in this

excess business holdings in a business

include those premium payments in the

return, read the applicable instructions. If any

enterprise.

amount entered on this line.

completed schedule shows taxes owed, enter

4. Section 4944 (Schedule D) — An

them on page 1 of this return.

A personal benefit contract is (to the

investment is considered to be removed from

transferor) any life insurance, annuity, or

The instructions for Schedules A through F

jeopardy when the investment is sold or

endowment contract that benefits directly or

describe acts or transactions subject to tax

otherwise disposed of, and the proceeds of

indirectly the transferor, a member of the

under Chapter 42. Also, refer to Pub. 578, Tax

such sale or other disposition are not

transferor’s family, or any other person

Information for Private Foundations and

investments that jeopardize the carrying out of

designated by the transferor (other than an

Foundation Managers, for a list of exceptions

the foundation’s exempt purposes.

organization described in section 170(c)).

that eliminate any tax liability that would

5. Section 4945 (Schedule E) —

otherwise be shown on Schedules A and E. Do

For more information, see Notice 2000-24,

a. Recovering part or all of the expenditure

not complete Schedules A and E if exceptions

2000-17 I.R.B. 952.

to the extent recovery is possible, and where

apply to all the acts or transactions. Question A

full recovery is not possible, such additional

Part II-A

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

corrective action as is prescribed by

not apply to public charities.

regulations, or

Columns (a) and (b). List the names,

Before completing Schedule C, determine

b. Obtaining or making the report in

addresses, and taxpayer identification number

whether the foundation has excess holdings in

question for a case that fails to comply with

of all persons who owe tax in connection with

any business enterprise. If the foundation has

section 4945(h)(2) or (3) (expenditure

the foundation or organization, whether as

holdings subject to the tax on excess business

responsibility).

managers, self-dealers, or disqualified

holdings, complete Schedule C for each

6. Section 4955 (Schedule F) —

persons, as shown in Schedules A, D, E, F, H,

enterprise.

Recovering part or all of the expenditure to the

and I.

extent recovery is possible, establishment of

Before completing Schedule D, determine

Column (c). For each person listed in column

safeguards to prevent future political

whether the investment was program related. If

(a), enter the sum of:

expenditures, and where full recovery is not

not, complete Schedule D for each investment

1. Taxes that person owes as a

possible, such additional corrective action as is

for which you answered “Yes” to Form 990-PF,

self-dealer, from Schedule A, Part II, column

prescribed by the regulations.

Part VII-B, question 4a or b, or Form 5227,

(d), and

7. Section 4958 (Schedule I) — Undoing

Part VI-B, question 4a or b.

2. Tax for acts of self-dealing in which the

the excess benefit to the extent possible and

individual participated as a foundation

taking any additional measures necessary to

manager, from Schedule A, Part III, column (d).

place the organization in a financial position

Specific Instructions for

not worse than that in which it would be if the

Column (d). Enter for each person listed in

Page 1

disqualified person had been dealing under the

column (a) the tax on jeopardy investments

highest fiduciary standards.

from Schedule D, Part II, column (d), that the

Question B. To avoid additional taxes and

individual took part in as a foundation

penalties under sections 4941 through 4945,

If, when the return is filed, the foundation,

manager.

4955, and 4958, and in some cases further

organization, managers, disqualified persons,

initial taxes on the foundation, organization,

or self-dealers have corrected any acts or

Column (e). Enter for each person listed in

and related persons, a foundation,

transactions resulting in liability for tax under

column (a) the tax on taxable expenditures

organization, disqualified person, or manager

Chapter 42, answer “Yes” to question B and

from Schedule E, Part II, column (d), that the

-3-

Form 4720 Instructions

Instructions For Form 4720 - Return Of Certain Excise Taxes On Charities And Other Persons - Department Of The Treasury - 2004 Page 3

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