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Abatement

Generally, the correction period begins on

2. A description of the act or transaction

the date the event occurs and ends 90 days

that resulted in the tax,

See section 4962 for rules on abatement,

after the mailing date of a notice of deficiency,

3. A detailed description of the correction

refund, or relief from payment of first tier taxes

under section 6212, in connection with the

made,

under sections 4942 through 4945, 4955, and

second tier tax imposed on that taxable event.

4. The amount of any political expenditure

4958. To request abatement, refund, or relief

That time is extended by:

recovered,

under section 4962, write “Request for

5. Description of safeguards to prevent

1. Any period in which a deficiency cannot

Abatement Under Section 4962” in the top

future political expenditures, and

be assessed under section 6213(a) because a

margin of Form 4720, page 1.

6. The date of correction.

petition to the Tax Court for redetermination of

the deficiency is pending, not extended by any

Initial Tax Liability

For any acts or transactions the foundation,

supplemental proceeding by the Tax Court

organization, managers, disqualified persons,

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

under section 4961(b), regarding whether

or self-dealers have not corrected, give the

investments that jeopardize charitable purpose

correction was made and

following information separately for each act:

(figured on Schedules A and D of Form 4720,

2. Any other period the IRS determines is

1. Schedule and item number of the act or

respectively) for tax year 2002, the payment

reasonable and necessary to correct the

transaction that has not been corrected,

may not satisfy the entire tax liability for an act

taxable event.

2. A description of the act or transaction,

of self-dealing or a jeopardy investment. (For

The taxable event will be treated as

and

the definition of self-dealing, see the

occurring:

3. A detailed explanation of why correction

instructions for Schedule A of this form; for the

has not been made and what steps are being

1. For the tax on failure to distribute

definition of jeopardy investment, see the

taken to make the correction.

income, on the first day of the tax year for

instructions for Schedule D of this form.)

which there was a failure to distribute income,

Paying the tax and filing a Form 4720 are

If you are correcting deficient distributions

2. For the tax on excess business

required for each year or part of a year in the

under section 4942 where an election under

holdings, on the first day on which there were

taxable period that applies to the act or

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

excess business holdings, or

investment. Generally, the taxable period

provide a copy of the election. See the

3. In any other case, on the date the event

begins with the date of the act or investment

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

occurred.

and ends with the date corrective action is

and 4c for more information.

completed, a notice of deficiency is mailed, or

Generally, the term “correction” has the

Part I

the tax is assessed, whichever comes first.

following meanings:

•

Section 4941 (Schedule A) — Undoing the

Similar rules apply for the initial tax liability

Line 8

transaction to the extent possible, but in any

resulting from failing to distribute income

If the organization has an entry on this

(Schedule B) and from acquiring excess

case placing the private foundation in a

TIP

line, it must also file Form 8870.

financial position not worse than that in which it

business holdings (Schedule C). Thus, the

would be if the disqualified person were

initial tax liability for those taxes continues to

accrue until the date a notice of deficiency is

dealing under the highest fiduciary standards.

Enter the total of all premiums paid by the

•

Section 4942 (Schedule B) — Making

mailed, the violation is corrected, or the tax is

organization on any personal benefit contract if

sufficient qualifying distributions to compensate

assessed, whichever comes first.

the payment of premiums is in connection with

for deficient qualifying distributions for a prior

a transfer for which a deduction is not allowed

Completing the Schedules

tax year.

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

•

Section 4943 (Schedule C) — Action that

understanding or expectation that any person

Before completing any of the schedules in this

results in the foundation no longer having

will directly or indirectly pay any premium on a

return, read the applicable instructions. If any

excess business holdings in a business

personal benefit contract for the transferor,

completed schedule shows taxes owed, enter

enterprise.

include those premium payments in the

•

them on page 1 of this return.

Section 4944 (Schedule D) — An investment

amount entered on this line.

is considered to be removed from jeopardy

The instructions for Schedules A through F

A personal benefit contract is (to the

when the investment is sold or otherwise

describe acts or transactions subject to tax

transferor) any life insurance, annuity, or

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

disposed of, and the proceeds of such sale or

endowment contract that benefits directly or

other disposition are not investments that

Information for Private Foundations and

indirectly the transferor, a member of the

jeopardize the carrying out of the foundation’s

Foundation Managers, for a list of exceptions

transferor’s family, or any other person

exempt purposes.

that eliminate any tax liability that would

•

designated by the transferor (other than an

Section 4945 (Schedule E) —

otherwise be shown on Schedules A and E. Do

organization described in section 170(c)).

not complete Schedules A and E if exceptions

1. Recovering part or all of the expenditure

apply to all the acts or transactions. Question A

to the extent recovery is possible, and where

For more information, see Notice 2000-24,

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

full recovery is not possible, such additional

I.R.B. 2000-17, 952.

not apply to public charities.

corrective action as is prescribed by

Part II-A

regulations or

Before completing Schedule C, determine

2. Obtaining or making the report in

whether the foundation has excess holdings in

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

question for a case that fails to comply with

any business enterprise. If the foundation has

addresses, and taxpayer identification number

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

holdings subject to the tax on excess business

of all persons who owe tax in connection with

responsibility).

holdings, complete Schedule C for each

the foundation or organization, whether as

•

Section 4955 (Schedule F) — Recovering

enterprise.

managers, self-dealers, or disqualified

part or all of the expenditure to the extent

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

Before completing Schedule D, determine

recovery is possible, establishment of

and I.

whether the investment was program related. If

safeguards to prevent future political

not, complete Schedule D for each investment

Column (c). For each person listed in column

expenditures, and where full recovery is not

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

(a), enter the sum of:

possible, such additional corrective action as is

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

prescribed by the regulations.

1. Taxes that person owes as a

•

Part VI-B, question 4a or b.

Section 4958 (Schedule I) — Undoing the

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

excess benefit to the extent possible and

(d), and

taking any additional measures necessary to

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

Specific Instructions for

place the organization in a financial position

individual participated as a foundation

not worse than that in which it would be if the

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

Page 1

disqualified person had been dealing under the

Column (d). Enter for each person listed in

highest fiduciary standards.

Question B. To avoid additional taxes and

column (a) the tax on jeopardy investments

If, when the return is filed, the foundation,

penalties under sections 4941 through 4945,

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

organization, managers, disqualified persons,

4955, and 4958, and in some cases further

individual took part in as a foundation

or self-dealers have corrected any acts or

initial taxes on the foundation, organization,

manager.

transactions resulting in liability for tax under

and related persons, a foundation,

Chapter 42, answer “Yes” to question B and

organization, disqualified person, or manager

Column (e). Enter for each person listed in

give the following information separately for

must correct the taxable event within the

column (a) the tax on taxable expenditures

each correction:

correction period. The taxable event is the act,

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

failure to act, or transaction that resulted in the

1. Schedule and item number of the act or

individual took part in as a foundation

liability for initial taxes under these provisions.

transaction that has been corrected,

manager.

-3-

Form 4720 Instructions

Instructions For Form 4720 - Return Of Certain Excise Taxes On Charities And Other Persons -Department Of The Treasury - 2002 Page 3

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