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entries to record in column (a). Enter in

in the taxable period that applies to the

Part II. Enter in column (a) the names

column (a) the percentage, using the

investments that jeopardize the

of all foundation managers who took

general rule (section 4943(c)(2)(A)) or

foundation’s charitable purpose.

part in making the investments listed in

the 35% rule (see section

Generally, the taxable period begins

Part I. See Initial taxes on foundation

4943(c)(2)(B)), if applicable, of

with the date of the investment and

managers above.

permitted holdings the foundation may

ends with the date corrective action is

If more than one foundation

have in the enterprise’s voting stock. If

completed, a notice of deficiency is

manager is listed in column (a), each is

the foundation determines the permitted

mailed, or the initial tax is assessed,

individually liable for the entire amount

holdings under section 4943(c)(2)(B),

whichever comes first. Therefore, in

of tax in connection with the

attach a statement showing effective

addition to investments made in 2011,

investment. However, the foundation

control by a third party.

include all investments subject to tax

managers who are liable for the tax

that were made before 2011 if those

Line 3. Enter the value of any stock,

may prorate payment among

investments were not removed from

interest, etc., in the business enterprise

themselves. Enter in column (c) the tax

jeopardy before 2011 and the initial tax

that the foundation is required to

each foundation manager will pay.

was not assessed before 2011.

dispose of so the foundation’s holdings

Carry the total amount in column (d)

in the enterprise are permitted. See

Taxable investments. An investment

for each foundation manager to Part

section 4943 and related regulations.

to be taxed on this schedule is an

II-A, column (d).

investment by a private foundation that

A private foundation using the

jeopardizes the carrying out of its

section 4943(c)(4) rules, or a donor

exempt purposes (for example, if it is

Schedule E—Initial

advised fund or supporting organization

determined that the foundation

using rules similar to that, has excess

Taxes on Taxable

managers, in making the investment,

holdings if line 1 is more than line 2 in

did not exercise ordinary business care

either column (a) or column (b). Do not

Expenditures (Section

and prudence, under prevailing facts

include in column (b) the value of any

and circumstances, in providing for the

4945)

voting stock included in column (a).

long- and short-term financial needs of

A private foundation using the

the foundation to carry out its exempt

General Instructions

section 4943(c)(2) rules has excess

purposes). See Regulations section

holdings if line 1 is more than line 2 in

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

Requirement. Complete Schedule E if

column (a) or if the private foundation

taxed on this schedule if it is a

you answered “Yes,” to Form 990-PF,

holds nonvoting stock and all

program-related investment; that is, one

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

disqualified persons together own more

whose primary purpose is one or more

Part VI-B, question 79b. Complete

than 20% (or 35%, if applicable) of the

of those described in section

Parts I and II of Schedule E only for

enterprise’s voting stock, interest, etc.

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

expenditures that are subject to tax.

In the latter case, enter in column (c)

educational, etc.). A significant purpose

Note. Also, see Schedule F, Initial

the value of all nonvoting stock the

of such an investment cannot be the

Taxes on Political Expenditures.

foundation holds.

production of income or the

Line 4. Enter the value of excess

Taxable expenditures. With certain

appreciation of property. See section

holdings disposed of under the 90-day

exceptions, this means any amount a

4944(c) and Regulations section

rule in Regulations section

private foundation pays or incurs:

53.4944-3.

53.4943-2(a)(1)(ii). If other conditions

1. To carry on propaganda or

Initial taxes on foundation. The

preclude imposition of tax on excess

otherwise influence any legislation

initial tax is 10% of the amount invested

business holdings, include the value of

through:

for each year or part of a year in the

the nontaxable amount on this line and

a. An attempt to influence general

taxable period.

attach an explanation.

public opinion or any segment of it, and

Initial taxes on foundation managers.

b. Communication with any member

When a tax is imposed on a jeopardy

or employee of a legislative body, or

Schedule D—Initial

investment of the foundation, the tax

with any other government official or

will be 10% of the investment for each

employee who may take part in

Taxes on Investments

year or part of a year in the taxable

formulating legislation;

period, up to $10,000 for any one

That Jeopardize

2. To influence the outcome of any

investment. It is imposed on all

specific public election, or to conduct,

Charitable Purpose

foundation managers who took part in

directly or indirectly, any voter

the act, knowing that it was such an

(Section 4944)

registration drive;

act, except for foundation managers

3. As a grant to an individual for

whose participation was not willful and

travel, study, or other purposes;

General Instructions

was due to reasonable cause. Any

4. As a grant to an organization not

foundation manager who took part in

Requirement. Complete Schedule D if

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

making the investment must pay the

you answered “Yes,” to Form 990-PF,

(3) or that is not an exempt operating

tax.

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

foundation (as defined in section

5227, Part VI-B, question 78a or b.

4940(d)(2)). This includes grants to:

Specific Instructions

Report each investment separately.

a. Type I, Type II, and Type III

Part I. Complete this part for all

Paying tax and filing a Form 4720 are

functionally integrated supporting

required for each year or part of a year

taxable investments.

organizations (as described in section

-11-

Form 4720 Instructions

Instructions For Form 4720 - Return Of Certain Excise Taxes - Department Of The Treasury - 2011 Page 11

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