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Part II. Enter in column (a) the names

Notice 2007-18, 2007-9 I.R.B. 608

entity has not established a method of

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of all disqualified persons who took part

T.D. 9334, 2007-34 I.R.B. 382

accounting for federal income tax

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in the excess benefit transactions. If

T.D. 9492, 2010-33 IRB 242

purposes, the entity must use the cash

more than one disqualified person took

receipts and disbursements method to

Managers of tax favored

part in an excess benefit transaction,

determine the amount and timing of net

retirement plans, individual

TIP

each is individually liable for the entire

income and proceeds attributable to a

retirement arrangements, and

tax on the transaction. But the

prohibited tax shelter transaction.

savings arrangements described in

disqualified persons who are liable for

If an entity has an established

sections 401(a), 403(a), 403(b), 529,

the tax may prorate the payment

method of accounting other than the

457(b), 408(a), 220(d), 408(b), 530, or

among themselves. Enter in column (c)

cash method, the entity may use the

223(d) must report and pay tax due

the tax to be paid by each disqualified

cash method to determine the amount

under 4965(a)(2) on Form 5330.

person.

of the net income and proceeds

Prohibited tax shelter transaction.

attributable to a prohibited tax shelter

Carry the total amount in column (d)

In general, a prohibited tax shelter

for each disqualified person to Part II-A,

transaction.

transaction means any listed

column (h).

transaction (including a subsequently

Specific Instructions

Part III. Enter in column (a) the names

listed transaction) and any prohibited

Part I. Complete this part for each

reportable transaction.

of all managers who knowingly took

transaction if during the tax year, the

part in the excess benefit transactions

Listed transaction. A listed

entity received proceeds from or has

listed in Part I. If more than one

transaction includes any transaction

net income attributable to a PTST.

manager knowingly took part in an

that is the same as or substantially

excess benefit transaction, each is

similar to one of the types of

Figure the tax for each transaction

individually liable for the entire tax in

transactions that the IRS has

as follows:

connection with the transaction. But the

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determined to be a tax avoidance

If column (e) was answered “Yes,”

managers liable for the tax may prorate

transaction. These transactions are

then enter the larger of the column (f)

the payment among themselves. Enter

identified by notice, regulation, or other

or column (g) amount in column (h).

in column (c) the tax to be paid by each

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form of published guidance as a listed

If column (e) was answered “No,”

organization manager.

transaction. For existing guidance see

then multiply the larger of the amount in

Notice 2009-59, 2009-31 I.R.B. 170.

column (f) or column (g) by 35% (.35)

Carry the total amount in column (d)

and enter the result in column (h).

for each manager to Part II-A, column

For updates to this list go to the IRS

(h).

website at

After the tax has been figured for all

corporations

and click on Abusive Tax

PTSTs entered on Schedule J, then

Shelters and Transactions. The listed

total column (h) and enter the amount

Schedule J—Taxes on

transactions in the above notices and

on the Total line and on line 9 of Part I.

rulings will also be periodically updated

Being a Party to

Part II. Enter in column (a) the names

in future issues of the Internal Revenue

of all entity managers who approved

Bulletin.

Prohibited Tax Shelter

the entity as (or otherwise caused the

Subsequently listed transaction.

entity to be) a party to a PTST at any

Transactions (Section

A subsequently listed transaction is a

time during the tax year and who knew

transaction that is identified in

4965)

or had reason to know that the

published guidance as a listed

transaction is a PTST.

transaction after the entity has entered

General Instructions

Carry the total amount in column (d)

into the transaction and that was not a

for each manager to Part II-A, column

confidential transaction or transaction

Requirement.

(i).

with contractual protection at the time

1. Complete Schedule J if you are

the entity entered into the transaction.

an entity described in section 501(c),

Prohibited reportable transaction.

Schedule K—Taxes on

501(d), or 170(c) (other than the United

A prohibited reportable transaction is

States) or an Indian tribal government

Taxable Distributions of

any confidential transaction or any

(within the meaning of section

transaction with contractual protection

7701(a)(40)) and you received

Sponsoring

that is a reportable transaction. See

proceeds from or have net income

Regulations sections 1.6011-4(b)(3)

Organizations

attributable to a prohibited tax shelter

and (4), and the Instructions for Form

transaction (PTST).

Maintaining Donor

8886-T, Disclosure by Tax-Exempt

2. Complete Schedule J if you are

Entity Regarding Prohibited Tax Shelter

an entity manager of such an entity

Advised Funds (Section

Transaction for more information.

who approved the entity as (or

4966)

Allocation of net income and

otherwise caused the entity to be) a

proceeds to a tax year. The net

party to a PTST at any time during the

income and proceeds attributable to a

tax year and who knew (or had reason

General Instructions

prohibited tax shelter transaction must

to know) that the transaction is a PTST.

Requirement. Complete Schedule K if

be allocated to a particular tax year in a

See the following guidance and any

manner consistent with the entity’s

you answered “Yes,” to question 9a in

future guidance for details.

established method of accounting for

Part V of Form 990, or if you are a fund

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Notice 2006-65, 2006-31 I.R.B. 102

federal income tax purposes. If an

manager of a sponsoring organization

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Form 4720 Instructions

Instructions For Form 4720 - Return Of Certain Excise Taxes - Department Of The Treasury - 2011 Page 15

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