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who agreed to the making of a taxable

member of which all the committee

Schedule L—Taxes on

distribution knowing that it was a

members are appointed by the

taxable distribution. Report each

sponsoring organization.

Prohibited Benefits

taxable distribution separately. These

b. No combination of persons with

terms are discussed below.

Distributed From Donor

advisory privileges, described in 3

Taxable distribution. A taxable

above, or persons related to those in 3

Advised Funds (Section

distribution is any distribution from a

above, directly or indirectly control the

donor advised fund to any natural

committee, and

4967)

person or to any other person if:

c. All grants from the fund or

1. The distribution is for any

account are awarded on an objective

General Instructions

purpose other than one specified in

and nondiscriminatory basis according

Requirement. A sponsoring

section 170(c)(2)(B), or

to a procedure approved in advance by

2. The sponsoring organization

organization of donor advised funds

the board of directors of the sponsoring

maintaining the donor advised fund

that answered “Yes,” to Form 990, Part

organization. The procedure must be

does not exercise expenditure

V, line 9b, or that otherwise distributed

designed to ensure that all grants meet

prohibited benefits under section 4967,

responsibility with respect to such

the requirements of section 4945(g)(1),

distribution in accordance with section

must complete Schedule L. Report

(2), or (3).

each taxable distribution separately.

4945(h).

Complete Parts I, II, and III of Schedule

However, a taxable distribution does

Tax on sponsoring organization. A

L only in connection with distributions

not include a distribution from a donor

made by a sponsoring organization

tax of 20% of the amount of each

advised fund to:

from a donor advised fund which results

taxable distribution is imposed on the

in a prohibited benefit. (See instructions

1. Any organization described in

sponsoring organization.

to Schedule K for definitions of the

section 170(b)(1)(A) (other than a

terms sponsoring organization and

disqualified supporting organization),

Tax on fund manager. If a tax is

donor advised fund).

2. The sponsoring organization of

imposed on a taxable distribution of the

such donor advised fund, or

sponsoring organization, a tax of 5% of

Prohibited benefit. If any donor,

3. Any other donor advised fund.

the distribution will be imposed on any

donor advisor, or related party advises

the sponsoring organization about

fund manager who agreed to the

Sponsoring organization. A

making a distribution which results in a

distribution knowing that it was a

sponsoring organization is a section

donor, donor advisor, or related party

taxable distribution. Any fund manager

170(c) organization that is not a

receiving (either directly or indirectly) a

who took part in the distribution and is

government organization (as referred to

more than incidental benefit, then such

liable for the tax must pay the tax. The

in section 170(c)(1) and (2)(A)) or a

benefit is a prohibited benefit.

maximum amount of tax on all fund

private foundation and maintains one or

managers for any one taxable

Donor advisor. A donor advisor is

more donor advised funds.

distribution is $10,000. If more than one

any person appointed or designated by

Donor advised fund. A donor

fund manager is liable for tax on a

a donor to advise a sponsoring

advised fund is a fund or account:

taxable distribution, all such managers

organization on the distribution or

1. Which is separately identified by

investment of amounts held in the

are jointly and severally liable for the

reference to contributions of a donor or

donor’s fund or account.

tax.

donors,

Related party. A related party

2. Which is owned and controlled by

includes any family member or 35%

Specific Instructions

a sponsoring organization, and

controlled entity. See the General

3. For which the donor (or any

Part I. Complete this part for all

Instructions for Schedule I for a

person appointed or designated by the

taxable distributions.

definition of those terms.

donor) has or expects to have advisory

Tax on donor, donor advisor, or

privileges concerning the distribution or

Part II. Enter in column (a) the names

related person. A tax of 125% of the

investment of the funds held in the

of all fund managers who agreed to

benefit resulting from the distribution is

donor advised funds or accounts

make the taxable distribution. If more

imposed on both the party who advised

because of the donor’s status as a

than one fund manager is listed in

as to the distribution (which might be a

donor.

column (a) for one distribution, each is

donor, donor advisor, or related party)

individually liable for the entire tax in

Exception. A donor advised fund

and the party who received such

connection with that distribution.

does not include:

benefit (which might be a donor, donor

However, the fund managers who are

advisor, or related party). The advisor

1. A fund or account that makes

liable for the tax may prorate the

and the party who received the benefit

distributions only to a single identified

payment among themselves. Enter in

are jointly and severally liable for the

organization or governmental entity, or

column (c) the tax each manager will

tax.

2. Any fund or account for a person

pay for each distribution for which such

described in 3 above that gives advice

Tax on fund managers. If a tax is

manager owes a tax.

about which individuals receive grants

imposed on a prohibited benefit

for travel, study, or similar purposes, if;

received by a donor, donor advisor, or

Carry the total amount in column (d)

a. The person’s advisory privileges

related person, a tax of 10% of the

for each fund manager to Part II-A,

are performed exclusively by such

amount of the prohibited benefit is

column (j).

person in their capacity as a committee

imposed on any fund manager who

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Form 4720 Instructions

Instructions For Form 4720 - Return Of Certain Excise Taxes - Department Of The Treasury - 2011 Page 16

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