Looking for a Form 4720 Templates? Download it for free!

permitted holdings. See Regulations

no longer has an excess. To avoid the

were more than the current limits

section 53.4943-3(c)(4).

tax, the disposition must take place

permit, there are transitional rules that

within 90 days from the date the

permit the foundation to dispose of the

Attribution of business holdings. In

foundation knew, or had reason to

excess over time without being subject

determining the holdings in a business

know, of the event that caused it to

to the tax on excess business holdings.

enterprise of either a private foundation

have excess business holdings. That

or a disqualified person, any stock or

During the first phase, no excess

90-day period will be extended to

other interest owned directly or

business holdings tax was imposed on

include the period during which federal

indirectly by or for a corporation,

a private foundation for interests held

or state securities laws prevent the

partnership, estate, or trust is

since May 26, 1969, if the foundation

foundation from disposing of those

considered owned proportionately by or

had excess holdings on that date. The

excess business holdings. See

for its shareholders, partners, or

first phase is:

Regulations section 53.4943-2(a).

beneficiaries. In general, this rule does

•

A 20-year period beginning on May

General rules on the permitted

not apply to certain income interests or

26, 1969, if on that date the foundation

holdings of a private foundation in a

remainder interests of a private

and all disqualified persons held more

business enterprise. No excess

foundation in a split-interest trust

than a 95% voting interest in the

business holdings tax is imposed (a) if

described in section 4947(a)(2). See

enterprise (the 20-year first phase

Regulations section 53.4943-8.

a private foundation and all disqualified

expired on May 25, 1989);

persons together hold no more than

•

Taxable period. The taxable period

A 15-year period beginning on May

20% of the voting stock of a business

begins on the first day the foundation

26, 1969, if on that date the foundation

enterprise or (b) on nonvoting stock, if

has excess business holdings and ends

and all disqualified persons together

all disqualified persons together do not

on the earliest of:

had more than a 75% voting stock

own more than 20% of the voting stock

•

The mailing date of a notice of

interest (or more than a 75% profits or

of the business enterprise.

deficiency, under section 6212, in

beneficial interest of any

connection with the initial tax on excess

If the private foundation and all

unincorporated business), or more than

business holdings related to those

disqualified persons together do not

a 75% interest in the value of all

own more than 35% of the enterprise’s

holdings,

outstanding shares of all classes of

•

The date the excess is eliminated, or

voting stock, and effective control is in

stock (or more than a 75% capital

•

one or more persons who are not

The date the initial tax on excess

interest of a partnership or joint

business holdings related to those

disqualified persons in connection with

venture) in the enterprise (the 15-year

holdings is assessed.

the foundation, then 35% may be

first phase expired on May 25, 1984);

substituted for 20% wherever it appears

and

When a notice of deficiency is not

•

in the preceding paragraph. See

A 10-year period beginning on May

mailed because the restrictions on

sections 4943(c)(2) and 4943(c)(3).

26, 1969, in all other cases in which the

assessment and collection are waived

foundation had excess business

If a private foundation and all

or because the deficiency is paid, the

holdings on May 26, 1969. The 10-year

date of filing the waiver or the date of

disqualified persons together had

first phase expired on May 25, 1979.

holdings in a business enterprise of

paying the tax, respectively, will be

more than 20% of the voting stock on

During the second phase (the

treated as the end of the taxable

May 26, 1969, substitute that

15-year period after the first phase), if

period. See Regulations section

percentage for 20% and for 35% (if the

the foundation’s disqualified persons

53.4943-9.

hold more than 2% of the enterprise’s

holding is greater than 35%), using the

Exceptions to Tax on Excess

principles of section 4943(c)(4) that

voting stock, the foundation will be

Business Holdings

apply. However, the percentage

liable for tax if the foundation holds

substituted may not be more than 50%.

more than 25% of the voting stock or if

2% De minimis rule. A private

the foundation and its disqualified

foundation will not be treated as having

The percentage substituted under

persons together hold more than 50%

excess business holdings in any

the preceding paragraph is (a) subject

of the voting stock.

enterprise in which it, together with

to reductions and limitations (see

However, during the second phase,

related foundations as described in the

sections 4943(c)(4)(A)(ii) and

instructions for Form 990-PF (under the

4943(c)(4)(D)) and (b) applicable, both

if a foundation’s disqualified persons

definition for “disqualified person” in the

in connection with the voting stock and,

purchase voting stock in a business

General Instructions) owns not more

enterprise after July 18, 1984, causing

separately, in connection with the value

than 2% of the voting stock and not

of all outstanding shares of all classes

the combined holdings of the

more than 2% in value of all

disqualified persons to exceed 2% of

of stock (see section 4943(c)(4)(A)(iii)).

outstanding shares of all classes of

the enterprise’s voting stock, the

Interests held by a private

stock.

foundation has 5 years to reduce its

foundation (other than donor

holdings in the enterprise to below its

Disposition of excess business

advised funds and supporting

second phase limit before the increase

holdings within 90 days. Generally,

organizations) on May 26, 1969. For

will be treated as held by the

when a private foundation acquires

private foundations, other than donor

foundation. See sections 4943(c)(4)(D)

excess business holdings other than as

advised funds and supporting

and 4943(c)(6).

a result of purchase by the foundation

organizations considered to be private

(such as an acquisition by a disqualified

foundations for purposes of section

The first-phase periods may be

person), the foundation will not be

4943, that had business holdings on

suspended pending the outcome of any

taxed on those excess holdings if it

May 26, 1969 (or holdings acquired by

judicial proceeding the private

disposes of enough of them so that it

trust or will as described below), that

foundation brings regarding reform or

-9-

Form 4720 Instructions

Instructions For Form 4720 - Return Of Certain Excise Taxes - Department Of The Treasury - 2011 Page 9

Related Articles

Related forms

Related Categories