Instructions For Form 4720 - 2016 (Page 11 of 19) in pdf

required for each year or part of a year

supported organizations of such

Part II. Enter in column (a) the names

in the taxable period that applies to the

supporting organizations, and

of all foundation managers who took

investments that jeopardize the

part in making the investments listed in

b. Type III supporting organizations

foundation's charitable purpose.

Part I. See Initial taxes on foundation

(as described in section 4943(f)(5)(A))

Generally, the taxable period begins

managers, earlier.

that aren't functionally integrated with

with the date of the investment and

their supported organizations; or

If more than one foundation manager

ends with the date corrective action is

is listed in column (a), each is

5. For any purpose other than

completed, a notice of deficiency is

individually liable for the entire amount

religious, charitable, scientific, literary,

mailed, or the initial tax is assessed,

of tax in connection with the investment.

educational, or public purposes, or the

whichever comes first. Therefore, in

However, the foundation managers who

prevention of cruelty to children or

addition to investments made in 2016,

are liable for the tax may prorate

animals.

include all investments subject to tax

payment among themselves. Enter in

that were made before 2016 if those

Exceptions. Section 4945(d)(4)(B)

column (c) the tax each foundation

investments were not removed from

provides an exception to taxable

manager will pay.

jeopardy before 2016 and the initial tax

expenditures that applies to certain

Carry the total amount in column (d)

was not assessed before 2016.

grants to organizations when the

for each foundation manager to Part

granting foundation exercises

Taxable investments. An investment

II-A, column (d).

expenditure responsibility described in

to be taxed on this schedule is an

section 4945(h). Additional information

investment by a private foundation that

Schedule E—Initial Taxes

on special rules and exceptions to the

jeopardizes the carrying out of its

definition of taxable expenditures given

exempt purposes (for example, if it is

on Taxable Expenditures

above can be found at

determined that the foundation

(Section 4945)

part7/irm_07-027-019.html.

managers, in making the investment,

didn't exercise ordinary business care

General Instructions

Initial tax on foundation. An initial tax

and prudence, under prevailing facts

of 20% is imposed on each taxable

Requirement. Complete Schedule E if

and circumstances, in providing for the

expenditure of the foundation.

you answered “Yes,” to Form 990-PF,

long- and short-term financial needs of

Initial tax on foundation managers.

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

the foundation to carry out its exempt

When a tax is imposed on a taxable

Part VI-B, question 79b. Complete Parts

purposes). See Regulations section

expenditure of the foundation, a tax of

I and II of Schedule E only for

53.4944-1(a)(2). An investment isn't

5% of the expenditure will be imposed

expenditures that are subject to tax.

taxed on this schedule if it is a

on any foundation manager who agreed

program-related investment; that is, one

Note. Also, see Schedule F, Initial

to the expenditure and who knew that it

whose primary purpose is one or more

Taxes on Political Expenditures.

was a taxable expenditure. Foundation

of those described in section 170(c)(2)

managers whose participation was not

(B) (religious, charitable, educational,

Taxable expenditures. With certain

willful and was due to reasonable cause

etc.). A significant purpose of such an

exceptions, this means any amount a

aren't liable for the tax. Any foundation

investment can't be the production of

private foundation pays or incurs:

manager who took part in the

income or the appreciation of property.

1. To carry on propaganda or

expenditure and is liable for the tax must

See section 4944(c) and Regulations

otherwise influence any legislation

pay the tax. The maximum total amount

section 53.4944-3.

through:

of tax on all foundation managers for

Initial taxes on foundation. The initial

a. An attempt to influence general

any one taxable expenditure is $10,000.

tax is 10% of the amount invested for

public opinion or any segment of it, and

If more than one foundation manager is

each year or part of a year in the taxable

liable for tax on a taxable expenditure,

b. Communication with any member

period.

all those foundation managers are

or employee of a legislative body, or

jointly and severally liable for the tax.

Initial taxes on foundation manag

with any other government official or

ers. When a tax is imposed on an

employee who may take part in

Specific Instructions

investment that jeopardizes the

formulating legislation;

charitable purpose of the foundation,

Part I. Complete this part for all taxable

2. To influence the outcome of any

the tax will be 10% of the investment for

expenditures. Enter in column (f) the

specific public election, or to conduct,

each year or part of a year in the taxable

number designation from Form 990-PF,

directly or indirectly, any voter

period, up to $10,000 for any one

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

registration drive;

investment. It is imposed on all

Part VI-B, question 79a, that applies to

3. As a grant to an individual for

foundation managers who took part in

the act; for example, “5a(1).”

travel, study, or other purposes;

the act, knowing that it was such an act,

Part II. Enter in column (a) the names

4. As a grant to an organization not

except for foundation managers whose

of all foundation managers who agreed

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

participation was not willful and was due

to make the taxable expenditure. See

(3) or that isn't an exempt operating

to reasonable cause. Any foundation

Initial tax on foundation managers,

manager who took part in making the

foundation (as defined in section

earlier. If more than one foundation

investment must pay the tax.

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

manager is listed in column (a), each is

a. Type I, Type II, and Type III

Specific Instructions

individually liable for the entire tax in

functionally integrated supporting

connection with the expenditure.

Part I. Complete this part for all taxable

organizations (as described in section

However, the foundation managers who

investments.

4942(g)(4)(B) and (C)) if a disqualified

are liable for the tax may prorate the

person of the foundation controls such

payment among themselves. Enter in

supporting organization or the

Instructions for Form 4720 (2016)

Instructions For Form 4720 - 2016 Page 11

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