Instructions For Form 4720 - 2016 (Page 13 of 19) in pdf

on the organization whose section

an excess benefit transaction (the

whole or in part by the revenues of the

501(c)(3) status is revoked because of

lookback period).

organization and violates the private

excess lobbying activities.

inurement prohibition rules (to the extent

Initial taxes. Excise taxes are imposed

provided in regulations).

Tax on organization managers. A tax

under section 4958 on each excess

of 5% of the lobbying expenditures is

benefit transaction. If a manager

Until final regulations are issued

also imposed on any manager who

receives an excess benefit from an

regarding the special rules for

willfully and without reasonable cause

excess benefit transaction, the manager

revenue sharing transactions

CAUTION

consented to the lobbying expenditures,

may be liable for the tax on disqualified

described in 2 above, these

knowing that they would likely result in

persons and the tax on the organization

transactions will only be subject to

the organization no longer qualifying

manager. See Abatement, earlier, for

section 4958 liability under the general

under section 501(c)(3).

information on abatement, refund, or

rule described in 1 above.

relief from this tax.

There is no limit on the amount of this

Supporting organization

tax that may be imposed against either

Tax on disqualified persons. The

transactions occurring after July 25,

the organization or its managers. Any

tax is 25% of the excess benefit and is

2006. For any supporting organization,

organization manager who agreed to

paid by any disqualified person who

as defined in section 509(a)(3), any

the expenditure must pay the tax.

improperly benefited from the excess

grant, loan, compensation, or other

benefit transaction.

Specific Instructions

similar payment provided to a

Tax on organization managers. If

substantial contributor (defined later),

Part I. Complete this part for all

tax is imposed on a disqualified person

family member, or 35% controlled entity

disqualifying lobbying expenditures.

for any excess benefit transaction, then

will be considered an excess benefit

Part II. Enter in column (a) the names

tax is also imposed on any manager

transaction. The amount of the excess

of all organization managers who took

who knowingly participated in the

benefit is the amount of such grant,

part in making disqualifying lobbying

excess benefit transaction. The tax is

loan, compensation, or other similar

expenditures listed in Part I. See Tax on

10% of the excess, not to exceed

payment. Also, any loan provided to a

organization managers, earlier.

disqualified person that isn't an

$20,000 for each transaction.

organization described in section 509(a)

If more than one organization

Additional tax on the disqualified

(1), (2), or (4) or a supported

manager is listed in column (a), each is

person. If the initial tax is imposed on

organization of the supporting

individually liable for the entire amount

an excess benefit transaction and the

organization exempt under section

of tax in connection with the

transaction isn't corrected within the

501(c)(4), (5), (6) and described in the

expenditure. However, the managers

taxable period, then any disqualified

last sentence of section 509(a) is

who are liable for the tax may prorate

person involved shall be liable for an

considered an excess benefit

payment among themselves. Enter in

additional tax equal to 200% of the

transaction.

column (c) the tax each manager will

excess benefit.

pay.

Donor advised fund transactions

This additional tax is abated

Carry the total amount in column (d)

occurring after August 17, 2006. Any

(refunded if collected) if the excess

for each organization manager to Part

grant, loan, compensation, or other

benefit transaction is corrected within

II-A, column (g).

similar payment from any donor advised

the correction period (defined in

fund to a donor, donor advisor, family

Question B, under Specific Instructions

member, or 35% controlled entity is an

Schedule I—Initial Taxes

for Page 1, earlier).

excess benefit transaction. The amount

on Excess Benefit

Taxable period. Taxable period

of the excess benefit is the amount of

Transactions (Section

means the period beginning with the

such grant, loan, compensation, or

date on which the excess benefit

other similar payment.

4958)

transaction occurs and ending on the

Excess benefit. Excess benefit

earlier of:

General Instructions

means the excess of the economic

1. The date a notice of deficiency

benefit received from the applicable

Requirement. Complete Schedule I for

was mailed to the disqualified person for

organization over the consideration

any Excess benefit transaction in

the initial tax on the excess benefit

given (including services) by a

which an Applicable organization

transaction, or

disqualified person, except in the

provides an Excess benefit to a

2. The date on which the initial tax

immediately preceding special rules

Disqualified person. These terms are

on the excess benefit transaction for the

where the entire amount of the grant,

discussed below.

disqualified person is assessed.

loan, compensation, or other similar

Applicable organization. In

payment is considered the excess

general, an applicable organization is

Excess benefit transaction. An

benefit.

any section 501(c)(3) (except a private

excess benefit transaction is any

However, an economic benefit won't

foundation), 501(c)(4), or 501(c)(29)

transaction in which:

be treated as compensation for services

organization.

1. An excess benefit is provided by

unless the applicable organization

the organization, directly or indirectly to,

Also, an applicable organization

clearly indicates its intent to treat the

or for the use of, any disqualified

includes any organization that was a

economic benefit (when paid) as

person, or

section 501(c)(3) (except a private

compensation for a disqualified person's

foundation), 501(c)(4), or 501(c)(29)

2. The amount of any economic

services. See Regulations section

organization at any time during a

benefit provided to, or for the use of, a

53.4958-4(c) for more information.

five-year period ending on the date of

disqualified person is determined in

Instructions for Form 4720 (2016)

Instructions For Form 4720 - 2016 Page 13

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