Instructions For Form 4720 - 2016 (Page 16 of 19) in pdf

Specific Instructions

c. All grants from the fund or

taxable distribution separately.

account are awarded on an objective

Complete Parts I, II, and III of

Part I. Complete this part for all

and nondiscriminatory basis according

Schedule L only in connection with

prohibited benefits.

to a procedure approved in advance by

distributions made by a sponsoring

the board of directors of the sponsoring

organization from a donor advised fund

Part II. Enter in column (a) the names

organization. The procedure must be

which results in a prohibited benefit.

of all donors, donor advisors, and

designed to ensure that all grants meet

(See instructions to Schedule K for

related persons who received a

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

definitions of the terms sponsoring

prohibited benefit. If more than one

(2), or (3).

organization and donor advised fund).

donor, donor advisor, or related person

is listed in column (a) for one

Prohibited benefit. If any donor, donor

Tax on sponsoring organization. A

distribution, each is individually liable for

advisor, or related party advises the

tax of 20% of the amount of each

the entire tax for that distribution.

sponsoring organization about making a

taxable distribution is imposed on the

However, the donors, donor advisors, or

distribution which results in a donor,

sponsoring organization.

related persons who are liable for the

donor advisor, or related party receiving

tax may prorate the payment among

Tax on fund manager. If a tax is

(either directly or indirectly) a more than

themselves. Enter in column (c) the tax

imposed on a taxable distribution of the

incidental benefit, then such benefit is a

each manager will pay for each

sponsoring organization, a tax of 5% of

prohibited benefit.

distribution for which such manager

the distribution will be imposed on any

Donor advisor. A donor advisor is any

owes a tax.

fund manager who agreed to the

person appointed or designated by a

distribution knowing that it was a taxable

Carry the total amount in column (d)

donor to advise a sponsoring

distribution. Any fund manager who took

for each donor, donor advisor, or related

organization on the distribution or

part in the distribution and is liable for

person to Part II-A, column (k).

investment of amounts held in the

the tax must pay the tax. The maximum

Part III. Enter in column (a) the names

donor's fund or account.

amount of tax on all fund managers for

of all fund managers who agreed to

any one taxable distribution is $10,000.

Related party. A related party includes

make the distribution conferring the

If more than one fund manager is liable

any family member or 35% controlled

prohibited benefit. If more than one fund

for tax on a taxable distribution, all such

entity. See the General Instructions for

manager is listed in column (a) for one

managers are jointly and severally liable

Schedule I for a definition of those

distribution, each is individually liable for

for the tax.

terms.

the entire tax for that distribution.

Specific Instructions

Tax on donor, donor advisor, or rela

However, the fund managers who are

ted person. A tax of 125% of the

liable for the tax may prorate the

Part I. Complete this part for all taxable

benefit resulting from the distribution is

payment among themselves. Enter in

distributions.

imposed on both the party who advised

column (c) the tax each manager will

as to the distribution (which might be a

Part II. Enter in column (a) the names

pay for each distribution for which such

donor, donor advisor, or related party)

of all fund managers who agreed to

manager owes a tax.

and the party who received such benefit

make the taxable distribution. If more

Carry the total amount in column (d)

(which might be a donor, donor advisor,

than one fund manager is listed in

for each fund manager to Part II-A,

or related party). The advisor and the

column (a) for one distribution, each is

column (k).

party who received the benefit are jointly

individually liable for the entire tax in

and severally liable for the tax.

connection with that distribution.

Schedule M—Tax on

However, the fund managers who are

Tax on fund managers. If a tax is

Failure to Meet the

liable for the tax may prorate the

imposed on a prohibited benefit

payment among themselves. Enter in

Community Health Needs

received by a donor, donor advisor, or

column (c) the tax each manager will

related person, a tax of 10% of the

Assessment Requirements

pay for each distribution for which such

amount of the prohibited benefit is

(Sections 4959 and 501(r)

manager owes a tax.

imposed on any fund manager who

(3))

Carry the total amount in column (d)

agreed to the distribution knowing that it

for each fund manager to Part II-A,

would confer a prohibited benefit. Any

General Instructions

column (j).

fund manager who took part in the

distribution and is liable for the tax must

Requirements. For tax years

pay the tax. The maximum amount of

Schedule L—Taxes on

beginning after March 23, 2012, section

tax on all fund managers for any one

4959 imposes an excise tax on hospital

Prohibited Benefits

taxable distribution is $10,000. If more

organizations that fail to meet the

Distributed From Donor

than one fund manager is liable for tax

section 501(r)(3) requirements in any

on a taxable distribution, all such

Advised Funds (Section

tax year.

managers are jointly and severally liable

4967)

Section 501(r)(3) requirements

for the tax.

pertain to a hospital organization

General Instructions

Exception. If a tax is imposed under

conducting a community health needs

section 4958 for the same transaction,

assessment (CHNA). The requirements,

Requirement. A sponsoring

then no additional tax is imposed under

which apply separately to each hospital

organization of donor advised funds that

section 4967 on that transaction.

facility the hospital organization

answered “Yes,” to Form 990, Part V,

operates, are as follows.

line 9b, or that otherwise distributed

1. To conduct a CHNA this tax year,

prohibited benefits under section 4967,

or in either of the two prior tax years.

must complete Schedule L. Report each

Instructions for Form 4720 (2016)

Instructions For Form 4720 - 2016 Page 16

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