4720 Instructions for Form 4720

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2021

Department of the Treasury
Internal Revenue Service

Instructions for Form 4720

Return of Certain Excise Taxes Under Chapters 41 and 42 of the
Internal Revenue Code
(Sections 170(f)(10), 664(c)(2), 4911, 4912, 4941, 4942,
4943, 4944, 4945, 4955, 4958, 4959, 4960, 4965, 4966, 4967 and 4968)

DRAFT AS OF
October 27, 2021

Section references are to the Internal Revenue
Code unless otherwise noted.

Contents

Page

General Instructions . . . . . . . . . .
Purpose of Form . . . . . . . . . . . .
Who Must File . . . . . . . . . . . . .
Where and How To File . . . . . . .
When To File . . . . . . . . . . . . . .
Extension . . . . . . . . . . . . . . . .
Name, Address, etc. . . . . . . . . .
Signature and Verification . . . . . .
Attachments . . . . . . . . . . . . . . .
Organizations Organized or
Created in a Foreign Country .
Tax Payments . . . . . . . . . . . . .
Rounding Off to Whole Dollars . . .
Penalties and Interest . . . . . . . . .
Abatement . . . . . . . . . . . . . . . .
Initial Tax Liability and Correction .
Completing the Schedules . . . . .
Amended Return . . . . . . . . . . . .
Specific Instructions for Page 1 . .
Schedule A—Initial Taxes on
Self-Dealing (Section 4941) . .
Schedule B—Initial Tax on
Undistributed Income (Section
4942) . . . . . . . . . . . . . . . .
Schedule C—Initial Tax on Excess
Business Holdings (Section
4943) . . . . . . . . . . . . . . . .
Schedule D—Initial Taxes on
Investments That Jeopardize
Charitable Purpose (Section
4944) . . . . . . . . . . . . . . . .
Schedule E—Initial Taxes on
Taxable Expenditures
(Section 4945) . . . . . . . . . .
Schedule F—Initial Taxes on
Political Expenditures
(Section 4955) . . . . . . . . . .
Schedule G—Tax on Excess
Lobbying Expenditures
(Section 4911) . . . . . . . . . .
Schedule H—Taxes on
Disqualifying Lobbying
Expenditures (Section 4912) .
Schedule I—Initial Taxes on
Excess Benefit Transactions
(Section 4958) . . . . . . . . . .
Schedule J—Taxes on Being a
Party to Prohibited Tax
Shelter Transactions (Section
4965) . . . . . . . . . . . . . . . .
Schedule K—Taxes on Taxable
Distributions of Sponsoring
Organizations Maintaining

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Oct 27, 2021

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Contents

Page

Donor Advised Funds
(Section 4966) . . . . . . . . . .
Schedule L—Taxes on Prohibited
Benefits Distributed From
Donor Advised Funds
(Section 4967) . . . . . . . . . .
Schedule M—Tax on Hospital
Organization for Failure to
Meet the Community Health
Needs Assessment
Requirements (Sections 4959
and 501(r)(3)) . . . . . . . . . . .
Schedule N—Tax on Excess
Executive Compensation
(Section 4960) . . . . . . . . . .
Schedule O—Excise Tax on Net
Investment Income of Private
Colleges and Universities
(Section 4968) . . . . . . . . . .
Paid Preparer . . . . . . . . . . . . . .
Phone Help . . . . . . . . . . . . . . .
Photographs of Missing Children .
How To Get Forms and
Publications . . . . . . . . . . . .
IRS e-Services Makes Taxes
Easier . . . . . . . . . . . . . . . .
Index . . . . . . . . . . . . . . . . . . .

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Future Developments

For the latest information about
developments related to Form 4720 and
its instructions, such as legislation
enacted after they were published, go to
IRS.gov/Form4720.

What’s New
Entity or person subject to tax filing
Form 4720 with respect to more than
one organization. Item B in the header
area of Form 4720 is revised for use by
any entity (other than the organization)
or person who is required to file Form
4720 to report and pay an excise tax
under Chapters 41 or 42 of the Internal
Revenue Code with respect to more
than one organization. The information
entered in Item B will allow IRS systems
to accept and process multiple Form
4720 filings under the same taxpayer
number (Employer Identification
Number or Social Security Number).
Explanations of corrective action
taken. Instead of using Item B to collect
information about corrections made (or
Cat. No. 13023Z

not made) on taxable events, Form
4720 is revised to request information
about such corrections in each of
Schedules A, B, C, D, E, F, or I. Now,
for each transaction to which an initial
tax applies under sections 4941, 4942,
4943, 4944, 4945, 4955, or 4958, the
organization or any other entity or
person required to file Form 4720 to
report one or more such transactions,
must indicate whether a correction has
been made (or not) on the Schedule
where each transaction is reported.

Reminders

Forms 4720 filed by private foundations
are publicly disclosable. Don’t enter
Social Security Numbers on these
publicly disclosable returns.

Separate returns. A manager,
self-dealer, disqualified person, donor,
donor advisor, or related person who
owes tax under Chapter 41 or 42,
(including an organization manager
under section 4965), may no longer
report the tax on the Form 4720 filed by
the organization. Each taxpayer must
file a separate Form 4720.
Electronic filing. Under Regulations
section 1.6033-2(a)(2)(ii)(J), private
foundations are required to report such
information as is required by Form 4720
as part of their information reporting
requirement under section 6033.
Therefore, private foundations reporting
information required as to liability for tax
imposed under Chapter 42 on the Form
4720 (Schedules A-F, J, or N) must file
this form electronically. Other filers of
Form 4720 may be required to file
electronically. See Regulations section
301.6011-12. Additionally, any other
filer of Form 4720 who is not required to
file electronically also may use the
electronic form.

General Instructions
Purpose of Form

Use Form 4720 to figure and pay the
following.

• The initial taxes on private
foundations and self-dealers, under
sections 4941 through 4945 for
self-dealing, failure to distribute income,
excess business holdings, investments
that jeopardize charitable purpose, and
taxable expenditures (see instructions
for Schedules A through E for
definitions).
• The initial tax on certain supporting
organizations and donor advised funds
for excess business holdings under
section 4943.
• The section 4911 tax on excess
lobbying expenditures by public
charities that have elected to be subject
to section 501(h) regarding
expenditures to influence legislation.
(Private foundations and section
4947(a) trusts aren't eligible to make
this election).
• The section 4912 tax on disqualifying
lobbying expenditures that result in loss
of section 501(c)(3) tax-exempt status.
• The section 4955 tax imposed on any
amount paid or incurred by a section
501(c)(3) organization that participates
or intervenes in any political campaign
on behalf of, or in opposition to, any
candidate for public office.
• The section 4958 initial taxes on
disqualified persons and organization
managers of section 501(c)(3) (except
private foundations), section 501(c)(4),
and section 501(c)(29) organizations
that engage in excess benefit
transactions.
• The section 4959 tax on the failure by
a hospital organization to meet the
community health needs assessment
requirements under section 501(r)(3).
• The section 4960 taxes on excess
tax-exempt organization executive
compensation.
• The section 4965 taxes on prohibited
tax shelter transactions.
• The section 4966 taxes on taxable
distributions by sponsoring
organizations maintaining donor
advised funds.
• The section 4967 taxes on
distributions of prohibited benefits from
donor advised funds.
• The section 4968 taxes on net
investment income of certain private
colleges and universities.
• The section 170(f)(10) tax on any
premiums paid on a personal benefit
contract in connection with a transfer to
an organization or charitable remainder
trust for which a charitable deduction
isn't allowed to the transferor.
• The section 664(c)(2) tax on the
unrelated business taxable income of a
charitable remainder trust.

Who Must File
Organizations
Private foundations and section
4947(a) trusts. Generally, Form 4720
must be filed by all organizations,
including foreign organizations, that
answered “Yes,” to question 1b, 1d, 2b,
3b, 4a, 4b, 5b, 6b, 7b, or 8 in Part VI-B
of Form 990-PF; or “Yes,” to question
1b, 1c, 3b, 4a, 4b, 5b, 6b, or 7 in Part
VIII of Form 5227. (Schedules A through
E and Part I, lines 1 through 4, as
applicable).

in Part VIII of Form 5227, or that
otherwise paid premiums on a personal
benefit contract in connection with a
transfer to an organization for which a
charitable deduction was not allowed to
the transferor (Part I, line 8).
Certain tax-exempt entities that are a
party to a prohibited tax shelter
transaction (PTST). Certain
tax-exempt entities must file Form 4720
to report the liability and pay the tax due
under section 4965(a)(1) (Schedule J
and Part I, line 9). This requirement
applies to entities described in sections
501(c), 501(d), or 170(c) (other than the
United States) or an Indian tribal
government (within the meaning of
section 7701(a)(40)).

DRAFT AS OF
October 27, 2021
Other organizations owing initial taxes on excess business holdings.
Supporting organizations described in
section 4943(f)(3) and donor advised
funds described in section 4966(d)(2)
that owe the tax reported on Schedule C
(section 4943(a)). (Schedule C and Part
I, line 2).
Organizations making political expenditures. All section 501(c)(3)
organizations that make a political
expenditure must file Form 4720 to
report the liability and pay the tax
(Schedule F and Part I, line 5).
Organization managers may report any
first-tier tax they owe on Schedule F of
Form 4720. (See Schedule F
instructions, later, for the definition of
political expenditures.)
Public charities making excess lobbying expenditures. Public charities
that made the election under section
501(h) and owe tax on excess lobbying
expenditures as figured on Schedule C
(Form 990), Part II-A, must file Form
4720 to report the liability and pay the
tax (Schedule G and Part I, line 6).
Certain organizations (and possibly their
managers) whose section 501(c)(3)
status is revoked because of excess
lobbying activities are subject to a 5%
excise tax on their lobbying
expenditures (Schedule H and Part I,
line 7 or Part II, line 5, as applicable).
Charitable organizations that engage in excess benefit transactions.
Form 4720 must be filed by any
organization that answered “Yes” to
question 25a in Part V of Form 990 or
that otherwise engaged in an excess
benefit transaction described in section
4958. (Schedule I and Part II, line 6).
Charitable organizations that make
certain premium payments on personal benefit contracts. Form 4720
must be filed by any organization
described in section 170(c) or section
664(d) that answered “Yes,” to question
7f in Part V of Form 990, question 6b in
Part VI-B of Form 990-PF, question 6b
-2-

Any entity described in section

TIP 4965(c) that is a party to a PTST
must file Form 8886-T.

Sponsoring organizations maintaining donor advised funds. All section
170(c) organizations (excluding private
foundations and government
organizations referred to in sections
170(c)(1) and 170(c)(2)(A)) that
maintain one or more donor advised
funds must file Form 4720 to report the
liability and pay the tax owed on any
taxable distributions under section 4966
(Schedule K and Part I, line 10). In
addition, sponsoring organizations that
have made a distribution resulting in a
prohibited benefit to a donor, donor
advisor, or related person must file
Form 4720 to report the distribution
(Schedule L and Part II, line 9).
Charitable remainder trusts. All
charitable remainder trusts described in
section 664 that have unrelated
business taxable income for the tax year
must file Form 4720 to report the liability
and pay the tax due (Part I, line 11).
Unrelated business taxable income is
figured under section 512 and is
determined as if Part III of subchapter F
applies to such trusts. Use Form 990-T
to compute unrelated business taxable
income. The charitable remainder trust
should not submit Form 990-T for
processing as a return. Instead, attach a
copy of the completed Form 990-T and
file with Form 4720.
Hospital organizations failing to
meet the community health needs
assessment requirements (Sections
501(r)(3), 4959). An excise tax is
imposed on the failure by a hospital
organization to meet the community
health needs assessment (“CHNA”)
requirements of section 501(r)(3)
(Schedule M and Part I, line 12).
Instructions for Form 4720 (2021)

Certain taxpayers that pay excess
executive compensation. An
applicable tax-exempt organization
(ATEO) that pays to any covered
employee more than $1 million in
remuneration or pays an excess
parachute payment during the year
must file Form 4720 to report the liability
and pay the excise tax imposed by
section 4960. (Schedule N and Part I,
line 13). An ATEO includes section
501(a) exempt organizations, section
527 political organizations, section 521
farmers’ cooperatives, and government
entities that have income excluded
under section 115(1). If remuneration
from a related organization is included
to determine the tax imposed by section
4960, the related organization must file
a separate Form 4720 to report its share
of liability for the tax on Schedule N and
Part I, line 13. See the instructions for
Schedule N, later, for the definition of
related organization.

Form 4720 showing the tax owed. The
Form 4720 filed by a manager,
self-dealer, disqualified person, donor,
donor advisor, or related person should
include the name of the organization in
Part II. If applicable, a separate Form
4720 should be filed for each
organization for which the manager,
self-dealer, disqualified person, donor,
donor advisor, or related person owes
tax. A person filing Form 4720 should
enter his or her tax year at the top of
Form 4720. Enter the name, address,
and taxpayer identification number of
the manager, self-dealer, disqualified
person, donor, donor advisor, or related
person in the address area at the top of
Form 4720. Enter the name of the
organization in the name and address
area in Part II. Each manager,
self-dealer, disqualified person, donor,
donor advisor, or related person should
complete all the information the form
requires, including the schedule(s)
applicable to each tax shown on Part II,
to the extent possible, and as
applicable.

IF you are
located in ...

THEN use the
following
address ...

the United States

Department of the
Treasury
Internal Revenue
Service Center
Ogden, UT
84201-0027

DRAFT AS OF
October 27, 2021
A governmental entity that is not

TIP exempt from tax under section

501(a) and does not exclude
income under section 115(1) is not an
ATEO for purposes of section 4960.

Certain private colleges and universities subject to the excise tax on
net investment income (section
4968). An applicable educational
institution must file Form 4720 to report
the liability and pay the excise tax
imposed by section 4968. (Schedule O
and Part I, line 14.) An applicable
educational institution is a private
college or university that:
• Answered “Yes” to line 16 in part V of
Form 990 or that otherwise is a private
college or university that is an eligible
educational institution, as defined in
section 25A(f)(2),
• Had at least 500 students during the
preceding tax year, with more than 50%
of those students located in the United
States, and
• Had an aggregate fair market value,
at the end of the preceding tax year, of
assets not used directly in the carrying
out of the organization’s exempt
purpose, held by the organization and
related organizations, of at least
$500,000 per student.

Managers of tax favored

TIP retirement plans, individual

retirement arrangements, and
savings arrangements described in
sections 401(a), 403(a), 403(b), 529,
457(b), 408(a), 220(d), 408(b), 530, or
223(d) must report and pay tax due
under section 4965(a)(2) on Form 5330.

Where and How To File
Electronic filing. All persons required
to file can file Form 4720 electronically.
For general information about electronic
filing, visit IRS.gov/Efile, and see Pub.
4163, Modernized e-file Information for
Authorized IRS e-File Providers for
Business Returns.
Mandatory electronic filing. All
private foundations reporting
information required as to liability for tax
imposed under Chapter 42 on the Form
4720 (Schedules A-F, J, or N) must file
this form electronically, regardless of
the number of other returns the private
foundation must file during the calendar
year.

Individuals
Managers, self-dealers, disqualified
persons, donors, donor advisors,
and related persons. A manager,
self-dealer, disqualified person, donor,
donor advisor, or related person who
owes tax under Chapter 41 or 42,
including an organization manager
under section 4965, must file a separate
Instructions for Form 4720 (2021)

-3-

a foreign country or Internal Revenue
a U.S. possession Service Center
P.O. Box 409101
Ogden, UT 84409

Private delivery services. You can
use certain private delivery services
(PDS) designated by the IRS to meet
the “timely mailing as timely filing/
paying” rule for tax returns and
payments. Go to IRS.gov/PDS for the
current list of designated services.
The private delivery service can tell
you how to get written proof of the
mailing date.
Private delivery services can't deliver
items to P.O. boxes. You must use the
U.S. Postal Service to mail any item to
an IRS P.O. box address. Private
delivery services deliver to:
Internal Revenue Service
1973 Rulon White Blvd.
Ogden, UT 84201

When To File
Part I taxes on the organization. File
Form 4720 by the due date (not
including extensions) for filing the
organization's Form 990-PF, Form 990,
Form 990-EZ, or Form 5227. If you
aren't required to file any of these forms,
file Form 4720 by the 15th day of the 5th
month after the organization's
accounting period ends.
If the regular due date falls on a
Saturday, Sunday, or legal holiday, file
by the next business day.
Affiliated group member. See
section 4911(f) and instructions for
Schedule G, later, for definition of
“affiliated group.” For members of an
affiliated group of organizations that
have different tax years, and who are
filing Form 4720 to report tax under
section 4911, the tax year of the
affiliated group is the calendar year,
unless all members of the group elect
under Regulations section 56.4911-7(e)
(5) to make a member's year the group's
tax year.

Part II taxes on managers, self-dealers, disqualified persons, donors,
donor advisors, or related persons.
Each manager, self-dealer, disqualified
person, donor, donor advisor, or related
person, must file Form 4720 by the 15th
day of the 5th month after the end of his
or her tax year.
If the regular due date falls on a
Saturday, Sunday, or legal holiday, file
by the next business day.

For a corporation (or an association),
the form may be signed by one of the
following: president, vice president,
treasurer, assistant treasurer, chief
accounting officer, or other corporate
officer (such as tax officer).
For a partnership, the form may be
signed by a partner or partners
authorized to sign the partnership
return.

For these purposes, a foreign
organization is an organization not
created or organized in or under the law
of the United States, a U.S. state or
possession, or the District of Columbia.
Gifts, grants, contributions, or
membership fees directly or indirectly
from a United States person (as defined
in section 7701(a)(30)) are from sources
within the United States. See
Regulations section 53.4948-1.

DRAFT AS OF
October 27, 2021

Extension

Use Form 8868, Application for
Automatic Extension of Time To File an
Exempt Organization Return, to request
an automatic extension of time to file.
The automatic extension will be granted
if Form 8868 is properly completed,
filed, and any balance due shown on
Form 4720 is paid by the due date for
Form 4720.

Name, Address, etc.

For an organization filing its own Form
4720, the name, address, and employer
identification number of the organization
should be the same as shown on Form
990-PF, Form 5227, Form 990, or Form
990-EZ, and entered in the address field
at the top of the form. A self-dealer,
donor, donor advisor, related person,
disqualified person, or manager filing a
separate Form 4720 enters his or her
name, address, and taxpayer
identification number in the address
field at the top of the form. The name
and address of the organization to
which taxes reported in Part II relate is
entered in the address field at the top of
Part II.
Include the suite, room, or other unit
number after the street address.
If the Post Office doesn't deliver mail
to the street address, show the P.O. box
number instead of the street address.
If you want a third party (such as an
accountant or an attorney) to receive
mail for the foundation or charity, enter
on the street address line “C/O”
followed by the third party's name and
street address or P.O. box.

Signature and Verification

If you are a manager, self-dealer,
disqualified person, donor, donor
advisor, or related person, you should
sign only in the spaces that apply.
If you are signing on behalf of the
foundation or organization and also
because of personal tax liability, you
must file two Forms 4720.

If the return is filed on behalf of a
trust, the authorized trustee(s) must sign
it.

A receiver, trustee, or assignee
required to file any return on behalf of an
individual, a trust, estate, partnership,
association, company, or corporation
must sign the Form 4720 filed for these
taxpayers.
Also, a person with a valid power of
attorney may sign for the organization,
foundation, manager, self-dealer, donor,
donor advisor, or related person.
Include a copy of the power of attorney
with the return.

Attachments

If you need more space, and are
permitted to file a paper form, attach
separate sheets showing the same
information in the same order as on the
printed form. Show the totals on the
printed form.
Enter the organization's name and
EIN on each sheet. Use sheets that are
the same size as the form and indicate
clearly the line of the paper form to
which the information relates.

Organizations Organized
or Created in a Foreign
Country

Report all amounts in U.S. currency
(state conversion rate used) and give
information in English. Report items in
total, including amounts and
transactions from both inside and
outside the United States.
Chapter 42 taxes (including sections
4941 through 4945, 4955, 4958 through
4960 and 4965 through 4968) don't
apply to foreign organizations that
receive substantially all of their support
(other than gross investment income)
from sources outside the United States.
See section 4948(b). These
organizations must complete this form
and file it in the same manner as
domestic organizations. However, these
organizations, as well as their
foundation managers and self-dealers,
don't have to pay any tax that would
otherwise be due on this return.
-4-

Although a foreign organization
described in section 4948(b) isn't
subject to Chapter 42 taxes, it shall not
be exempt from tax under section
501(a) if it engages in a prohibited
transaction. See section 4948(c). A
prohibited transaction is a transaction
that would subject the organization or its
disqualified person to a penalty under
section 6684 if the foreign organization
were a domestic organization. Unless
the transaction constitutes a willful and
flagrant violation of a Chapter 42
provision, a transaction violating a
Chapter 42 provision won't constitute a
prohibited transaction except under the
following circumstances:
1. There was a prior Chapter 42
violation that resulted in a warning from
the IRS that a second violation would
result in a prohibited transaction.
2. The IRS provides notice that the
second transaction will constitute a
prohibited transaction unless it is
corrected within 90 days of the notice.
3. The second transaction isn't
timely corrected.

Tax Payments

The organization reports and computes
the taxes owed on Part I. The
organization pays the applicable taxes
on Part III of the organization’s Form
4720.
Managers, self-dealers, disqualified
persons, donors, donor advisors, and
related persons, report and compute the
applicable taxes on Part II. Such
persons pay the applicable tax on Part
III, each filing a separate Form 4720.
Payment by a private foundation of
any taxes owed by the foundation
managers or self-dealers will result in
additional taxes under the self-dealing
and taxable expenditure provisions
(section 4941 and 4945, respectively).
In addition, these payments could
impact the foundation's calculation of
undistributed income on Form 990-PF
which could subject the foundation to
additional taxes under section 4942.
Managers and self-dealers should pay
Instructions for Form 4720 (2021)

taxes imposed on them from their own
funds.
Similarly, disqualified persons and
entity managers should pay taxes on
excess benefit transactions that are
imposed on them under section 4958
from their own funds. Any
reimbursement of a disqualified
person's tax liability from excess benefit
transactions by the organization will be
treated as an excess benefit transaction
subject to the tax unless the
organization included the
reimbursement in the disqualified
person's compensation and the
disqualified person's total compensation
was reasonable. See the instructions for
Schedule I, later, for information on
excess benefit transactions.

Abatement

Use Form 843, Claim for Refund and
Request for Abatement, to request
abatement, refund, or relief under
section 4962. See section 4962 for rules
on abatement, refund, or relief from
payment of first tier taxes under
sections 4942 through 4945, 4955,
4958, 4966, and 4967.

• For the tax on excess business
holdings (section 4943), on the first day
on which there were excess business
holdings, or
• • In any other case (sections 4941,
4945, 4955, and 4958), on the date the
event occurred.
Refer to the instructions for the
applicable schedule for information
relating to corrections made (or not
made) for the applicable excise tax.

DRAFT AS OF
October 27, 2021

Tax payments can be made by check
or through the Electronic Federal Tax
Payment System (EFTPS). For more
information about EFTPS or to enroll in
EFTPS, visit the EFTPS website at
EFTPS.gov, or call 800-555-4477. You
can also get Pub. 966, Electronic
Federal Tax Payment System: A Guide
to Getting Started. See below for an
exception to this rule for small
foundations.

Rounding Off to Whole
Dollars

You may round off cents to whole
dollars on your return and schedules. If
you do round to whole dollars, you must
round all amounts. To round, drop
amounts under 50 cents and increase
amounts from 50 to 99 cents to the next
dollar. For example, $1.39 becomes $1
and $2.50 becomes $3.
If you have to add two or more
amounts to figure the amount to enter
on a line, include cents when adding the
amounts and round off only the total.

Penalties and Interest

There are penalties for failure to file or to
pay tax. There are also penalties for
willful failure to file, supply information or
pay tax, and for filing fraudulent returns
and statements, that apply to public
charities, private foundations,
managers, donors, donor advisors,
related persons, and self-dealers who
are required to file this return. See
sections 6651, 7203, 7206, and 7207.
Also, see section 6684 for penalties that
relate to tax liability under Chapter 42.
Interest charges for any unpaid tax is
charged at the underpayment rate
established under section 6621. The
interest on underpayments is in addition
to any penalties.
Instructions for Form 4720 (2021)

Initial Tax Liability and
Correction

If you pay an initial tax under sections
4941 through 4945, 4955, and 4958, for
tax year 2021, the payment may not
satisfy the entire tax liability for a taxable
event. The taxable event is the act,
failure to act, or transaction that resulted
in the liability for initial taxes under these
provisions.

Paying the tax and filing a Form 4720
are required for each year or part of a
year in the taxable period that applies to
the taxable event. Generally, the taxable
period begins with the date of the act or
investment and ends with the date
corrective action is completed, a notice
of deficiency is mailed, or the tax is
assessed, whichever comes first. Thus,
the initial tax liability for those taxes
continues to accrue until the date a
notice of deficiency is mailed, the
violation is corrected, or the tax is
assessed, whichever comes first.
To avoid additional taxes and
penalties and in some cases further
initial taxes, a foundation, organization,
disqualified person, or manager must
correct the taxable event within the
correction period.
Generally, the correction period
begins on the date the event occurs and
ends 90 days after the mailing date of a
notice of deficiency, under section
6212, in connection with the second-tier
tax imposed on that taxable event. That
time is extended by:
• Any period in which a deficiency can't
be assessed under section 6213(a)
because a petition to the Tax Court for
redetermination of the deficiency is
pending, not extended by any
supplemental proceeding by the Tax
Court under section 4961(b), regarding
whether any correction was made, and
• Any other period the IRS determines
is reasonable and necessary to correct
the taxable event.
The taxable event will be treated as
occurring:
• For the tax on failure to distribute
income (section 4942), on the first day
of the tax year for which there was a
failure to distribute income,
-5-

Completing the Schedules

Before completing any of the schedules
in this return, read the applicable
instructions. If any completed schedule
shows taxes owed, enter them on Part I
or Part II of this return.

The organization will complete all
parts of each applicable schedule,
including computation of the initial tax
on other persons (e.g., self-dealers and
managers), even though the
organization is not liable for those tax
amounts. Entities other than the
organization and individuals filing Form
4720 should complete the parts of a
schedule that apply to the transaction(s)
that give rise to their liability. Where
liability is being allocated among more
than one person (e.g., two or more
managers allocating the initial tax on
managers), the person filing the return
should show the full amount of tax and
show how the liability allocated.
Note. See Liability for Tax (later in Part
II) regarding allocation of liability among
2 or more persons liable for an excise
tax under Chapter 42.
The instructions for Schedules A
through O describe acts or transactions
subject to tax under Chapter 42. Don't
complete Schedules A and E if
exceptions apply to all the acts or
transactions. In general, question A on
page 1 and Schedules A, B, C, D, and E
don't apply to public charities. However,
Schedule C does apply to some public
charities including certain sponsoring
organizations of donor advised funds
and certain supporting organizations
that are treated as private foundations
for purposes of section 4943. See the
instructions for Schedule C for a
description of the public charities to
which section 4943 applies.
Before completing Schedule C,
determine whether the organization or
donor advised fund has excess holdings
in any business enterprise. If the
organization or donor advised fund has
holdings subject to the tax on excess
business holdings, complete
Schedule C for each enterprise.

Before completing Schedule D,
determine whether the investment was
program related. If not, complete
Schedule D for each investment for
which you answered “Yes,” to Form
990-PF, Part VI-B, question 4a or b, or
Form 5227, Part VIII, question 4a or b.

Amended Return

Form 4720 returns you must file can be
accepted for processing.

Part I
Line 8
If the organization has an entry

TIP on this line, it must also file
Form 8870.

3. After all Schedules A have been
prepared, complete Form 990-T, Part I
only. Don't complete Parts II through V
or the signature area of Form 990-T.
4. Enter the amount from Part I,
line 11 of Form 990-T on Part I, line 11
of Form 4720.

Part II

DRAFT AS OF
October 27, 2021

To correct a previously filed Form 4720
(including the reporting of additional
excise taxes discovered after the
original Form 4720 filing), use the same
year form as the form you are
correcting. Check the “Amended
Return” box in the heading area.

Complete the entire return (not just
the part that changed) following the form
and instructions for the amended year.
Include a statement that identifies the
lines and amounts being changed and
the reason for each change.
If the amended return shows tax due
and you wish to request abatement of
the tax reported on Form 4720, see
Abatement, earlier. If the amended
return results in an overpayment of tax
previously paid, show the amount of the
overpayment in Part III, line 4. Do not file
Form 843, Claim for Refund and
Request for Abatement, to request a
refund of an overpayment computed on
Part III, line 4.

Specific Instructions for
Page 1

An organization filing Form 4720 should
check the appropriate box for type of
annual return it files. If filing as a person
subject to a Chapter 42 tax, check
“Other.”
Question A. If filing as a person
subject to a Chapter 42 tax, answer with
respect to the related organization.
Question B. Answer “Yes” to question
B if you are a self-dealer, donor, donor
advisor, related person, disqualified
person, or manager and you will be filing
Form 4720 to report and pay excise
taxes with respect to more than one
organization. For example, if you are a
manager of two private foundations,
both of which made taxable
expenditures for which the initial tax on
managers is imposed under section
4945(a)(2), answer “Yes” to question B.
Attach a list showing the name and EIN
of each organization.
Note. A complete list of organizations
with respect to which you will file Form
4720 is necessary to ensure that all

Enter the total of all premiums paid by
the organization on any personal benefit
contract if the payment of premiums is in
connection with a transfer for which a
deduction isn't allowed under section
170(f)(10)(A). Also, if there is an
understanding or expectation that any
person will directly or indirectly pay any
premium on a personal benefit contract
for the transferor, include those
premium payments in the amount
entered on this line.
A personal benefit contract is (to the
transferor) any life insurance, annuity, or
endowment contract that benefits
directly or indirectly the transferor, a
member of the transferor's family, or any
other person designated by the
transferor (other than an organization
described in section 170(c)).
For more information, see Notice
2000-24, 2000-17 I.R.B. 952, at
IRS.gov/pub/irs-irbs/irb00-17.pdf.

Part II is completed by a manager, selfdealer, disqualified person, donor,
donor advisor, or related person subject
to tax under sections 4912(b), 4941(a),
4944(a)(2), 4945(a)(2), 4955(a)(2),
4958(a), 4965(a)(2), 4966(a)(2), and
4967(a). Enter the name, address, and
employer identification number of the
foundation or organization with respect
to which tax is owed as a manager,
self-dealer, disqualified person, donor,
donor advisor, or related person, as
computed in Schedules A, D, E, F, H, I,
J, K, and L.
Line 1. Enter the sum of:
1. Taxes you owe as a self-dealer,
from Schedule A, Part II, column (d),
and
2. Tax for acts of self-dealing in
which you participated as a manager,
from Schedule A, Part III, column (d).

Line 11

Line 2. Enter the tax on investments
that jeopardize charitable purpose from
Schedule D, Part II, column (d), that you
took part in as a foundation manager.

Section 664(c)(2) imposes an excise tax
on the unrelated business taxable
income of a charitable remainder trust.
The excise tax is equal to the trust's
unrelated business taxable income.
Enter the charitable remainder trust's
unrelated business taxable income on
line 11.

Line 3. Enter the tax on taxable
expenditures from Schedule E, Part II,
column (d), that you took part in as a
foundation manager.

Computation of unrelated business
taxable income. Charitable remainder
trusts should use Form 990-T to
compute their unrelated business
taxable income. Complete Form 990-T
as follows.
1. Enter the trust's name under
“Name of organization” and complete
item D (EIN) at the top of page 1.
2. Complete as many Schedules A
(Form 990-T) as needed to calculate the
trust’s unrelated business taxable
income. Leave any line that does not
apply blank. Complete the applicable
parts of each Schedule A, including the
business activity code for each
Schedule A. Attach forms or other
attachments required for a complete
Schedule A. However, if Schedule D
(Form 1041) is required, don't complete
Part V of Schedule D (Form 1041).

Line 4. Enter the tax on political
expenditures from Schedule F, Part II,
column (d), that you took part in as an
organization or foundation manager.
Line 5. Enter the tax on disqualifying
lobbying expenditures from Schedule H,
Part II, column (d), that you took part in
as an organization manager.

-6-

Line 6. Enter the sum of:
1. Taxes you owe as a disqualified
person, from Schedule I, Part II, column
(d), and
2. Tax on excess benefit
transactions in which you as
organization manager participated
knowing that the transaction was an
excess benefit transaction, from
Schedule I, Part III, column (d).
Line 7. Enter the tax on you as the
entity manager who approved or
otherwise caused the entity to be a
party to a prohibited tax shelter
Instructions for Form 4720 (2021)

transaction from Schedule J, Part II,
column (d).
Line 8. Enter the tax on taxable
distributions from sponsoring
organizations maintaining donor
advised funds from Schedule K, Part II,
column (d), that you took part in as a
manager.

Schedule A—Initial Taxes
on Self-Dealing (Section
4941)
General Instructions
Requirement. All organizations that
answered “Yes,” to question 1b or 1d in
Part VI-B of Form 990-PF, or “Yes,” to
question 1b or 1c in Part VIII of Form
5227, must complete Schedule A. In
addition, a self-dealer or a manager that
participated in an act of self-dealing
knowing that it was such an act must
also complete Schedule A. Complete
Parts I, II, and III of Schedule A only in
connection with acts that are subject to
the tax on self-dealing.
Paying the tax and filing a Form 4720
is required for each year or part of a
year in the taxable period that applies to
the act of self-dealing. Generally, the
taxable period begins with the date on
which the self-dealing occurs and ends
on the earliest of:
• The date a notice of deficiency is
mailed under section 6212, in
connection with the initial tax imposed
on the self-dealer,
• The date the initial tax on the
self-dealer is assessed, or
• The date any correction of the act of
self-dealing is completed.

Foundations for a description of acts
that aren't considered self-dealing.
Initial taxes on self-dealer. An initial
tax of 10% of the amount involved is
charged for each act of self-dealing
between a disqualified person and a
private foundation for each year or part
of a year in the taxable period. Any
disqualified person (other than a
foundation manager acting only as
such) who takes part in the act of
self-dealing must pay the tax.

DRAFT AS OF
October 27, 2021

Line 9. Enter the sum of:
1. Tax imposed on you as a donor,
donor advisor, or related person, from
Schedule L, Part II, column (d), and
2. Tax imposed on you as a fund
manager who agreed to making of a
prohibited benefit distribution from
Schedule L, Part III, column (d).

Liability for tax. A person's liability
for tax as a manager, self-dealer,
disqualified person, donor, donor
advisor, or related person, under
sections 4912, 4941, 4944, 4945, 4955,
4958, 4966, and 4967 is joint and
several. Therefore, if more than one
person owes tax on an act as a
manager, self-dealer, disqualified
person, donor, donor advisor, or related
person, they may apportion the tax
among themselves. However, when all
managers, self-dealers, donors, donor
advisors, related persons, or
disqualified persons who are liable for
tax on a particular transaction under
sections 4912, 4941, 4944, 4945, 4955,
4958, 4966, or 4967 pay less than the
total tax due on that transaction, then
the IRS may charge the amount owed to
one or more of them regardless of the
tax apportionment shown on this return.

Part III
Line 1. Organizations enter the total tax
amount from Part I, line 15. Managers,
self-dealers, disqualified persons,
donors, donor advisors, or related
persons enter the total tax amount from
Part II, line 10.
Line 2. List total payments here,
including amounts paid on extension
with Form 8868. See the discussion on
Extensions, earlier, for details on
amounts paid with extensions.
Line 3. Enter the tax due on this line.
Make check(s) or money order(s)
payable to the United States Treasury.
Line 4. This is your refund. Only
persons with a legal right to a refund
should file a refund request here.

Self-dealing. Self-dealing includes any
direct or indirect:
• Sale, exchange, or leasing of
property between a private foundation
and a disqualified person (see
definitions in Form 990-PF instructions),
• Lending of money or other extension
of credit between a private foundation
and a disqualified person,
• Furnishing of goods, services, or
facilities between a private foundation
and a disqualified person,
• Payment of compensation (or
payment or reimbursement of
expenses) by a private foundation to a
disqualified person,
• Transfer to, or use by or for the
benefit of, a disqualified person of the
income or assets of a private
foundation, and
• Agreement by a private foundation to
make any payment of money or other
property to a government official other
than an agreement to employ or make a
grant to that individual for any period
after the end of government service if
that individual will be ending
government service within a 90-day
period.
Exceptions to self-dealing. Go to
IRS.gov Audit Technique Guide Private

Instructions for Form 4720 (2021)

-7-

Initial taxes on foundation managers. When a tax is imposed on a
foundation manager for an act of
self-dealing, the tax will be 5% of the
amount involved in the act of
self-dealing for each year or part of a
year in the taxable period. However, the
total tax imposed for all years in the
taxable period is limited to $20,000 for
each act of self-dealing. The tax is
imposed on any foundation manager
who took part in the act knowing that it
was self-dealing except those
foundation managers whose
participation was not willful and was due
to reasonable cause.

Specific Instructions
Part I. List each act of self-dealing in
Part I. In column (c), for each act of
self-dealing in Part I, indicate whether
the act has been corrected. For the
purposes of a self-dealing transaction
described in section 4941, the term
“correction” generally means undoing
the transaction to the extent possible,
but in any case, placing the private
foundation in a financial position not
worse than that in which it would be if
the disqualified person were dealing
under the highest fiduciary standards.
Answer “Yes,” in column (c) if
correction has been made in whole or in
part. Answer “No,” only if the transaction
has not been corrected in any way. An
attachment will open, depending upon
whether you answer “Yes,”or “No.”
• If correction has been made, provide
a detailed description of any correction
made, and the date of each correction.
If correction is partial, explain why
complete correction has not been
made. If correction is made in more than
one transaction, describe each
transaction separately.
• If correction has not been made,
provide a detailed explanation of why
correction hasn't been made and what
steps are being taken to make the
correction.
Enter in column (e) the number
designation from Form 990-PF, Part
VI-B question 1a, or Form 5227, Part

VIII, question 1a that applies to the act.
For example, “1a(1)” or “1a(4).”
Part II. Enter in column (a) the names
of all disqualified persons who took part
in the acts of self-dealing listed in Part I.
If more than one disqualified person
took part in an act of self-dealing, each
is individually liable for the entire tax in
connection with the act. But the
disqualified persons who are liable for
the tax may prorate the payment among
themselves. Enter in column (c) the tax
to be paid by each disqualified person.
A self-dealer filing Form 4720 should
carry the appropriate amount in column
(d) to Part II, line 1.

(3) and related regulations or in section
4942(j)(5)), or
• To the extent it didn't distribute an
amount solely because of an incorrect
valuation of assets, provided the
foundation satisfies the requirements of
section 4942(a)(2), or
• For any year for which the initial tax
was previously assessed or a notice of
deficiency was issued.

excess holdings are determined on the
day during the tax year when they were
the largest.
If the foundation keeps the excess
business holdings after the initial tax
has been imposed, the foundation
becomes liable for an additional tax of
200% of the remaining excess business
holdings unless it disposes of them
within the taxable period. However, if
the foundation disposes of its excess
business holdings during the correction
period, the additional tax won't be
assessed or, if assessed, will be abated
and if collected, will be credited or
refunded. For information on the
correction period, go to IRS.gov Audit
Technique Guide Private Foundations.

DRAFT AS OF
October 27, 2021

Part III. Enter in column (a) the names
of all foundation managers who took
part in the acts of self-dealing listed in
Part I, and who knew that the acts were
self-dealing (except for foundation
managers whose participation was not
willful and was due to reasonable
cause).
If more than one foundation manager
took part in the act of self-dealing,
knowing that it was such an act, and
participation was willful and not due to
reasonable cause, each is individually
liable for the entire tax in connection
with the act. But the foundation
managers liable for the tax may prorate
the payment among themselves. Enter
in column (c) the tax to be paid by each
foundation manager.
Carry the total amount in column (d)
for each foundation manager to Part II,
line 1.

Schedule B—Initial Tax on
Undistributed Income
(Section 4942)
Complete Schedule B if you answered
“Yes,” to Form 990-PF, Part VI-B,
question 2b.

An initial excise tax of 30% is
imposed on a private foundation's
undistributed income on the first day of
the second or any succeeding tax year
after the tax year in connection with
which income remains undistributed.
Use the 2021 Form 4720 to report
the initial tax on undistributed income for
tax years beginning in 2020 or earlier
that remains undistributed at the end of
the foundation's current tax year
beginning in 2021. The initial tax won't
apply to a private foundation's
undistributed income:
• For any tax year it is an operating
foundation (as defined in section 4942(j)

Line 3. . Undistributed income is
corrected by making sufficient qualifying
distributions to compensate for deficient
qualifying distributions for a prior tax
year. You must attach a statement that
describes any qualifying distributions
made to correct the undistributed
income and the date(s) of those
distributions were made. If no qualifying
distributions have been made to correct
the undistributed income, explain why
and describe steps you will take to
make the necessary qualifying
distributions. If applicable, indicate
whether the election under 4942(h) has
been made. See Instructions for Form
990-PF, Part XII, lines 4b and 4c.

Schedule C—Initial Tax on
Excess Business Holdings
(Section 4943)
General Instructions

Private foundations may be subject to
an excise tax on the amount of any
excess holdings, as described later. For
purposes of section 4943, donor
advised funds and certain supporting
organizations are considered private
foundations. For more information on
the applicability of Schedule C to such
organizations, see General rules on the
permitted holdings of donor advised
funds and certain supporting
organizations in a business enterprise,
later.

Requirement. If you answered “Yes,”
to Form 990-PF, Part VI-B, question 3b;
Form 990, Part V, question 8; or Form
5227, Part VIII, question 3b, or
otherwise had excess business
holdings, complete a Schedule C for
each business enterprise in which the
foundation had excess business
holdings for its tax year beginning in
2021.
Taxes. A private foundation that has
excess holdings in a business
enterprise may become liable for an
excise tax based on the amount of
holdings. The initial tax is 10% of the
value of the excess holdings and is
imposed on the last day of each tax year
that ends during the taxable period. The
-8-

Business enterprise. In general, this
means the active conduct of a trade or
business, including any activity regularly
conducted to produce income from
selling goods or performing services,
that is an unrelated trade or business
described in section 513.
The term “business enterprise”
doesn't include a functionally related
business as defined in section 4942(j)
(4). In addition, business holdings don't
include program-related investments
(such as investments in small
businesses in economically depressed
areas or in corporations to assist in
neighborhood renovations) as defined
in section 4944(c) and related
regulations. Also, business enterprise
doesn't include a trade or business at
least 95% of the gross income of which
comes from passive sources. For more
information, go to IRS.gov Audit
Technique Guide Private Foundations.
Excess business holdings. Excess
business holdings is the amount of
stock or other interest in a business
enterprise that the foundation would
have to dispose of to a person other
than a disqualified person in order for
the foundation's remaining holdings in
the enterprise to be permitted holdings
(section 4943(c)(1)). Go to IRS.gov
Audit Technique Guide Private
Foundations for more information.

Sole proprietorships. In general, a
private foundation can't have any
permitted holdings in a business
enterprise that is a sole proprietorship.
For exceptions, go to IRS.gov Audit
Technique Guide Private Foundations.
For a definition of sole proprietorship,
see Regulations section 53.4943-10(e).
Corporate voting stock. This stock
entitles a person to vote for the election
of directors. Treasury stock and stock
that is authorized but unissued isn't
Instructions for Form 4720 (2021)

voting stock for these purposes. See
Regulations sections 53.4943-3(b)(1)(ii)
and 53.4943-3(b)(2)(ii).
For a partnership (including a limited
partnership) or joint venture, the term
“profits interest” should be substituted
for “voting stock.” For any
unincorporated business enterprise that
isn't a partnership, joint venture, or sole
proprietorship, the term “beneficial
interest” should be substituted for
“voting stock.” See Regulations section
53.4943-3(c).

date of filing the waiver or the date of
paying the tax, respectively, will be
treated as the end of the taxable period.
See Regulations section 53.4943-9.

Exceptions to Tax on Excess
Business Holdings

percentage for 20% and for 35% (if the
holding is greater than 35%), using the
principles of section 4943(c)(4) that
apply. However, the percentage
substituted can't be more than 50%.
The percentage substituted under
the preceding paragraph is (1) subject
to reductions and limitations (see
sections 4943(c)(4)(A)(ii) and 4943(c)
(4)(D)) and (2) applicable, both in
connection with the voting stock and,
separately, in connection with the value
of all outstanding shares of all classes of
stock (see section 4943(c)(4)(A)(iii)).

DRAFT AS OF
October 27, 2021

Nonvoting stock. Corporate equity
interests that don't have voting power
should be classified as nonvoting stock.
Evidences of indebtedness (including
convertible indebtedness), warrants,
and other options or rights to acquire
stock shouldn't be considered equity
interests. See Regulations section
53.4943-3(b)(2).
For a partnership (including a limited
partnership) or joint venture, the term
“capital interest” should be substituted
for “nonvoting stock.” For any
unincorporated business that isn't a
partnership, joint venture, or sole
proprietorship, references to nonvoting
stock don't apply for computation of
permitted holdings. See Regulations
section 53.4943-3(c)(4).

Attribution of business holdings. In
determining the holdings in a business
enterprise of either a private foundation
or a disqualified person, any stock or
other interest owned directly or
indirectly by or for a corporation,
partnership, estate, or trust is
considered owned proportionately by or
for its shareholders, partners, or
beneficiaries. In general, this rule
doesn't apply to certain income interests
or remainder interests of a private
foundation in a split-interest trust
described in section 4947(a)(2). See
Regulations section 53.4943-8.
Taxable period. The taxable period
begins on the first day the foundation
has excess business holdings and ends
on the earliest of:
• The mailing date of a notice of
deficiency, under section 6212, in
connection with the initial tax on excess
business holdings related to those
holdings,
• The date the excess is eliminated, or
• The date the initial tax on excess
business holdings related to those
holdings is assessed.
When a notice of deficiency isn't
mailed because the restrictions on
assessment and collection are waived
or because the deficiency is paid, the
Instructions for Form 4720 (2021)

2% de minimis rule. A private
foundation won't be treated as having
excess business holdings in any
enterprise in which it, together with
related foundations as described in the
instructions for Form 990-PF (under the
definition for “disqualified person” in the
General Instructions), owns not more
than 2% of the voting stock and not
more than 2% in value of all outstanding
shares of all classes of stock.

Disposition of excess business holdings within 90 days. Generally, when
a private foundation acquires excess
business holdings other than as a result
of purchase by the foundation (such as
an acquisition by a disqualified person),
the foundation won't be taxed on those
excess holdings if it disposes of enough
of them so that it no longer has an
excess. To avoid the tax, the disposition
must take place within 90 days from the
date the foundation knew, or had reason
to know, of the event that caused it to
have excess business holdings. That
90-day period will be extended to
include the period during which federal
or state securities laws prevent the
foundation from disposing of those
excess business holdings. See
Regulations section 53.4943-2(a).
General rules on the permitted holdings of a private foundation in a
business enterprise. No excess
business holdings tax is imposed (a) if a
private foundation and all disqualified
persons together hold no more than
20% of the voting stock of a business
enterprise or (b) on nonvoting stock, if
all disqualified persons together don't
own more than 20% of the voting stock
of the business enterprise.
If the private foundation and all
disqualified persons together don't own
more than 35% of the enterprise's voting
stock, and effective control is in one or
more persons who aren't disqualified
persons in connection with the
foundation, then 35% may be
substituted for 20% wherever it appears
in the preceding paragraph. See
sections 4943(c)(2) and 4943(c)(3).
If a private foundation and all
disqualified persons together had
holdings in a business enterprise of
more than 20% of the voting stock on
May 26, 1969, substitute that
-9-

Interests held by a private foundation (other than donor advised funds
and supporting organizations) on
May 26, 1969. For private foundations,
other than donor advised funds and
supporting organizations considered to
be private foundations for purposes of
section 4943, that had business
holdings on May 26, 1969 (or holdings
acquired by trust or will as described
below), that were more than the current
limits permit, there are transitional rules
that permit the foundation to dispose of
the excess over time without being
subject to the tax on excess business
holdings.
During the first phase, no excess
business holdings tax was imposed on
a private foundation for interests held
since May 26, 1969, if the foundation
had excess holdings on that date. The
first phase is:
• A 20-year period beginning on May
26, 1969, if on that date the foundation
and all disqualified persons held more
than a 95% voting interest in the
enterprise (the 20-year first phase
expired on May 25, 1989);
• A 15-year period beginning on May
26, 1969, if on that date the foundation
and all disqualified persons together
had more than a 75% voting stock
interest (or more than a 75% profits or
beneficial interest of any unincorporated
enterprise), or more than a 75% interest
in the value of all outstanding shares of
all classes of stock (or more than a 75%
capital interest of a partnership or joint
venture) in the enterprise (the 15-year
first phase expired on May 25, 1984);
and
• A 10-year period beginning on May
26, 1969, in all other cases in which the
foundation had excess business
holdings on May 26, 1969. The 10-year
first phase expired on May 25, 1979.
During the second phase (the
15-year period after the first phase), if
the foundation's disqualified persons
hold more than 2% of the enterprise's
voting stock, the foundation will be liable

for tax if the foundation holds more than
25% of the voting stock or if the
foundation and its disqualified persons
together hold more than 50% of the
voting stock.
However, during the second phase, if
a foundation's disqualified persons
purchase voting stock in a business
enterprise after July 18, 1984, causing
the combined holdings of the
disqualified persons to exceed 2% of
the enterprise's voting stock, the
foundation has 5 years to reduce its
holdings in the enterprise to below its
second phase limit before the increase
will be treated as held by the foundation.
See sections 4943(c)(4)(D) and 4943(c)
(6).
The first-phase periods may be
suspended pending the outcome of any
judicial proceeding the private
foundation brings regarding reform or
other procedure to excuse it from
compliance with its governing
instrument or similar instrument in effect
on May 26, 1969. See section 4943(c)
(4)(C) and Regulations section
53.4943-4.

A private foundation that received an
unusually large gift or bequest of
business holdings after 1969, and that
has made a diligent effort to dispose of
excess business holdings, may apply
for an additional 5-year period to reduce
its holdings to permissible levels if
certain conditions are met. See section
4943(c)(7).

different classes of stock won't result in
excess business holdings.
See Regulations section
53.4943-6(d) for rules on treatment of
increases in holdings due to
readjustments, distributions, or
redemptions.
See Regulations section 53.4943-7
for special rules for readjustments
involving grandfathered holdings.

DRAFT AS OF
October 27, 2021

Holdings acquired by trust or will.
Holdings acquired under the terms of a
trust that was irrevocable on May 26,
1969, or under the terms of a will
executed by that date, are treated as
held by the foundation on May 26, 1969,
except that the 15- and 10-year periods
of the first phase for the holdings start
on the date of distribution under the trust
or will instead of on May 26, 1969. See
section 4943(c)(5) and Regulations
section 53.4943-5. See section 4943(d)
(1) and Regulations section 53.4943-8
for rules relating to constructive
holdings held in a corporation,
partnership, estate, or trust for the
benefit of the foundation.
Gifts or bequests of business holdings. Except as provided in the
exception regarding Holdings acquired
by trust or will (discussed above), there
is a special rule for private foundations
that have excess business holdings as a
result of a change in holdings after May
26,1969. This rule applies if the change
is other than by purchase by the
foundation or by disqualified persons
(such as through gift or bequest) and
the additional holdings result in the
foundation having excess business
holdings. In that case, the foundation
has 5 years to reduce these holdings or
those of its disqualified persons to
permissible levels to avoid the tax. See
section 4943(c)(6) and Regulations
section 53.4943-6.

General rules on the permitted holdings of donor advised funds and certain supporting organizations in a
business enterprise. Rules similar to
those described above for interests held
by private foundations on May 26, 1969,
will be applied to determine if donor
advised funds or certain supporting
organizations with interests as of August
17, 2006, have any excess business
holdings. However, the date of August
17, 2006, will be substituted for May 26,
1969.

Donor advised fund. In general, a
donor advised fund is a fund or account
separately identified by reference to
contributions of a donor or donors that is
owned and controlled by a sponsoring
organization and for which the donor
has or expects to have advisory
privileges concerning the distribution or
investment of the funds. See
Schedule K for further details.
Sponsoring organization. A
sponsoring organization is any section
170(c) organization other than
governmental entities (described in
section 170(c)(1) and (2)(A)) that isn't a
private foundation as defined in section
509(a)(3) that maintains one or more
donor advised funds.
Supporting organizations. Only
certain supporting organizations are
subject to the excess business holdings
tax under section 4943. These include
(1) Type III supporting organizations that
aren't functionally integrated and (2)
Type II supporting organizations that
accept any gift or contribution from a
person who by himself or in connection
with a related party controls the
supported organization that the Type II
supporting organization supports. (See
the 2021 Instructions for Schedule A
(Form 990), Part I, question 11, for help
in determining the type of your
supporting organization.)
Readjustments, distributions, or
changes in relative value of different
classes of stock. See Regulations
section 53.4943-4(d)(10) for special
rules whereby increases in the
percentage of value of holdings in a
corporation that result solely from
changes in the relative values of
-10-

Exceptions from self-dealing taxes
on certain dispositions of excess
business holdings. Section 101(I)(2)
(B) of the Tax Reform Act of 1969
provides for a limited exception from
self-dealing taxes for private
foundations that dispose of certain
excess business holdings to disqualified
persons, as long as the sales price
equals or is more than fair market value.
The excess business holdings
involved are interests that are subject to
the section 4941 transitional rules for
May 26, 1969, holdings. These interests
would also be subject to the excess
business holdings tax if they were not
reduced by the required amount.

Specific Instructions

Complete columns (a) and (b) of
Schedule C if sections 4943(c)(4),
4943(c)(3) (using the principles of
4943(c)(4)), or 4943(c)(5) apply.
Complete column (a) and column (c)
(if applicable) if sections 4943(c)(2) or
4943(c)(3) (using the principles of
4943(c)(2)) apply.
Complete Schedule C for that day
during the tax year when the
foundation's excess holdings in the
enterprise were largest.
Line 1. Enter in column (a) the
percentage of voting stock the
foundation holds in the business
enterprise.
If the foundation is using the rules or
principles for determining present
holdings under section 4943(c)(4)(A) or
(D) (or rules similar to that for donor
advised funds and certain supporting
organizations), enter in column (b) the
percentage of value the foundation
holds in all outstanding shares of all
classes of stock.
Don't include in either column (a) or
(b) stock treated as held by disqualified
persons:
• Under section 4943(c)(6) or
Regulations sections 53.4943-6 and
53.4943-10(d), or
• During the first phase if the first phase
is still in effect (see Regulations
sections 53.4943-4(a), (b), and (c)).
Instructions for Form 4720 (2021)

Line 2. If the foundation is using the
rules or principles for determining
present holdings under section 4943(c)
(4) (or rules similar to that for donor
advised funds and certain supporting
organizations), refer to that section and
Regulations section 53.4943-4(d) to
determine which entries to record in
columns (a) and (b). Enter in column (a)
the excess of the substituted combined
voting level over the disqualified person
voting level. Enter in column (b) the
excess of the substituted combined
value level over the disqualified person
value level.
If the foundation is using the rules or
principles for determining permitted
holdings under section 4943(c)(2), refer
to that section to determine which
entries to record in column (a). Enter in
column (a) the percentage, using the
general rule (section 4943(c)(2)(A)) or
the 35% rule (see section 4943(c)(2)
(B)), if applicable, of permitted holdings
the foundation may have in the
enterprise's voting stock. If the
foundation determines the permitted
holdings under section 4943(c)(2)(B),
attach a statement showing effective
control by a third party.

electronic version of Form 4720.
Organizations not required to file
electronically may attach an
explanation.
Line 5. Compute the excess holdings
in a business enterprise subject to tax.
Line 8. Excess business holdings are
corrected by taking action as needed
such that the foundation no longer has
excess business holdings in a business
enterprise. Answer “Yes,” if the excess
business holdings have been corrected
in whole or in part.
• If correction has been made, provide
a detailed description of any correction
made, and the date of each correction.
If correction is made in more than one
transaction, describe each transaction
separately.
• If correction has not been made,
provide a detailed explanation of why
correction hasn't been made and what
steps are being taken to make the
correction.

long- and short-term financial needs of
the foundation to carry out its exempt
purposes). See Regulations section
53.4944-1(a)(2). An investment isn't
taxed on this schedule if it is a
program-related investment; that is, one
whose primary purpose is one or more
of those described in section 170(c)(2)
(B) (religious, charitable, educational,
etc.). A significant purpose of such an
investment can't be the production of
income or the appreciation of property.
See section 4944(c) and Regulations
section 53.4944-3.

DRAFT AS OF
October 27, 2021

Line 3. Enter the value of any stock,
interest, etc., in the business enterprise
that the foundation is required to
dispose of so the foundation's holdings
in the enterprise are permitted. See
section 4943 and related regulations.
A private foundation using the
section 4943(c)(4) rules, or a donor
advised fund or supporting organization
using rules similar to that, has excess
holdings if line 1 is more than line 2 in
either column (a) or column (b). Don't
include in column (b) the value of any
voting stock included in column (a).
A private foundation using the
section 4943(c)(2) rules has excess
holdings if line 1 is more than line 2 in
column (a) or if the private foundation
holds nonvoting stock and all
disqualified persons together own more
than 20% (or 35%, if applicable) of the
enterprise's voting stock, interest, etc. In
the latter case, enter in column (c) the
value of all nonvoting stock the
foundation holds.
Line 4. Enter the value of excess
holdings disposed of under the 90-day
rule in Regulations section 53.4943-2(a)
(1)(ii). If other conditions preclude
imposition of tax on excess business
holdings, include the value of the
nontaxable amount on this line and
check the appropriate boxes on the
statement page attached to the
Instructions for Form 4720 (2021)

Schedule D—Initial Taxes
on Investments That
Jeopardize Charitable
Purpose (Section 4944)
General Instructions
Requirement. Complete Schedule D if
you answered “Yes,” to Form 990-PF,
Part VI-B, question 4a or b; or Form
5227, Part VIII, question 4a or b. Report
each investment separately. Paying tax
and filing a Form 4720 are required for
each year or part of a year in the taxable
period that applies to the investments
that jeopardize the foundation's
charitable purpose. Generally, the
taxable period begins with the date of
the investment and ends with the date
corrective action is completed, a notice
of deficiency is mailed, or the initial tax
is assessed, whichever comes first.
Therefore, in addition to investments
made in 2021, include all investments
subject to tax that were made before
2021 if those investments were not
removed from jeopardy before 2021 and
the initial tax was not assessed before
2021.
Taxable investments. An investment
to be taxed on this schedule is an
investment by a private foundation that
jeopardizes the carrying out of its
exempt purposes (for example, if it is
determined that the foundation
managers, in making the investment,
didn't exercise ordinary business care
and prudence, under prevailing facts
and circumstances, in providing for the
-11-

Initial taxes on foundation. The initial
tax is 10% of the amount invested for
each year or part of a year in the taxable
period.
Initial taxes on foundation managers. When a tax is imposed on an
investment that jeopardizes the
charitable purpose of the foundation,
the tax will be 10% of the investment for
each year or part of a year in the taxable
period, up to $10,000 for any one
investment. It is imposed on all
foundation managers who took part in
the act, knowing that it was such an act,
except for foundation managers whose
participation was not willful and was due
to reasonable cause. Any foundation
manager who took part in making the
investment must pay the tax.

Specific Instructions
Part I. Complete this part for all taxable
investments. Investments that
jeopardize the carrying out of the
foundation’s exempt purpose are
corrected by selling or otherwise
disposing of the investment, and holding
the proceeds of such sale or other
disposition in investments that do not
jeopardize the carrying out of the
foundation's exempt purpose. In column
(c), for each act of investment listed in
Part I, indicate whether the investment
has been corrected. Answer “Yes,” if
correction has been made in whole or in
part. Answer “No,” only if the investment
has not been corrected in any way. An
attachment will open, depending upon
whether you answer “Yes,”or “No.”
• If correction has been made, provide
a detailed description of any correction
made, and the date of each correction.
If correction is partial, explain why
complete correction has not been
made. If correction is made in more than
one transaction, describe each
transaction separately.
• If correction has not been made,
provide a detailed explanation of why
correction hasn't been made and what

steps are being taken to make the
correction.
Part II. Enter in column (a) the names
of all foundation managers who took
part in making the investments listed in
Part I. See Initial taxes on foundation
managers, earlier.
If more than one foundation manager
is listed in column (a), each is
individually liable for the entire amount
of tax in connection with the investment.
However, the foundation managers who
are liable for the tax may prorate
payment among themselves. Enter in
column (c) the tax each foundation
manager will pay.
A foundation manager filing this Form
4720 should carry the appropriate
amount in column (d) to Part II, line 2.

4942(g)(4)(B) and (C)) if a disqualified
person of the foundation controls such
supporting organization or the
supported organizations of such
supporting organizations, and
b. Type III supporting organizations
(as described in section 4943(f)(5)(A))
that aren't functionally integrated with
their supported organizations; or
5. For any purpose other than
religious, charitable, scientific, literary,
educational, or public purposes, or the
prevention of cruelty to children or
animals.

(expenditure responsibility), obtaining or
making the report in question. In column
(d), for each act of taxable expenditure
listed in Part I, indicate whether the
investment has been corrected. Answer
“Yes,” if correction has been made in
whole or in part. Answer only “No,” if the
taxable expenditure has not been
corrected in any way. An attachment will
open, depending upon whether you
answer “Yes,” or “No.”
• If correction has been made, provide
a detailed description of any correction
made, and the date of each correction.
If correction is partial, explain why
complete correction has not been
made. If correction is made in more than
one transaction, describe each
transaction separately.
• If correction has not been made,
provide a detailed explanation of why
correction hasn't been made and what
steps are being taken to make the
correction.

DRAFT AS OF
October 27, 2021

Schedule E—Initial Taxes
on Taxable Expenditures
(Section 4945)
General Instructions
Requirement. Complete Schedule E if
you answered “Yes,” to Form 990-PF,
Part VI-B, question 5b, or Form 5227,
Part VIII, question 5b. Complete Parts I
and II of Schedule E only for
expenditures that are subject to tax.
Note. Also, see Schedule F, Initial
Taxes on Political Expenditures.
Taxable expenditures. With certain
exceptions, this means any amount a
private foundation pays or incurs:
1. To carry on propaganda or
otherwise influence any legislation
through:
a. An attempt to influence general
public opinion or any segment of it, and
b. Communication with any member
or employee of a legislative body, or
with any other government official or
employee who may take part in
formulating legislation;
2. To influence the outcome of any
specific public election, or to conduct,
directly or indirectly, any voter
registration drive;
3. As a grant to an individual for
travel, study, or other purposes;
4. As a grant to an organization not
described in section 509(a)(1), (2), or
(3) or that isn't an exempt operating
foundation (as defined in section
4940(d)(2)). This includes grants to:
a. Type I, Type II, and Type III
functionally integrated supporting
organizations (as described in section

Exceptions. Section 4945(d)(4)(B)
provides an exception to taxable
expenditures that applies to certain
grants to organizations when the
granting foundation exercises
expenditure responsibility described in
section 4945(h). Additional information
on special rules and exceptions to the
definition of taxable expenditures given
above can be found at IRS.gov Audit
Technique Guide Private Foundations.

Initial tax on foundation. An initial tax
of 20% is imposed on each taxable
expenditure of the foundation.
Initial tax on foundation managers.
When a tax is imposed on a taxable
expenditure of the foundation, a tax of
5% of the expenditure will be imposed
on any foundation manager who agreed
to the expenditure and who knew that it
was a taxable expenditure. Foundation
managers whose participation was not
willful and was due to reasonable cause
aren't liable for the tax. Any foundation
manager who took part in the
expenditure and is liable for the tax must
pay the tax. The maximum total amount
of tax on all foundation managers for
any one taxable expenditure is $10,000.
If more than one foundation manager is
liable for tax on a taxable expenditure,
all those foundation managers are
jointly and severally liable for the tax.

Specific Instructions
Part I. Complete this part for all taxable
expenditures. Enter in column (f) the
number designation from Form 990-PF,
Part VI-B, question 5a, or Form 5227,
Part VIII, line 5 that applies to the act; for
example, “5a(1).
A taxable expenditure is corrected by
(a) recovering part or all of the
expenditure to the extent recovery is
possible, and where full recovery isn't
possible, such additional corrective
action as is prescribed by regulations,
or (b) if the taxable expenditure is due to
failure to comply with requirements
described in section 4945(h)(2) or (3)
-12-

Part II. Enter in column (a) the names
of all foundation managers who agreed
to make the taxable expenditure. See
Initial tax on foundation managers,
earlier. If more than one foundation
manager is listed in column (a), each is
individually liable for the entire tax in
connection with the expenditure.
However, the foundation managers who
are liable for the tax may prorate the
payment among themselves. Enter in
column (c) the tax each foundation
manager will pay.
A foundation manager filing this Form
4720 should carry the appropriate
amount in column (d) to Part II, line 3.

Schedule F—Initial Taxes
on Political Expenditures
(Section 4955)
General Instructions
Requirement. Complete Schedule F if
you answered “Yes,” to question 5a(2)
and 5b of Form 990-PF, Part VI-B.
Complete Schedule F if you entered an
amount on line 2 of Schedule C (Form
990), Part I-A. Complete Schedule F if
you are otherwise a section 501(c)(3)
organization that made a political
expenditure.
Political expenditures. These include
any amount paid or incurred by a
section 501(c)(3) organization that
participates or intervenes in (including
the publication or distribution of
statements) any political campaign on
behalf of, or in opposition to, any
candidate for public office. The tax is
imposed even if the political expenditure
Instructions for Form 4720 (2021)

gives rise to a revocation of the
organization's section 501(c)(3) status.
These taxes apply in the case of both
public charities and private foundations.
When tax is imposed under this
provision in the case of a private
foundation, however, the expenditure in
question won't be treated as a taxable
expenditure under section 4945.
For an organization formed primarily
to promote the candidacy or prospective
candidacy of an individual for public
office (or that is effectively controlled by
a candidate or prospective candidate
and is used primarily for such
purposes), amounts paid or incurred for
any of the following purposes are
deemed political expenditures:
• Remuneration to the candidate or
prospective candidate for speeches or
other services;
• Travel expenses of the individual;
• Expenses of conducting polls,
surveys, or other studies, or preparing
papers or other material for use by the
individual;
• Expenses of advertising, publicity,
and fundraising for such individual; and
• Any other expense which has the
primary effect of promoting public
recognition or otherwise primarily
accruing to the benefit of the individual.

political expenditure has not been
corrected in any way. An attachment will
open, depending upon whether you
answer “Yes,” or “No.”
• If correction has been made, provide
a detailed description of any correction
made, and the date of each correction.
If correction is partial, explain why
complete correction has not been
made. If correction is made in more than
one transaction, describe each
transaction separately.
• If correction has not been made,
provide a detailed explanation of why
correction hasn't been made and what
steps are being taken to make the
correction.

other organization, and who, by
aggregating their votes, hold sufficient
voting power to cause or prevent action
on legislative activities by the first
organization. See section 4911(f) and
Regulations section 56.4911-7.
A nonelecting member of an affiliated
group doesn’t file Form 4720.
Electing members of an affiliated
group may file a group return or may file
separately. An electing member of an
affiliated group that files a separate
return, should enter on line 1 the
amount from Schedule C (Form 990),
Part II-A, column (a), line 1h. Enter on
line 2 the amount from Schedule C
(Form 990), Part II-A, column (a), line 1i.
An electing member of an affiliated
group that is included in a group return,
should enter on line 1 its share of the
excess grass root lobbying
expenditures of the affiliated group, and
on line 2 its share of the excess
lobbying expenditures of the affiliated
group. Take these amounts from the
schedule of excess lobbying
expenditures that must be attached to
Schedule C (Form 990). See the
instructions for Schedule C (Form 990),
Part II-A, for a discussion of the lobbying
provisions, including how to figure the
taxable amount.

DRAFT AS OF
October 27, 2021

Initial tax on organization or foundation. The initial tax on the organization
or foundation is 10% of the amount
involved.
Initial tax on organization managers
or foundation managers. An initial tax
of 2.5% of the amount involved (up to
$5,000 of tax on any one expenditure) is
imposed on any manager who agrees to
an expenditure, knowing that it is a
political expenditure, unless the
agreement isn't willful and is due to
reasonable cause.
Any manager who agreed to the
expenditure must pay the tax.

Specific Instructions
Part I. Complete this part for all political
expenditures. A political expenditure
described in section 4955 is corrected
by recovering part or all of the
expenditure to the extent recovery is
possible, establishment of safeguards
to prevent future political expenditures,
and where full recovery isn't possible,
such additional corrective action as is
prescribed by the regulations. In column
(d), for each act of political expenditure
listed in Part I, indicate whether the
investment has been corrected. Answer
“Yes,” if correction has been made in
whole or in part. Answer “No,” only if the
Instructions for Form 4720 (2021)

Part II. Enter in column (a) the names
of all managers who took part in making
the political expenditures listed in Part I.
See Initial tax on organization managers
or foundation managers, earlier.
If more than one manager is listed in
column (a), each is individually liable for
the entire amount of tax on the
expenditure. However, the managers
who are liable for the tax may prorate
payment among themselves. Enter in
column (c) the tax each manager will
pay.
An organization manager filing this
Form 4720 should carry the appropriate
amount in column (d) to Part II, line 4.

Schedule G—Tax on
Excess Lobbying
Expenditures (Section
4911)
Requirement. Schedule G must be
completed by eligible section 501(c)(3)
organizations that elected to be subject
to the limitations on lobbying
expenditures under section 501(h) and
that made excess lobbying
expenditures as defined in section
4911(b).
Except as noted below, follow the
line instructions on Schedule G.
Affiliated groups. Two or more
organizations are members of an
affiliated group of organizations for the
purposes of section 4911 only if:
• The governing instrument of one
organization requires it to be bound by
decisions of the other organization on
legislative issues; or
• The governing board of one
organization includes persons who are
specifically designated representatives
of another such organization or are
members of the government, officers or
paid executive staff members of such
-13-

Schedule H—Taxes on
Disqualifying Lobbying
Expenditures (Section
4912)
General Instructions
Requirement. Schedule H must be
completed by certain organizations
whose section 501(c)(3) status is
revoked because of excess lobbying
activities.
Exceptions. These taxes aren't
imposed on a private foundation (whose
lobbying expenditures may be subject to
the tax on taxable expenditures). These
taxes also aren't imposed on any
organization for which a section 501(h)
election was in effect at the time of the
lobbying expenditures or that was not
eligible to make a section 501(h)
election.
Tax on organization. A tax of 5% of
the lobbying expenditures is imposed
on the organization whose section
501(c)(3) status is revoked because of
excess lobbying activities.
Tax on organization managers. A tax
of 5% of the lobbying expenditures is
also imposed on any manager who

willfully and without reasonable cause
consented to the lobbying expenditures,
knowing that they would likely result in
the organization no longer qualifying
under section 501(c)(3).
There is no limit on the amount of this
tax that may be imposed against either
the organization or its managers. Any
organization manager who agreed to
the expenditure must pay the tax.

receives an excess benefit from an
excess benefit transaction, the manager
may be liable for the tax on disqualified
persons and the tax on the organization
manager. See Abatement, earlier, for
information on abatement, refund, or
relief from this tax.
Tax on disqualified persons. The
tax is 25% of the excess benefit and is
paid by any disqualified person who
improperly benefited from the excess
benefit transaction.

will be considered an excess benefit
transaction. The amount of the excess
benefit is the amount of such grant,
loan, compensation, or other similar
payment. Also, any loan provided to a
disqualified person that isn't an
organization described in section 509(a)
(1), (2), or (4) or a supported
organization of the supporting
organization exempt under section
501(c)(4), (5), (6) and described in the
last sentence of section 509(a) is
considered an excess benefit
transaction.

DRAFT AS OF
October 27, 2021

Specific Instructions

Part I. Complete this part for all
disqualifying lobbying expenditures.

Part II. Enter in column (a) the names
of all organization managers who took
part in making disqualifying lobbying
expenditures listed in Part I. See Tax on
organization managers, earlier.
If more than one organization
manager is listed in column (a), each is
individually liable for the entire amount
of tax in connection with the
expenditure. However, the managers
who are liable for the tax may prorate
payment among themselves. Enter in
column (c) the tax each manager will
pay.
A manager filing this Form 4720
should carry the appropriate amount in
column (d) to Part II, line 5.

Schedule I—Initial Taxes
on Excess Benefit
Transactions (Section
4958)
General Instructions
Requirement. Schedule I must be
completed by any Applicable
organization or Disqualified person
that engaged in an Excess benefit
transaction, and by any fund manager
who knowingly participated in the
excess benefit transaction. These terms
are discussed below.
Applicable organization. In
general, an applicable organization is
any section 501(c)(3) (except a private
foundation), 501(c)(4), or 501(c)(29)
organization.
Also, an applicable organization
includes any organization that was a
section 501(c)(3) (except a private
foundation), 501(c)(4), or 501(c)(29)
organization at any time during a
five-year period ending on the date of
an excess benefit transaction (the
lookback period).
Initial taxes. Excise taxes are imposed
under section 4958 on each excess
benefit transaction. If a manager

Tax on organization managers. If
tax is imposed on a disqualified person
for any excess benefit transaction, then
tax is also imposed on any manager
who knowingly participated in the
excess benefit transaction. The tax is
10% of the excess, not to exceed
$20,000 for each transaction.

Taxable period. Taxable period
means the period beginning with the
date on which the excess benefit
transaction occurs and ending on the
earlier of:
1. The date a notice of deficiency
was mailed to the disqualified person for
the initial tax on the excess benefit
transaction, or
2. The date on which the initial tax
on the excess benefit transaction for the
disqualified person is assessed.
Excess benefit transaction. An
excess benefit transaction is any
transaction in which:
1. An excess benefit is provided by
the organization, directly or indirectly to,
or for the use of, any disqualified
person, or
2. The amount of any economic
benefit provided to, or for the use of, a
disqualified person is determined in
whole or in part by the revenues of the
organization and violates the private
inurement prohibition rules (to the extent
provided in regulations).
Until final regulations are issued
regarding the special rules for
CAUTION revenue sharing transactions
described in 2 above, these
transactions will only be subject to
section 4958 liability under the general
rule described in 1 above.

!

Supporting organization
transactions occurring after July 25,
2006. For any supporting organization,
as defined in section 509(a)(3), any
grant, loan, compensation, or other
similar payment provided to a
substantial contributor (defined later),
family member, or 35% controlled entity
-14-

Donor advised fund transactions
occurring after August 17, 2006. Any
grant, loan, compensation, or other
similar payment from any donor advised
fund to a donor, donor advisor, family
member, or 35% controlled entity is an
excess benefit transaction. The amount
of the excess benefit is the amount of
such grant, loan, compensation, or
other similar payment.
Excess benefit. Excess benefit
means the excess of the economic
benefit received from the applicable
organization over the consideration
given (including services) by a
disqualified person, except in the
immediately preceding special rules
where the entire amount of the grant,
loan, compensation, or other similar
payment is considered the excess
benefit.
However, an economic benefit won't
be treated as compensation for services
unless the applicable organization
clearly indicates its intent to treat the
economic benefit (when paid) as
compensation for a disqualified person's
services. See Regulations section
53.4958-4(c) for more information.
Exception. Generally, section 4958
doesn't apply to any fixed payment
made to a person under an initial
contract. See Regulations section
53.4958-4(a)(3) for details.

Special rule. The initial and additional
taxes of this section don't apply if the
transaction described in 1 under Excess
benefit transaction was pursuant to a
written contract in effect on September
13, 1995, and at all times after that date
until the time that the transaction
occurs.
However, if a written contract is
materially modified, it is treated as a
new contract entered into as of the date
of the material modification. A material
modification includes amending the
contract to extend its term or to increase
the compensation payable to a
disqualified person.
Instructions for Form 4720 (2021)

Disqualified person. For purposes of
this Schedule I, a disqualified person
means:
1. Any person (at any time during
the 5-year period ending on the date of
the transaction) in a position to exercise
substantial influence over the affairs of
the organization,
2. A family member of an individual
described in 1 above, and
3. A 35% controlled entity of a
person described in 1 or 2 above.

Donor advised fund. See the
Schedule K instructions for a definition
of donor advised fund.

Family members. Family members
of a disqualified person described in 1
above include a disqualified person's
spouse, ancestors, children,
grandchildren, great grandchildren, and
brothers and sisters (whether by wholeor half-blood). It also includes the
spouse of the children, grandchildren,
great grandchildren, brothers, or sisters
(whether by whole- or half-blood).

Sponsoring organization. See the
Schedule K instructions for a definition
of sponsoring organization.

Investment advisor. Investment
advisor means for any sponsoring
organization, any person compensated
by such organization (but not an
employee of such organization) for
managing the investment of, or
providing investment advice for assets
maintained in donor advised funds
maintained by such sponsoring
organization.

one transaction, describe each
transaction separately.
• If correction has not been made,
provide a detailed explanation of why
correction hasn't been made and what
steps are being taken to make the
correction.
For organization managers, the tax is
the lesser of 10% of the excess benefit
or $20,000. This tax is computed on
each transaction.

DRAFT AS OF
October 27, 2021

35% controlled entity. The term
35% controlled entity means:
• A corporation in which a disqualified
person described in 1 or 2 above owns
more than 35% of the total combined
voting power,
• A partnership in which such persons
own more than 35% of the profits
interest, or
• A trust or estate in which such
persons own more than 35% of the
beneficial interest.
In determining the holdings of a
business enterprise, any stock or other
interest owned directly or indirectly shall
apply.
For donor advised funds, sponsoring organizations, and certain supporting organization transactions
occurring after August 17, 2006. The
following persons will be considered
disqualified persons along with certain
family members and 35% controlled
entities associated with them:

• Donors of donor advised funds,
• Donor advisors of donor advised

funds,
• Investment advisors of sponsoring
organizations, and
• Disqualified persons of a section
509(a)(3) supporting organization for
the organizations that organization
supports.
For certain supporting
organization transactions occurring
after July 25, 2006. Substantial
contributors to supporting organizations
will also be considered disqualified
persons along with their family members
and 35% controlled entities.
Instructions for Form 4720 (2021)

Substantial contributor. In
general, a substantial contributor means
any person who contributed or
bequeathed an aggregate of more than
$5,000 to the organization, if that
amount is more than 2% of the total
contributions and bequests received by
the organization before the end of the
tax year of the organization in which the
contribution or bequest is received by
the organization from such person. A
substantial contributor includes the
grantor of a trust.

Specific Instructions
Part I. List each excess benefit
transaction in Part I, column (d). Enter
the date of the transaction in column (b)
and the amount of the excess benefit in
column (e). Compute the tax on the
excess benefit for disqualified persons
and enter it in column (f). Compute any
tax on the excess benefit for
organization managers and enter the
amount in column (g).
An excess benefit transaction is
corrected by undoing the excess benefit
to the extent possible and taking any
additional measures necessary to place
the organization in a financial position
not worse than that in which it would be
if the disqualified person had been
dealing under the highest fiduciary
standards. In column (c), for each act of
excess benefit transaction in Part I,
indicate whether the act has been
corrected. Answer “Yes,” if correction
has been made in whole or in part.
Answer “No,” only if the transaction has
not been corrected in any way. An
attachment will open, depending upon
whether you answer “Yes,” or “No.”
• If correction has been made, provide
a detailed description of any correction
made, and the date of each correction.
If correction is partial, explain why
complete correction has not been
made. If correction is made in more than
-15-

Part II. Enter in column (a) the names
of all disqualified persons who took part
in the excess benefit transactions. If
more than one disqualified person took
part in an excess benefit transaction,
each is individually liable for the entire
tax on the transaction. But the
disqualified persons who are liable for
the tax may prorate the payment among
themselves. Enter in column (c) the tax
to be paid by each disqualified person.
Carry the total amount in column (d)
for each disqualified person to Part II,
line 6.
Part III. Enter in column (a) the names
of all managers who knowingly took part
in the excess benefit transactions listed
in Part I. If more than one manager
knowingly took part in an excess benefit
transaction, each is individually liable for
the entire tax in connection with the
transaction. But the managers liable for
the tax may prorate the payment among
themselves. Enter in column (c) the tax
to be paid by each organization
manager.
A manager filing this Form 4720
should carry the appropriate amount in
column (d) to Part II, line 6.

Schedule J—Taxes on
Being a Party to Prohibited
Tax Shelter Transactions
(Section 4965)
General Instructions
Requirement.
1. Complete Schedule J if you are
an entity described in section 501(c),
501(d), or 170(c) (other than the United
States) or an Indian tribal government
(within the meaning of section 7701(a)
(40)) and you received proceeds from or
have net income attributable to a
prohibited tax shelter transaction
(PTST).
2. Complete Schedule J if you are
an entity manager of such an entity who
approved the entity as (or otherwise
caused the entity to be) a party to a
PTST at any time during the tax year

and who knew (or had reason to know)
that the transaction is a PTST.
See the following guidance and any
future guidance for details.
• Notice 2006-65, 2006-31 I.R.B. 102;
• Notice 2007-18, 2007-9 I.R.B. 608;
• T.D. 9334, 2007-34 I.R.B. 382; and
• T.D. 9492, 2010-33 I.R.B. 242.

prohibited tax shelter transaction must
be allocated to a particular tax year in a
manner consistent with the entity's
established method of accounting for
federal income tax purposes. If an entity
hasn't established a method of
accounting for federal income tax
purposes, the entity must use the cash
receipts and disbursements method to
determine the amount and timing of net
income and proceeds attributable to a
prohibited tax shelter transaction.
If an entity has an established
method of accounting other than the
cash method, the entity may use the
cash method to determine the amount
of the net income and proceeds
attributable to a prohibited tax shelter
transaction.

distribution knowing that it was a taxable
distribution. Report each taxable
distribution separately. These terms are
discussed below.
Taxable distribution. A taxable
distribution is any distribution from a
donor advised fund to any natural
person or to any other person if:
1. The distribution is for any
purpose other than one specified in
section 170(c)(2)(B), or
2. The sponsoring organization
maintaining the donor advised fund
doesn't exercise expenditure
responsibility with respect to such
distribution in accordance with section
4945(h).

DRAFT AS OF
October 27, 2021
Managers of tax favored

TIP retirement plans, individual

retirement arrangements, and
savings arrangements described in
sections 401(a), 403(a), 403(b), 529,
457(b), 408(a), 220(d), 408(b), 530, or
223(d) must report and pay tax due
under section 4965(a)(2) on Form 5330.

Prohibited tax shelter transaction. In
general, a prohibited tax shelter
transaction means any listed transaction
(including a subsequently listed
transaction) and any prohibited
reportable transaction.

Listed transaction. A listed
transaction includes any transaction that
is the same as or substantially similar to
one of the types of transactions that the
IRS has determined to be a tax
avoidance transaction. These
transactions are identified by notice,
regulation, or other form of published
guidance as a listed transaction. For
existing guidance, see Notice 2009-59,
2009-31 I.R.B. 170.
For updates to this list, go to the IRS
website at IRS.gov/businesses/
corporations/abusive-tax-shelters-andtransactions. The listed transactions in
the above notices and rulings will also
be periodically updated in future issues
of the Internal Revenue Bulletin.
Subsequently listed transaction.
A subsequently listed transaction is a
transaction that is identified in published
guidance as a listed transaction after
the entity has entered into the
transaction and that was not a
confidential transaction or transaction
with contractual protection at the time
the entity entered into the transaction.
Prohibited reportable transaction. A
prohibited reportable transaction is any
confidential transaction or any
transaction with contractual protection
that is a reportable transaction. See
Regulations sections 1.6011-4(b)(3)
and (4), and the Instructions for Form
8886-T, Disclosure by Tax-Exempt
Entity Regarding Prohibited Tax Shelter
Transaction, for more information.
Allocation of net income and proceeds to a tax year. The net income
and proceeds attributable to a

Specific Instructions

Part I. Complete this part for each
transaction if during the tax year the
entity received proceeds from or has net
income attributable to a PTST.
Figure the tax for each transaction as
follows.
• If column (e) was answered “Yes,”
then enter the larger of the column (f) or
column (g) amount in column (h).
• If column (e) was answered “No,”
then multiply the larger of the amount in
column (f) or column (g) by 21% (0.21)
and enter the result in column (h).
After the tax has been figured for all
PTSTs entered on Schedule J, then
total column (h) and enter the amount
on the Total line and on line 9 of Part I.
Part II. Enter in column (a) the names
of all entity managers who approved the
entity as (or otherwise caused the entity
to be) a party to a PTST at any time
during the tax year and who knew or
had reason to know that the transaction
is a PTST.
A manager filing this Form 4720
should carry the appropriate amount in
column (d) to Part II, line 7.

Schedule K—Taxes on
Taxable Distributions of
Sponsoring Organizations
Maintaining Donor
Advised Funds (Section
4966)
General Instructions
Requirement. Complete Schedule K if
you answered “Yes,” to question 9a in
Part V of Form 990, or if you are a fund
manager of a sponsoring organization
who agreed to the making of a taxable
-16-

However, a taxable distribution
doesn't include a distribution from a
donor advised fund to:
1. Any organization described in
section 170(b)(1)(A) (other than a
disqualified supporting organization),
2. The sponsoring organization of
such donor advised fund, or
3. Any other donor advised fund.

Sponsoring organization. A
sponsoring organization is a section
170(c) organization that isn't a
government organization (as referred to
in section 170(c)(1) and (2)(A)) or a
private foundation and maintains one or
more donor advised funds.
Donor advised fund. A donor advised
fund is a fund or account:
1. Which is separately identified by
reference to contributions of a donor or
donors,
2. Which is owned and controlled by
a sponsoring organization, and
3. For which the donor (or any
person appointed or designated by the
donor) has or expects to have advisory
privileges concerning the distribution or
investment of the funds held in the
donor advised funds or accounts
because of the donor's status as a
donor.
Exception. A donor advised fund
doesn't include:
1. A fund or account that makes
distributions only to a single identified
organization or governmental entity, or
2. Any fund or account with respect
to which a donor or donor advisor (as
defined in the Schedule L instructions)
gives advice about which individuals
receive grants for travel, study, or
similar purposes, if:

Instructions for Form 4720 (2021)

a. Such person's advisory privileges
are performed exclusively by such
person in their capacity as a committee
member of which all the committee
members are appointed by the
sponsoring organization,
b. No combination of donors, donor
advisors, or persons related (as defined
in the Schedule L instructions) to donors
or donor advisors, directly or indirectly
control the committee, and
c. All grants from the fund or
account are awarded on an objective
and nondiscriminatory basis according
to a procedure approved in advance by
the board of directors of the sponsoring
organization. The procedure must be
designed to ensure that all grants meet
the requirements of section 4945(g)(1),
(2), or (3).

Schedule L—Taxes on
Prohibited Benefits
Distributed From Donor
Advised Funds (Section
4967)
General Instructions

received by a donor, donor advisor, or
related person, a tax of 10% of the
amount of the prohibited benefit is
imposed on any fund manager who
agreed to the distribution knowing that it
would confer a prohibited benefit. Any
fund manager who took part in the
distribution and is liable for the tax must
pay the tax. The maximum amount of
tax on all fund managers for any one
taxable distribution is $10,000. If more
than one fund manager is liable for tax
on a taxable distribution, all such
managers are jointly and severally liable
for the tax.

DRAFT AS OF
October 27, 2021

Tax on sponsoring organization. A
tax of 20% of the amount of each
taxable distribution is imposed on the
sponsoring organization.
Tax on fund manager. If a tax is
imposed on a taxable distribution of the
sponsoring organization, a tax of 5% of
the distribution will be imposed on any
fund manager who agreed to the
distribution knowing that it was a taxable
distribution. Any fund manager who took
part in the distribution and is liable for
the tax must pay the tax. The maximum
amount of tax on all fund managers for
any one taxable distribution is $10,000.
If more than one fund manager is liable
for tax on a taxable distribution, all such
managers are jointly and severally liable
for the tax.

Specific Instructions
Part I. Complete this part for all taxable
distributions.
Part II. Enter in column (a) the names
of all fund managers who agreed to
make the taxable distribution. If more
than one fund manager is listed in
column (a) for one distribution, each is
individually liable for the entire tax in
connection with that distribution.
However, the fund managers who are
liable for the tax may prorate the
payment among themselves. Enter in
column (c) the tax each manager will
pay for each distribution for which such
manager owes a tax.
A fund manager filing this Form 4720
should carry the apportioned amount in
column (d) to Part II, line 8.

Requirement. A sponsoring
organization of donor advised funds that
answered “Yes,” to Form 990, Part V,
line 9b, or that otherwise distributed
prohibited benefits under section 4967,
must complete Schedule L. In addition,
a donor, donor advisor, or related party
that (1) advised a distribution that
provided a prohibited benefit under
section 4967 or (2) that received such a
benefit, and any fund manager who
agreed to the distribution knowing that it
would confer a prohibited benefit, must
complete Schedule L. Report each
distribution separately. Complete Parts
I, II, and III of Schedule L only in
connection with distributions made by a
sponsoring organization from a donor
advised fund which results in a
prohibited benefit. (See instructions to
Schedule K for definitions of the terms
sponsoring organization and donor
advised fund).

Prohibited benefit. If any donor, donor
advisor, or related party advises the
sponsoring organization about making a
distribution which results in a donor,
donor advisor, or related party receiving
(either directly or indirectly) a more than
incidental benefit, then such benefit is a
prohibited benefit.
Donor advisor. A donor advisor is any
person appointed or designated by a
donor to advise a sponsoring
organization on the distribution or
investment of amounts held in the
donor's fund or account.
Related party. A related party includes
any family member or 35% controlled
entity. See the General Instructions for
Schedule I for a definition of those
terms.
Tax on donor, donor advisor, or related person. A tax of 125% of the
benefit resulting from the distribution is
imposed on both the party who advised
as to the distribution (which might be a
donor, donor advisor, or related party)
and the party who received such benefit
(which might be a donor, donor advisor,
or related party). The advisor and the
party who received the benefit are jointly
and severally liable for the tax.
Tax on fund managers. If a tax is
imposed on a prohibited benefit

Instructions for Form 4720 (2021)

-17-

Exception. If a tax is imposed under
section 4958 for the same transaction,
then no additional tax is imposed under
section 4967 on that transaction.

Specific Instructions

Part I. Complete this part for all
prohibited benefits.
Part II. Enter in column (a) the names
of all donors, donor advisors, and
related persons who received a
prohibited benefit or advised as to the
distribution of such benefit. If more than
one donor, donor advisor, or related
person is listed in column (a) for one
distribution, each is individually liable for
the entire tax for that distribution.
However, the donors, donor advisors, or
related persons who are liable for the
tax may prorate the payment among
themselves. Enter in column (c) the tax
each donor, donor advisor, or related
person will pay for each distribution for
which such donor, donor advisor, or
related person owes a tax.
A donor, donor advisor, or related
person filing this Form 4720 should
carry the apportioned amount in
Schedule L, Part II, column (d) to Part II,
line 9.
Part III. Enter in column (a) the names
of all fund managers who agreed to
make the distribution conferring the
prohibited benefit. If more than one fund
manager is listed in column (a) for one
distribution, each is individually liable for
the entire tax for that distribution.
However, the fund managers who are
liable for the tax may prorate the
payment among themselves. Enter in
column (c) the tax each donor advisor,
or related person will pay for each
distribution for which such donor, donor
advisor, or related person owes a tax.
A fund manager filing this Form 4720
should carry the total amount in
Schedule L, Part III, column (d) to Part
II, line 9.

Schedule M—Tax on
Hospital Organization for
Failure to Meet the
Community Health Needs
Assessment Requirements
(Sections 4959 and 501(r)
(3))

Schedule N—Tax on
Excess Executive
Compensation (Section
4960)
General Instructions

any remuneration paid with respect to
employment of such employee by any
related person or governmental entity,
whether taxable or tax-exempt.
For this purpose, a person or
governmental entity is related to an
ATEO if it:
• Controls, or is controlled by, the
ATEO;
• Is controlled by one or more persons
who control the ATEO;
• Is a supported organization (as
defined in section 509(f)(3)) or
supporting organization (as defined in
section 509(a)(3)) with respect to the
ATEO during the taxable year; or
• In the case of an ATEO that is a
section 501(c)(9) voluntary employees’
beneficiary association (VEBA),
establishes, maintains, or makes
contributions to the ATEO.

DRAFT AS OF
October 27, 2021

General Instructions

Requirements. Section 4959 imposes
an excise tax on hospital organizations
that fail to meet the section 501(r)(3)
requirements in any tax year.
Section 501(r)(3) requirements
pertain to a hospital organization
conducting a community health needs
assessment (CHNA). The requirements,
which apply separately to each hospital
facility the hospital organization
operates, are as follows.
1. To conduct a CHNA this tax year,
or in either of the two prior tax years.
The CHNA must take into account input
from persons who represent the broad
interests of the community served by
the hospital facility, including people
with special knowledge of or expertise
in public health. The CHNA must be
made widely available to the public.
2. To adopt an implementation
strategy to meet the community health
needs identified through the CHNA.
See Notice 2011-52, 2011-30 I.R.B.
60; Final Regulations, T.D. 9708, 79
Fed. Reg. 78954 (Dec. 31, 2014),
2012-32 I.R.B. 126; Notice 2014-2,
2014-3 I.R.B. 407; Notice 2014-3,
2014-3 I.R.B. 408; as well as any future
related guidance for details. For
additional information on the CHNA
requirements, see Schedule H (Form
990), Hospitals, Part V, Section B.

Specific Instructions
Part I. For each hospital facility, list the
following information in the relevant
column: (b) name of facility, (c)
description of the failure to meet section
501(r)(3), (d) tax year hospital facility
last conducted a CHNA, and (e) tax
year hospital facility last adopted an
implementation strategy.
Part II. On line 1 enter the number of
hospital facilities operated by the
hospital organization that failed to meet
the CHNA requirements of section
501(r)(3). Enter $50,000 multiplied by
line 1 on line 2 and on Part I, line 12.
This is the CHNA excise tax under
section 4959.

Requirement. Complete Schedule N if
you answered “Yes” to question 15 in
Part V of Form 990, question 8 of Part
VI-B of Form 990-PF, or if you are an
ATEO (as defined earlier) or a related
organization but only if you are liable for
the tax under section 4960(a). Section
4960(a) imposes an excise tax of 21%
on the amount of remuneration paid by
an ATEO with respect to employment of
any covered employee in excess of $1
million and on any excess parachute
payment paid by such organization to
any covered employee.

Form 4720, Schedule N, is used
TIP to report and pay any section
4960 tax owed. Because there
is no requirement to make estimated tax
payments for the section 4960 tax, Form
990-W does not apply to the section
4960 tax.
Covered employee. A covered
employee means any employee of an
ATEO (including any former employee)
that is one of the ATEO’s five highest
compensated employees for the tax
year or was the ATEO’s (or a
predecessor’s) covered employee for
any preceding tax year beginning after
2016.
Remuneration. Remuneration means
wages (as defined in section 3401(a)).
Remuneration also includes amounts
required to be included in gross income
under section 457(f). Remuneration
shall be treated as paid when there is no
substantial risk of forfeiture (within the
meaning of section 457(f)(3)(B)) of the
rights to such remuneration.
Remuneration exceptions. For
purposes of this provision, remuneration
does not include:
• Designated Roth contributions (as
defined in section 402A(c)),
• The portion of any remuneration paid
to a licensed medical professional
(including a veterinarian) which is for the
performance of medical or veterinary
services by such professional, or
• Remuneration the deduction for
which is not allowed by reason of
section 162(m).
Remuneration from related
organizations. Remuneration of a
covered employee by an ATEO includes
-18-

Liability for tax in case of
remuneration from more than one
employer. In any case in which
remuneration from more than one
employer is taken into account under
the rule above, each related employer is
liable for the tax in an amount which
bears the same ratio to the total tax as
the ratio of (1) the amount of
remuneration that employer paid with
respect to such employee, to (2) the
amount of remuneration paid by all
related employers to the employee.
Excess parachute payment. For
purposes of this provision, an excess
parachute payment equals the excess
of any parachute payment over the
portion of the base amount allocated to
such payment.
Parachute payment. A parachute
payment is any payment in the nature of
compensation to (or for the benefit of) a
covered employee if the payment:
• Is contingent on such employee’s
separation from the employment with
the employer, and
• Has an aggregate present value that
equals or exceeds three times the base
amount.
Base amount. Rules similar to the
rules of section 280G(b)(3) shall apply
for purposes of determining the base
amount.
Property transfers. Rules similar to
the rules of section 280G(d)(3) and (4)
shall apply to property transfers.
Exception from excess parachute
payments. An excess parachute
payment does not include any
payments:

Instructions for Form 4720 (2021)

• Described in section 280G(b)(6)
(relating to exemption for payments
under qualified plans),
• Made under or to an annuity contract
described in section 403(b) or a plan
described in section 457(b),
• To a licensed medical professional
(including a veterinarian) to the extent
that such payment is for the
performance of medical or veterinary
services by such professional, or
• To an individual who is not a highly
compensated employee as defined in
section 414(q).

Organizations subject to the section
4968 excise tax. A private college or
university is subject to a 1.4% excise tax
on net investment income under section
4968 if all four of the following threshold
tests are met.
• The organization must be an eligible
educational institution (as defined in
section 25A(f)(2)). Section 25A(f)(2)
defines “eligible educational institution”
as an institution that is described in
section 481 of the Higher Education Act
of 1965 (20 U.S.C. section 1088), as in
effect on August 5, 1997; and is eligible
to participate in a program under Title IV
of such Act (20 U.S.C. sections 1070 et
seq.).
• The organization must have had at
least 500 tuition-paying students, based
upon a daily average student count,
during the preceding tax year.
• More than 50% of those students
must have been located in the United
States.
• The aggregate fair market value, at
the end of the preceding tax year, of the
assets not used directly in carrying out
the organization’s exempt purpose, held
by the organization and related
organizations, must be at least
$500,000 per student.

net investment income from assets that
are not intended, or are not available for
the use or benefit of the educational
institution, unless the related
organization is controlled by the
educational institution, or unless the
related organization is a supporting
organization with respect to the
educational institution.

DRAFT AS OF
October 27, 2021

Specific Instructions

Enter in column (b) the name of each
covered employee who was paid more
than $1 million in renumeration or was
paid an excess parachute payment
during the year. If more than five
covered employees, attach a statement
with the information required by the
schedule and show the total amounts
for column (e) on line 6.

For each covered employee reported
in column (b), enter in column (c) the
amount of remuneration you paid that
exceeded $1 million. Do not include any
excess parachute payment reported in
column (d). If remuneration from related
employer(s) was taken into account in
determining that remuneration
exceeded $1 million, enter your
proportional share of the amount of
remuneration that exceeded $1 million,
based on your proportional share of
total remuneration paid to the covered
employee. Also, attach a statement to
Form 4720 with the name and EIN of the
related employer(s).
For each covered employee reported
in column (b), enter in column (d) the
amount of any excess parachute
payment you paid.
For each covered employee reported
in column (b), enter in column (e) the
sum of columns (c) and (d).

Schedule O—Excise Tax
on Net Investment Income
of Private Colleges and
Universities (Section
4968)
General Instructions
Requirement. An applicable
educational institution that answered
“Yes” to Form 990, Part V, line 16, or
that is otherwise subject to the section
4968 tax on net investment income,
must complete Schedule O.
Instructions for Form 4720 (2021)

Form 4720, Schedule O, is used

TIP by applicable educational

institutions to report and pay
any section 4968 tax owed. Because
there is no requirement to make
estimated tax payments for the section
4968 tax, Form 990-W does not apply to
the section 4968 tax.
Related organizations. The net
investment income of related
organizations is taken into account
under certain circumstances. Section
4968 defines “related organization” to
include only the following organizations.
• Organizations that control or are
controlled by the educational institution,
• Organizations that are controlled by
one or more of the same persons who
control the educational institution,
• A supported organization (as defined
in section 509(f)(3)) during the tax year
with respect to the education institution,
and
• Supporting organizations described
in section 509(a)(3) during the tax year
with respect to the education institution.
When calculating the net investment
income of a related organization,
exclude (1) net investment income of
any related organization to the extent
that such net investment income is
taken into account with respect to
another educational institution; and (2)
-19-

Net investment income. Net
investment income is the amount by
which the sum of the gross investment
income and the capital gain net income
exceeds the administrative expenses
allocable to gross investment income
and capital gain net income.
To determine net investment income,
including certain exceptions to gross
investment income and modifications to
allowable deductions, see Regulations
section 53.4968-2.
Basis. As described in Regulations
section 53.4968-2(d)(2), in the case of
property held by an applicable
educational institution on December 31,
2017, and continuously thereafter to the
date of its disposition, the basis for
determining gain shall be deemed not to
be less than the fair market value of
such property on December 31, 2017,
plus or minus all adjustments after
December 31, 2017, and before the
date of disposition consistent with the
regulations under section 4940(c).
However, for purposes of determining
loss, basis rules that are consistent with
the regulations under section 4940(c)
will apply.

Modified capital gain net income.
Column (d) can reflect capital losses
from sales or other dispositions of
property in one organization only to the
extent of capital gains from such sales
or other dispositions in all the other
organizations (modified capital gain net
income). See Regulations section
53.4968–2. Amounts listed in column
(d), for the filing organization and any
related organization, may indicate a net
loss. However, the amount carried to
line 6, column (d) must be the greater of
the modified capital gain net income or
zero. Do not take into account capital
loss carrybacks. Capital loss carryovers
are allowed.

Specific Instructions
Line 1. Use Line 1 to report the gross
investment income , capital gain net
income (or loss), and associated
allocable administrative expenses of the
filing organization.
Lines 2–5. Use Lines 2–5 to report the
gross investment income, capital gain

net income (or loss), and associated
allocable administrative expenses from
related organizations during the related
organizations’ tax years that end with or
within the tax year of the organization. If
a related organization is a partner in a
partnership or a shareholder of an S
corporation, include the pertinent items
of income, gain, loss, or deduction from
the entity's Schedule K-1 (Form 1065 or
1120-S) for the tax year of the entity
ending with or within the tax year of the
filing organization.
Report income from related
organizations in descending order from
most income to least income. If there
are more than three related
organizations, attach a schedule to your
Form 4720 showing the information for
columns (a) through (e) for each related
organization and enter the total amounts
from the schedule in line 5, columns (c)
through (e).

who signed the return to discuss the
return. This authorization applies only to
the individual whose signature appears
in the Paid Preparer Use Only section of
Form 4720. It doesn't apply to the firm, if
any, shown in that section.
By checking the “Yes box,” the
organization is authorizing the IRS to
contact the paid preparer to answer any
questions that arise during the
processing of the return. The
organization is also authorizing the paid
preparer to:
• Give the IRS any information missing
from the return,
• Call the IRS for information about
processing the return, and
• Respond to certain IRS notices about
math errors, offsets, and return
preparation.

• Download forms, including talking tax
forms, instructions, and publications.
• Order IRS products online.
• Research your tax questions online.
• Search publications online by topic or
keyword.
• Sign up to receive local and national
tax news by email.
• You can order forms and publications
by downloading from the IRS website at
IRS.gov/OrderForms.

DRAFT AS OF
October 27, 2021

Line 6. Total the amounts in columns
(c), (d), and (e). See Notice 2018-55,
2018-26 I.R.B. 773.
Add 6(c) and 6(d), subtract 6(e), and
enter the total in 6(f).
Line 7. Multiply line 6(f) by 0.014
(1.4%) and enter the amount in box 7f
and on Part I, line 14.

Paid Preparer

Generally, anyone who is paid to
prepare the return must sign the return
and fill in the other blanks in the Paid
Preparer Use Only area. An employee
of the filing organization isn't a paid
preparer.
The paid preparer must:

• Sign the return in the space provided

for the preparer's signature,
• Enter the preparer information,
• Enter the preparer tax identification
number (PTIN), and
• Give a copy of the return to the
organization, in addition to the copy to
be filed with the IRS.

Any paid preparer whose
identifying number must be
CAUTION listed on Form 990-PF can
apply for and obtain a PTIN. You can
apply for a PTIN online or by filing Form
W-12, IRS Paid Preparer Tax
Identification Number (PTIN)
Application and Renewal. For more
information about applying for a PTIN
online, visit the IRS website at IRS.gov/
PTIN.

!

Paid Preparer Authorization

On the “Sign Here” line, check “Yes,” if
the IRS can contact the paid preparer

The organization isn't authorizing the
paid preparer to bind the organization to
anything or otherwise represent the
organization before the IRS.
The authorization will automatically
end no later than the due date
(excluding extensions) for filing of the
organization's 2021 Form 4720. If the
organization wants to expand the paid
preparer's authorization or revoke it
before it ends, see Pub. 947, Practice
Before the IRS and Power of Attorney.
Check “No,” if the IRS should contact
the organization listed on the first page
of the Form 4720, rather than the paid
preparer.

Phone Help

If you have questions and/or need help
completing this form, please call
877-829-5500. This toll-free telephone
service is available Monday through
Friday.

Photographs of Missing
Children

The Internal Revenue Service is a proud
partner with the National Center for
Missing & Exploited Children®
(NCMEC). Photographs of missing
children selected by the Center may
appear in instructions on pages that
would otherwise be blank. You can help
bring these children home by looking at
the photographs and calling
1-800-THE-LOST (1-800-843-5678) if
you recognize a child.

How To Get Forms and
Publications
Internet. You can access the IRS
website 24 hours a day, 7 days a week,
at IRS.gov to:
-20-

IRS e-Services Makes
Taxes Easier

Now more than ever before, businesses
can enjoy the benefits of filing and
paying their federal taxes electronically.
Whether you rely on a tax professional
or handle your own taxes, the IRS offers
you convenient programs to make taxes
easier. Use these electronic options to
make filing and paying easier.
• You can e-file your Form 990 or Form
990-PF; Form 940 and 941 employment
tax returns; Forms 1099; and other
information returns. Visit IRS.gov/E-File
for details. For tax years beginning on or
after July 2, 2019, section 3101 of P.L.
116-25 requires that returns by exempt
organizations be filed electronically.
Organizations filing Form 990 or Form
990-PF for a tax year beginning on or
after July 2, 2019 must file the return
electronically. For tax years ending on
or after July 31, 2021, Form 990-EZ also
must be filed electronically. Limited
exceptions apply. See When, Where,
and How To File, in the instructions for
Form 990, Form 990-PF or 990–EZ for
more information.
• You can pay taxes online or by phone
using the free Electronic Federal Tax
Payment System (EFTPS). Visit
EFTPS.gov or call 1-800-555-4477 for
details. Electronic Funds Withdrawal
(EFW) from a checking or savings
account also is available to those who
file electronically.
Privacy Act and Paperwork Reduction Act Notice. We ask for the
information on this form to carry out the
Internal Revenue laws of the United
States. You are required to give us the
information. We need it to ensure that
you are complying with these laws and
to allow us to figure and collect the right
amount of tax. Certain individuals who
owe tax under Chapter 41 or 42 of the
Internal Revenue Code, and who don't
sign the Form 4720 of the foundation or
organization, must file a separate Form
4720 showing the tax owed and the
name of the foundation or organization
for which they owe tax. Sections 6001
and 6011 of the Internal Revenue Code
Form 4720 Instructions

require you to provide the requested
information if the tax applies to you.
Section 6109 requires you to provide
your identifying number. Routine uses of
this information include disclosing it to
the Department of Justice for civil and
criminal litigation and to other federal
agencies, as provided by law. We may
disclose the information to cities, states,
the District of Columbia, and U.S.
Commonwealths and possessions to
administer their laws. We may also
disclose this information to other
countries under a tax treaty, to federal
and state agencies to enforce federal
nontax criminal laws, or to federal law

enforcement and intelligence agencies
to combat terrorism. If you don't file this
information, you may be subject to
interest, penalties, and/or criminal
prosecution.
You aren’t required to provide the
information requested on a form that is
subject to the Paperwork Reduction Act
unless the form displays a valid OMB
control number. Books or records
relating to a form or its instructions must
be retained as long as their contents
may become material in the
administration of any Internal Revenue
law. Generally, tax returns and return

information are confidential, as required
by section 6103. However, certain
returns and return information of tax
exempt organizations and trusts are
subject to public disclosure and
inspection, as provided by section 6104.
The time needed to complete and file
this form will vary depending on
individual circumstances. The estimated
burden for tax exempt organizations
filing this form is approved under OMB
control number 1545-0047 and is
included in the estimates shown in the
instructions for their information return.

DRAFT AS OF
October 27, 2021

Instructions for Form 4720 (2021)

-21-

Index
A
Amended return 6
Attorney 20

Initial taxes on investments
that jeopardize charitable
purpose:
section 4944 11
Initial taxes on political
expenditures:
section 4955 12
Initial taxes on taxable
expenditures:
section 4945 12

Schedule E; Initial Taxes
on Taxable
Expenditures 12
Schedule F; Initial Taxes
on Political
Expenditures 12
Schedule G; Tax on
Excess Lobbying
Expenditures 13
Schedule H; Taxes on
Disqualifying Lobbying
Expenditures 13
Schedule I; Initial Taxes
on Excess Benefit
Transactions 14
Schedule J; Taxes on
Being a Party to
Prohibited Tax Shelter
Transactions (Section
4965) 15
Schedule K; Taxes on
Taxable Distributions of
Sponsoring
Organizations
Maintaining Donor
Advised Funds 16
Schedule L; Taxes on
Prohibited Benefits
Distributed From Donor
Advised Funds 17
Schedule M; Tax on
Failure to Meet the
Community Health
Needs Assessment
Requirements (Section
501(r)(3)) 18
Schedule N; Tax on
Excess Executive

Compensation (Section
4960) 18
Schedule O; Excess Tax
on Net Investment
Income of Private
Colleges and
Universities (Section
4968) 19
Signature and Verification 4
Summary of Taxes 7

DRAFT AS OF
October 27, 2021

D
Disqualified person 15
Donor advised funds 16, 17
E
Excess business holdings:
Exceptions to tax 9
Schedule C 8
Extension 4
F
Filing requirements:
When to file 3
Where to file 3
Who must file 2
Foreign Organizations or
U.S. Possession 4
I
Initial Taxes on Excess
Benefit Transactions:
disqualified person 15
donor advised funds 15
excess benefit
transaction 14
section 4958 14
sponsoring
organizations 15
supporting
organizations 15

P
Paid Preparer 20
Paid Preparer
Authorization 20
Preparer Tax identification
Number (PTIN) 20
Publications:
Pub. 947, Practice Before
the IRS and Power of
Attorney 20
S
Schedule:
Schedule A; Initial Taxes
on Self-Dealing 7
Schedule B; Initial Tax on
Undistributed
Income 8
Schedule C; Initial Tax on
Excess Business
Holdings 8
Schedule D; Initial Taxes
on Investments That
Jeopardize Charitable
Purpose 11

-22-

T
Taxes on being a party to
Prohibited Tax Shelter
Transactions:
listed transaction 16
section 4965 15
Taxes on disqualifying
lobbying expenditures:
section 4912 13
Taxes on Managers,
Self-Dealers, etc. 6
Taxes on Prohibited Benefits
Distributed From Donor
Advised Funds:
section 4967 17
Taxes on Taxable
Distributions of
Sponsoring Organizations
Maintaining Donor
Advised Funds:
section 4966 16
Tax on excess lobbying
expenditures:
section 4911 13
Tax Payments 4