Time for Filing Form 4720 Return

DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 53

[TD 8736]

RIN 1545-AU66

Time for Filing Form 4720 Return

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Final and temporary regulations.

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SUMMARY: This document contains a regulation that specifies the filing

date by which Form 4720 returns must be filed by disqualified persons

and organization managers liable for Internal Revenue Code section 4958

excise taxes. These excise taxes are imposed on excess benefit

transactions between disqualified persons and section 501(c)(3)

organizations (except for private foundations) or section 501(c)(4)

organizations.

DATES: This regulation is effective October 7, 1997.

For dates of applicability, see Sec. 53.6071-1(f).

FOR FURTHER INFORMATION CONTACT: Phyllis Haney, (202) 622-4290 (not a

toll-free number).

SUPPLEMENTARY INFORMATION:

Background

This document contains amendments to the Foundation and Similar

Excise Taxes regulations (26 CFR part 53) under Internal Revenue Code

(Code) section 6071. Those amendments provide guidance on the time for

filing the return that is required to accompany payment of section 4958

excise taxes. This rule was first published in Notice 96-46 (1996-39

I.R.B. 7) (September 23, 1996). A notice of proposed rulemaking (NPRM)

of that rule was published at 62 FR 84, by cross reference to a

temporary regulation, (TD 8705, 62 FR 25), on January 2, 1997. The

deadline for comments on the NPRM was April 2, 1997; no comments were

received.

Taxpayer Bill of Rights 2, Public Law 104-168, 110 Stat. 1452

(TBOR2), enacted July 30, 1996, added section 4958 to the Code, which

imposes excise taxes on excess benefit transactions. Section 4958 taxes

apply retroactively to excess benefit transactions occurring on or

after September 14, 1995. The taxes do not, however, apply to any

benefit arising from a transaction pursuant to any written contract

which was binding on September 13, 1995, and at all times thereafter

before such transaction occurred.

An ``excess benefit transaction'' subject to tax under section 4958

is any transaction in which an economic benefit is provided by an

organization described in Code section 501(c)(3) (except for a private

foundation) or 501(c)(4) directly or indirectly to, or for the use of,

any disqualified person if the value of the economic benefit provided

exceeds the value of the consideration (including the performance of

services) received for providing the benefit. A ``disqualified person''

is any person who was, at any time during the 5-year period ending on

the date of the excess benefit transaction, in a position to exercise

substantial influence over the affairs of the organization.

Disqualified persons also include family members and certain entities

in which at least 35 percent of the control or beneficial interest are

held by persons described in the preceding sentence.

Code section 4958 imposes three taxes. The first tax is equal to 25

percent of the excess benefit amount, and is to be paid by any

disqualified person who engages in an excess benefit transaction. The

second tax is equal to 200 percent of the excess benefit amount, and is

to be paid by any disqualified person if the excess benefit transaction

is not corrected within the taxable period. The third tax is equal to

10 percent of the excess benefit amount, and is to be paid generally by

any organization manager who knowingly participates in an excess

benefit transaction. The maximum amount of this third tax with respect

to any one excess benefit transaction may not exceed $10,000. An

``organization manager'' is any officer, director, trustee, or any

individual having powers or responsibilities similar to those of any

officer, director, or trustee. Final regulations under Code section

6011 were published on January 2, 1997, at TD 8705 (62 FR 25),

prescribing Form 4720 for calculating and paying the first and third

taxes described above.

TBOR2 also amended Code section 6033(b) to require section

501(c)(3) organizations to report the amounts of the taxes paid under

section 4958 with respect to excess benefit transactions involving the

organization, as well as any other information the Secretary may

require concerning those transactions. Section 6033(f) also was amended

to impose the same reporting requirements on section 501(c)(4)

organizations. Those amendments to section 6033 only apply to

organizations' returns for taxable years beginning after July 30, 1996.

These and other TBOR2 amendments to the reporting requirements for

section 501(c)(3) and section 501(c)(4) organizations are

[[Page 52257]]

reflected on IRS Forms 990 and 990-EZ beginning with the 1996 versions.

Explanation of Provisions

This regulation provides the general rule that Form 4720 returns

will be due on or before the 15th day of the fifth month following the

close of the taxable year of any disqualified person or organization

manager who is liable for section 4958 excise taxes on excess benefit

transactions. The regulations also provide that returns on Form 4720

for taxable years ending after September 13, 1995, and on or before

July 30, 1996, will be due on or before December 15, 1996. See also

Notice 96-46 (1996-39 I.R.B. 7) (September 23, 1996), and 62 FR 25, 84

(January 2, 1997).

Special Analyses

It has been determined that this Treasury decision is not a

significant regulatory action as defined in EO 12866. Therefore, a

regulatory assessment is not required. It also has been determined that

section 553(b) of the Administrative Procedure Act (5 U.S.C. chapter 5)

does not apply to these regulations, and because the regulation does

not impose a collection of information on small entities, the

Regulatory Flexibility Act (5 U.S.C. chapter 6) does not apply.

Pursuant to section 7805(f) of the Internal Revenue Code, these

regulations will be submitted to the Chief Counsel for Advocacy of the

Small Business Administration for comment on their impact on small

business.

Drafting Information

The principal author of these regulations is Phyllis Haney, Office

of Associate Chief Counsel (Employee Benefits and Exempt

Organizations). However, other personnel from the IRS and Treasury

Department participated in their development.

List of Subjects in 26 CFR Part 53

Excise taxes, Foundations, Investments, Lobbying, Reporting and

recordkeeping requirements.

Adoption of Amendments to the Regulations

Accordingly, 26 CFR part 53 is amended as follows:

PART 53--FOUNDATION AND SIMILAR EXCISE TAXES

Paragraph 1. The authority citation for part 53 continues to read

as follows:

Authority: 26 U.S.C. 7805.

Sec. 53.6071-1T and Sec. 53.6071-1 [Amended]

Par 2. In Sec. 53.6071-1T, paragraph (f) is redesignated as

paragraph (f) of Sec. 53.6071-1.

Sec. 53.6071-1T [Removed]

Par 3. Sec. 53.6071-1T is removed.

Michael P. Dolan,

Acting Commissioner of Internal Revenue.

Approved: August 27, 1997.

Donald C. Lubick,

Acting Assistant Secretary of the Treasury.

[FR Doc. 97-26556 Filed 10-6-97; 8:45 am]

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