[Federal Register Volume 62, Number 194 (Tuesday, October 7, 1997)]
[Rules and Regulations]
[Pages 52256-52257]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-26556]


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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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