Tax Planning and Compliance for Tax-Exempt Organizations, 2024 Cumulative Supplement, 6th Edition

CHAPTER 12Private Foundations—General Concepts

• § 12.1 Why Private Foundations Are Special
• 12.4 Termination of Private Foundation Status
  • (e) Mergers, Split‐Ups, and Transfers Between Foundations
  • (h) Notifying the IRS

§ 12.1 Why Private Foundations Are Special

EXHIBIT 12.1 Private Foundation Excise Taxes

Excise Tax	Common Name	Reported on Form	Tax Imposed On		1st Tier Tax		2nd Tier Tax		3rd Tier Tax
			Private Foundation	Others	Rate	Comment/Description	Rate	Comment/Description	Rate	Comment/Description
Section 4940	Excise Tax on Domestic Foundation Net Investment Income	Form 990‐PF	X	N/A	1.39%	Not a penalty tax ‐ Assessed on the net investment income of operating and non‐operating private foundations annually. Reported on Form 990‐PF	N/A	N/A	N/A	N/A
Section 4941	Self‐Dealing	Form 4720	No tax liability but must file the Form		N/A	Must report the act of self‐dealing on a separately e‐filed Form 4720 from the disqualified person(s) and/or manager(s)	N/A	N/A	N/A	N/A
		Form 4720		Disqualified Person(1)	10%	Of the “amount involved” for each type of self‐dealing transaction, for each year the transaction remailed outstanding until it is corrected.	200%	If not corrected	100% of PF assets or the aggregate tax benefits resulting from section 501(c)(3) status	Any of the penalty taxes under chapter 42 IRC sections 4941 ‐ 4945, if repeated and willful acts or failures to act, may result in the IRS revoking the private foundation's status. This can trigger the termination ...