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Part 3. Submission Processing

Chapter 11. Returns and Documents Analysis

Section 12. Exempt Organization Returns (Cont. 3)

3.11.12  Exempt Organization Returns (Cont. 3)

3.11.12.6 
Form 4720

3.11.12.6.5  (01-01-2008)
Abatement Requests under IRC §4962

  1. Do all of the following if "Request for Abatement under IRC 4962" is indicated on Form 4720 or Form 4720-A:

    1. Correspond for a reasonable cause statement if not attached. If corresponding, do not make photocopies per 2) below until after a reply is received or the correspondence suspense period has expired.

      Note:

      If the TIN is missing in Part II-A, Column (b), see IRM 3.11.12.6.11.

    2. Photocopy all pages of the numbered or unnumbered return and all attachments (including copies of Forms 4720–A prepared).

    3. Route the photocopies to the Ogden IRS Campus, Attn: EO Accounts, via Form 4227 annotating "4962 abatement request" .

    4. Write "Photocopy sent to EO Accounts" in the left margin of the Form 4720 or Form 4720-A.

    5. Process the original Form 4720 and/or Form 4720-A.

3.11.12.6.6  (01-01-2008)
Perfection, Editing, and Correspondence

  1. An edit sheet is not used for Form 4720.

    Caution:

    Make all required photocopies for Form 4720–A prior to perfection of Form 4720.

  2. Refer to the following instructions to edit the following generic items on the return:

    1. Audit Code, IRM 3.11.12.1.14 and 3.11.12.6.6(3)&(4).

    2. Computer Condition Codes (D, F, G, R, U, W, X, 3, and 7), IRM 3.11.12.1.15. Edit the CCC to the right of the printed year.

    3. Entity Perfection, IRM 3.11.12.1.24 through 3.11.12.1.24.6

      Note:

      Perfect the name and EIN. Address perfection is not required on this form.

    4. Penalty and Interest Code, IRM 3.11.12.1.30

    5. Received Date, IRM 3.11.12.1.32

    6. Tax Period, IRM 3.11.12.1.42

  3. Edit Audit Code 4 (Form 4720 only) if either of the following apply:

    1. Parts I, II–A, II–B, and Schedule G have no dollar entries.

    2. The return is a Substitute for Return (SFR). See 3.11.12.1.39, 3.11.12.1.39.1 and 3.11.12.1.39.3.

  4. Edit Audit Code 5 (Form 4720 only) if TE/GE Field Agents entered "P" following the preprinted "Form 4720" in the upper left corner of page 1.

  5. If both Audit Code conditions (4) and (5) are present, edit Audit Code 4.

3.11.12.6.7  (01-01-2008)
Type of Organization Code

  1. Edit the Type of Organization Code in the space under the "990-EZ" box of the Entity section.

  2. Do not edit a Type of Organization Code if you edited Audit Code 4.

  3. Edit a Type of Organization Code as follows:

    Form 4720
    Type of Organization Code Description
    1 Form 990-PF box is checked
    2 Forms 990/990–EZ box is checked
    3 Form 5227 box is checked

  4. If no box is checked or more than one box is checked, request INOLES research for the EO filing requirements. If the Type of Organization Code cannot be determined per (3) above, route to Entity.

3.11.12.6.8  (01-01-2008)
Question B
(Entity Section)

  1. Correspond if Question B is answered "yes" or "no" , and a detailed statement describing what kind of corrective action was taken is not attached.

3.11.12.6.9  (01-01-2008)
Form 4720
Part I
Perfection

  1. Part I applies to an organization which allowed a disqualified expenditure or act.

  2. Compute the total for any of the schedule lines listed below if the line has not been totaled.

  3. Line 1: If blank, edit from Schedule B, Line 4.

  4. Line 2: If blank, edit from Schedule C, Line 7.

  5. Line 3: If blank, edit from Schedule D, Part I, Column (e).

  6. Line 4: If blank, edit from Schedule E, Part I, Column (g).

  7. Line 5: If blank, edit from Schedule F, Part I, Column (e).

  8. Line 7: If blank, edit from Schedule H, Part I, Column (e).

  9. Line 8 (2000 and subsequent form revisions): Perfect.

  10. Line 8 (1999 and prior form revisions): See table below:

    If "Sec. 170(f)(10)(F)" is And Then
    not referenced an amount is presenton the solid line convert to Line 12.
    is oris not referenced an amount is presenton the dotted line 1. Convert the dotted line number to Line 8. (See Exhibit 3.11.12–29).
    2. Convert and perfect the "Total" line, to Line 12.
    is referenced an amount is not present on the dotted line 1. Determine if an amount is included in the total by adding Lines 1-7 and comparing the total to the taxpayer's amount on Line 8.
    2. Enter any difference on the dotted portion of Line 8. (See Exhibit 3.11.12–29).
    3. Convert the dotted line number to Line 8. (See Exhibit 3.11.12–29).
    4. Convert and perfect the "Total" line, to Line 12.

  11. If "Sec. 170(f)(10)(F)" is referenced per (10) above, and/or an amount is present on the dotted portion of Part I, Line 8 "Total" for 1999 and prior Forms 4720:

    1. Photocopy all pages of the return and attachments.

    2. Route the photocopies to:
      Ogden IRS Center
      Mail Stop 1110
      Attn: SE:T:BSP:SPP

    3. Process the original return.

  12. Line 9: If blank, edit from the"total line" of Schedule J, Part I, Column (h).

  13. Line 10: If blank, edit from Schedule K, Part I, Column (f).

  14. Line 11: Perfect.

  15. Line 12: If blank, add lines 1-11.

3.11.12.6.10  (01-01-2008)
Form 4720–A
Part II-A
Preparation

  1. Form 4720–A is a Non-Master File return that is internally prepared when the return is being filed for a manager, self-dealer, disqualified person, donor, donor advisor, or related person. See "Filers Defined" in IRM 3.11.12.6.2.

  2. Part II–A applies to the person(s) who allowed a disqualified expenditure or act.

  3. If Part II-A is present, but the TIN in Column (b) is blank, do not prepare Form(s) 4720–A. See IRM 3.11.12.6.11 for Part II-A correspondence procedures.

  4. Do all of the following if Form 4720 contains dollar entries in Parts I and II–A, or only Part II–A, and there is no phrase "Form 4720-A prepared" in the left margin of the return:

    If the return is batched as Then
    With remit Pull the return and route to Receipt and Control for Form 4720-A preparation and proper application of the remittance. See IRM 3.11.12.6.4.
    Non-remit 1. Make a separate photocopy of all pages of Form 4720 and all attachments for each individual listed in Part II–A.

    Caution:

    Cover up the DLN before photocopying if the Form 4720 has been numbered.


    2. Annotate "4720–A prepared" in the left margin of Form 4720.
    3. Process as a Form 4720 and/or Form(s) 4720–A based on who signed the return. See IRM 3.11.12.6.2.

3.11.12.6.11  (01-01-2008)
Form 4720–A
Part II-A
Correspondence

  1. If Part II-A, Column(b) does not contain a TIN and you cannot perfect from attachments, process the return as a 4720 and correspond with the entity shown in the entity section of the return for the missing information in Part II-A, Column(b). Do not correspond for a signature of an officer or trustee, if missing.

3.11.12.6.12  (01-01-2008)
Form 4720–A
Parts II-A & II-B
Perfection

  1. Prepare a separate Form 4720–A for each individual listed in Part II–A by doing the following on each photocopy. See Exhibit 3.11.12-8:

    1. Edit the letter "A" after the form number (i.e. "4720–A" ).

    2. Circle the name and EIN of the Organization in the Entity section.

    3. Underline the name and EIN in Part II-A of the individual for which the Form 4720–A is being prepared. If name and EIN is not available, correspond per IRM 3.11.12.6.11.

    4. Edit the tax period to the left of the preprinted tax year.

    5. Circle out the individuals’ name(s) in Part II-A, not applicable to the Form 4720–A being prepared.

    6. "X" all entries in Part II-A, Columns (c)-(i) not applicable to the 4720–A being prepared.

    7. "X" Lines 1 and 2 in Part II–B, and edit Line 2 to equal the column for this individual.

  2. Route photocopies of prepared Forms 4720–A and any attachments to OAMC EO Accounts M/S 6710, if any of the following applies:

    1. The Form 4720–A is not timely filed (the due date is the same as for Form 4720).

    2. The taxpayer has annotated "4962 abatement request" . See IRM 3.11.12.6.5.

    3. Any correspondence requiring action (i.e., tax payer is expecting a reply) is attached.

  3. Route all other prepared Forms 4720–A to CSPC Non-Master File.

3.11.12.6.13  (01-01-2008)
Schedule G
Perfection

  1. Lines 1 and 2: If both lines are blank, and there is a Schedule A (Form 990/990-EZ) attached:

    1. Enter on Line 1 the amount from Schedule A, Part VI-A, Column (b), Line 43.

    2. Enter on Line 2 the amount from Schedule A, Part VI-A, Column (b), Line 44.

  2. Line 4: If blank, the larger of Line 1 or 2 , multiplied by 0.25., or edit the amount from page 1, Part I, Line 6.

3.11.12.7  (01-01-2008)
Form 990–PF

  1. Form 990–PF is filed to provide financial information from organizations described in Section 501(c)(3) or Section 4947(a)(1) of the Code that are classified as private foundations.

    Note:

    All Forms 990–PF must be scanned through the imaging process. See IRM 3.11.12.1.29.

3.11.12.7.1  (01-01-2008)
Form 990–PF
General Instructions

  1. Request and follow INOLES research when editing all Form 990–PFs.

    Reminder:

    Form 5800, Exempt Organization Return Edit Sheet has been revised. The majority of Form 990-PF editing previously entered on the Edit Sheet will now be entered on the return.

  2. Always follow the instructions for a "special return" .

  3. Exhibit 3.11.12-9 identifies the transcribed lines (T-lines) for Form 990–PF.

  4. Perfect all T-lines as follows:

    1. Always perfect for legibility.

    2. Always perfect from attachments, if available.

    3. Correspond if the conditions are met.

    4. Follow the stated instruction for the line.

    5. Leave the T-line blank only if it cannot be perfected in the steps above.

  5. Put Form 990–PF in the following order:

    • Pages 1-13, followed by

    • Schedule B, if required.

    Note: Insert and edit pages 2, and/or 4 if missing.

3.11.12.7.2  (01-01-2008)
Form 990–PF
Filers Defined

  1. Form 990–PF is the primary annual information and taxable return filed by a foundation or trust to comply with the filing requirements of IRC §6033.

  2. A foundation or trust is required to file each year regardless of the amount of its gross receipts or assets.

  3. Form 990–PF is subject to:

    1. Excise tax on net investment income if a U.S. organization or gross investment income if a foreign organization.

    2. Daily Delinquency Penalty.

    3. Failure to pay penalty.

    4. Estimated tax penalty.

    5. Failure to Deposit Penalty

    Note:

    Route any correspondence stating a reasonable cause for failing to deposit along with a photocopy of the first page of the return to OAMC, EO Accounts, M/S 6710.

3.11.12.7.3  (01-01-2008)
Special Returns

  1. Form 990–PF special returns are:

    • Foreign Return 3.11.12.7.4
    • Inactive 990–PF 3.11.12.7.5 and 3.11.12.7.6
    • Limited 990–PF 3.11.12.7.7 through
    3.11.12.7.9
    • Private Operating Foundation 3.11.12.7.10

3.11.12.7.4  (01-01-2008)
Foreign Return
Form 990-PF

  1. Correspond for clarification as to whether the organization is foreign or domestic if the Organization Code is "4" or "7" , Line 26, Column (b) has a dollar entry, and the address is not foreign.

  2. Do all of the following if Box D1 or D2 on page 1 is checked:

    1. "X" Part IV.

    2. "X" Part V.

    3. Perfect the remainder of the return.

  3. In addition to (2) above, do all of the following if Box D2 on page 1 is checked:

    1. "X" Part X I.

    2. "X" Part XIII.

    3. "X" Part XV.

      Note:

      Follow 3.11.12.7.12 for Organization Code perfection and 3.11.12.7.17 for Line 27b perfection.

3.11.12.7.5  (01-01-2008)
Inactive Form 990–PF
Correspondence

  1. Correspond for a signature, if missing. Use Action Code 225 or 226 (see Exhibit 3.11.12–35).

  2. Do NOT correspond for any other issues.

3.11.12.7.6  (01-01-2008)
Inactive Form 990–PF

  1. An organization is inactive if either of the following apply:

    1. The return is marked INACTIVE.

    2. Part I - Part XVII have no dollar entries.

  2. Completely perfect an inactive Form 990-PF by perfecting the Schedule B Indicator, Organization Code, 4940 Code, Termination Code and all of the following:

    1. Edit and insert pages 2, and/or 4 if one or more are missing.

    2. Perfect the entity information (name control, address, EIN, tax period, and received date).

    3. Part I, Column (a), Line 12 – Edit "1" .

    4. Part II — Edit "1" on Line 16, Column (b) and/or (c).

      Note:

      Do not edit the amount from Item I of the entity section, if present.

    5. Part VII-A — Code Line 9.

    6. Part XIV —"X" Part XIV if Foundation Code is other than "02" or "03" and Part VII-A, Line 9 is "2" . Edit "1" on Lines 2a and 3a(1), Columns (a) and (e) if the Foundation Code is "02" or "03" .

3.11.12.7.7  (01-01-2008)
Limited
Form 990–PF
Defined

  1. A limited, also known as Rev. Proc. 79–8, Form 990–PF, is defined as follows:

    1. The Area Office issues an advance exemption ruling to the organization that it is a public charity liable for filing Form 990.

    2. One or more years later, the Area Office notifies the organization that it is actually a private foundation.

    3. The organization must file limited Forms 990–PF for all of the years it filed Forms 990.

    4. A limited Form 990–PF allows the organization to complete the parts which are not required of a public charity on Form 990, but are required of a private foundation on Form 990–PF.

  2. Identify a limited return by any of the following

    1. Marked "limited"

    2. Marked "Rev. Proc 79-8"

    3. Part I, Column (b) are the only entries

3.11.12.7.8  (01-01-2008)
Limited
Form 990–PF
Correspondence

  1. Correspond for a signature, if missing. Use Action Code 225 or 226 (see Exhibit 3.11.12–35).

  2. Correspond if marked "Rev. Proc. 79-8" or "limited" and Part I, Column (b) is missing. Use Action Code 211.

  3. Correspond if only the entity section and Part I, Column (b) are present and the return is NOT marked "Rev. Proc. 79-8" or "limited" . Use Action Code 211 using the clarification of a limited paragraph.

  4. Do NOT correspond for any other issue.

3.11.12.7.9  (01-01-2008)
Limited
Form 990–PF
Perfection

  1. Completely perfect a limited or Rev. Proc. 79–8 Form 990–PF by perfecting the Schedule B Indicator, Organization Code, 4940 Code, Termination Code and all of the following:

    1. Insert and edit pages 2 and/or 4 if one or more are missing.

    2. Edit "LTD" at the top of page 1 if "limited" or "Rev. Proc. 79–8" is not written at the top of page 1.

    3. Perfect the entity information (name control, address, EIN, tax period, and received date).

    4. Part I, Column (a), Line 12 — If blank, add Lines 1-11. If Column (a) has no dollar entries, edit "1" .

    5. Part I, Column (b) — perfect.

    6. Part II —Edit "1" on Line 16(b) and/or (c) if Column (b) and/or (c) has no dollar entries.

      Note:

      Do NOT edit the amount from Item I of the entity section, if present.

    7. Part VII–A Code Line 9.

    8. Part XIV —"X" Part XIV if Foundation Code is other than "02" , or "03" and Part VII-A, Line 9 is "2" . Edit "1" on Lines 2a and 3a(1), Columns (a) and (e) if no dollar entries and Foundation Code is "02" or "03" .

3.11.12.7.10  (01-01-2008)
Private Operating/
Nonoperating Private
Foundation

  1. A private operating foundation (POF) described in IRC §4942(j)(3) (SS03 with Foundation Code 02) may not be liable for tax on net investment income reported on Part I, Line 27b, if they qualify as an exempt operating foundation under §4940(d)(2).

  2. A POF described in IRC §4942(j)(5) (SS 03 with Foundation Code 03) must pay tax on their net investment income on Part I, Line 27b.

  3. Identify a § 4942(j)(3) POF or § 4942(j)(5) from INOLES or IRS label.

    Note:

    If Part VII-A, Line 9 is "1" , "X" Parts XI and XIII.

    Note:

    Part XIV must be completed, and all foreign POFs must complete Part X.

  4. A nonoperating private foundation is an organization not described in (1) or (2) above.

    Examples:
    • SS03 with Foundation Code 04
    • SS92
    • Foundation Code 00

3.11.12.7.11  (01-01-2008)
Perfection,
Editing, and Correspondence

  1. Attach an edit sheet to Form 990–PF if required.

    Reminder:

    Form 5800, Exempt Organization Return Edit Sheet has been revised. The majority of Form 990-PF editing previously entered on the Edit Sheet will now be entered on the return.

  2. Item I of the entity section: If blank, edit from Part II, Line 16, Column (c).

    Note:

    Do not edit "1" in Item I if Part II, Line 16(c) has no dollar entries and you are editing "1" on Line 16(c).

  3. Refer to the following instructions to perfect the generic items:

    1. Action Codes (ERS), IRM 3.11.12.1.12

    2. Computer Condition Codes (A, D, F, G, O, R, T, V, W, X, Y, 3, 7, 8), IRM 3.11.12.1.15

    3. Daily Delinquency Penalty, IRM 3.11.12.1.19

    4. Entity Perfection, IRM 3.11.12.1.24 through 3.11.12.1.24.6

    5. Incomplete Return Item (IRI) Program, IRM 3.11.12.1.16

    6. Penalty and Interest Code, IRM 3.11.12.1.30

    7. Received Date, IRM 3.11.12.1.32

    8. Tax Period, IRM 3.11.12.1.42

3.11.12.7.12  (01-01-2008)
Type of Organization Code

  1. Edit the Type of Organization Code in the right margin next to Item C in the entity section.

  2. Determine the Type of Organization Code from the box(es) checked in Item H and/or D1 or D2 of the entity section. If no boxes are checked, edit from INOLES or IRS label.

  3. Edit a Type of Organization Code as follows:

    Form 990–PF
    Type of Organization Code Description Address
    3

    • 4947(a)(1) box is checked, or

    • No box is checked and SS92 is indicated.

    • U.S. Trust

    • U.S. Address

    • Box D1 or D2 in the entity section is not checked
    6 501(c)(3) Exempt Private Foundation box is checked.

    • U.S. Foundation

    • U.S. Address

    • Box D1 or D2 in the entity section is not checked.
    4

    • 4947(a)(1) box is checked, or

    • No box is checked and SS92 is indicated.

    • Foreign Trust

    • Foreign Address

    • Box D1 or D2 in the entity section is checked.
    7 501(c)(3) Exempt Private Foundation box is checked.

    • Foreign Foundation

    • Foreign Address

    • Box D1 or D2 in the entity section is checked.
    5

    • 4947(a)(1) box is checked, or

    • No box is checked and SS92 is indicated.

    • Canadian Trust

    • Canadian Address

    • Treaty between the U.S. and Canada is referenced or attached.
    Code 8 501(c)(3) Exempt Private Foundation box is checked.

    • Canadian Foundation

    • Canadian Address

    • Treaty between the U.S. and Canada is referenced or attached.
    6 all others  

3.11.12.7.13  (01-01-2008)
Foundation Code

  1. Edit the two–digit Foundation Code in the white space of Item H (below the entity section). This is obtained through IDRS research (INOLES).

    Example:

    If the Foundation Code on INOLES is "02" , edit "02" .

  2. If IDRS does not have a Foundation Code present, leave blank.

3.11.12.7.14  (01-01-2008)
Termination
Code

  1. If Box "F" of the entity section is checked do all of the following:

    1. Edit Termination Code"1" in the right margin of page 1, Form 990-PF, next to Item F.

    2. Edit ERS Action Code 320.

    3. Leave the return in the batch.

    4. Prepare Form 4227, Reject to Entity stating "status 25" .

  2. The organization is allowed to start a 60-month period to end (terminate) their private foundation status and become a public charity only when they receive permission from the Area Office to begin an IRC §507(b)(1)(B) termination.

  3. The Part VI taxes owed over the 60-month period are abated if at the end of the 60-month termination period, the Area Office determines that the organization had a "successful" termination.

3.11.12.7.15  (01-01-2008)
Schedule B
Indicator

  1. Edit a Schedule B Indicator to the right of Part I, Line 1, if the tax period is 200112 or subsequent as shown below:

    If And Then
    The box in Part I, Line 2 is or is not checked,

    • A Schedule B or a substitute Schedule B is attached, containing contributor information (name(s) / amount(s)), or

    • The word "anonymous" , "N/A" , "none" , "zero" , "dash" , in Parts I, II, or III, or

    • The third box under "Special Rules" , page 1 is checked,

    		Edit a Schedule B Indicator of "1" .
    The box in Part I, Line 2 is or is not checked, and Part I, Line 1 is $4999 or less, or
    There is a statement indicating contributions from any one contributor did not exceed $5000,     		A Schedule B or Substitute Schedule B is not attached, 1. Do not edit a Schedule B Indicator.
    2. Continue processing return.
    Part I, Line 2 is checked and Part I, Line 1 is $5000 or more, A Schedule B or a substitute Schedule B is not attached, or
    Is attached, but does not contain:

    • contributor information (name(s) / amount(s)), or

    • The word "anonymous" , "N/A" , "none" , "zero" , "dash" , in Parts I, II, or III, or

    • The third box under "Special Rules" , page 1 is not checked,

    		1. Do not edit a Schedule B Indicator or correspond.
    2. Continue processing return.
    The box in Part I, Line 2 is not checked and Part I, Line 1 is $5000 or more, A Schedule B or a substitute Schedule B is not attached, or
    Is attached, but does not contain:

    • contributor information (name(s) / amount(s)), or

    • The word "anonymous" , "N/A" , "none" , "zero" , "dash" , in Parts I, II, or III, or

    • The third box under "Special Rules" , page 1 is not checked,

    		1. Correspond per IRM 3.11.12.2.37.1.
    2. Do not edit a Schedule B Indicator.

3.11.12.7.16  (01-01-2008)
Part I
Correspondence

  1. Correspond for Schedule B if all of the following apply:

    1. Schedule B is missing or is present but does not contain contributor information (name(s) / amount(s)), or "anonymous" , "N/A" , "none" , "zero" , or "dash" in Parts I, II, or III, or the third box under "Special Rules" , page 1 is not checked.

    2. Part I, Line 1, Form 990–PF is $5,000 or more.

    3. The box in Part I, Line 2 is not checked.

    4. The tax period is 200112 or subsequent.

  2. Correspond for Column (a) if Lines 1-27 are blank.

  3. Correspond for clarification as to whether the organization is foreign or domestic if the Organization Code is "4" or "7" , Line 26, Column (b) has a dollar entry, and the address is not foreign.

3.11.12.7.17  (01-01-2008)
Part I
Perfection

  1. Perfect Item I of the entity section from Part II, Line 16, Column (c).

  2. Lines 6b and 10b: If blank, perfect.

  3. Column (a), perfect as follows: