Return of Private Foundation or Section 4947(a)(1)
Nonexempt Charitable Trust Treated as a Private Foundation

R. Disclosures Regarding Certain Information and Services Furnished

A section 501(c) organization that offers to sell or solicits money for specific information or a routine service to any individual that could be obtained by the individual from a Federal Government agency free or for a nominal charge must disclose that fact conspicuously when making such offer or solicitation.

Any organization that intentionally disregards this requirement will be subject to a penalty for each day the offers or solicitations are made. The penalty is the greater of $1,000 or 50% of the total cost of the offers and solicitations made on that day.

S. Organizations Organized or Created in a Foreign Country or U.S. Possession

If you apply any provision of any U.S. tax treaty to compute the foundation's taxable income, tax liability, or tax credits in a manner different from the 990-PF instructions, attach an explanation.

Regulations section 53.4948-1(b) states that sections 507, 508, and Chapter 42 (other than section 4948) do not apply to a foreign private foundation that from the date of its creation has received at least 85% of its support (as defined in section 509(d), other than section 509(d)(4)) from sources outside the United States.

Section 4948(a) imposes a 4% tax on the gross investment income from U.S. sources (i.e., income from dividends, interest, rents, payments received on securities loans (as defined in section 512(a)(5)), and royalties not reported on Form 990-T of an exempt foreign private foundation. This tax replaces the section 4940 tax on the net investment income of a domestic private foundation. To pay any tax due, see the instructions for Part VI, line 9.

Taxable foreign private foundations and foreign section 4947(a)(1) nonexempt charitable trusts are not subject to the excise taxes under sections 4948(a) and 4940, but are subject to income tax under subtitle A of the Code.

Certain foreign foundations are not required to send copies of annual returns to state officials, or comply with the public inspection and notice requirements of annual returns. (See General Instructions G and Q.)

T. Liquidation, Dissolution, Termination, or Substantial Contraction

If there is a liquidation, dissolution, termination, or substantial contraction (defined below) of the organization, attach:

1. A statement to the return explaining it,
2. A certified copy of the liquidation plan, resolution, etc. (if any) and all amendments or supplements that were not previously filed,
3. A schedule that lists the names and addresses of all recipients of assets, and
4. An explanation of the nature and fair market value of the assets distributed to each recipient.

Additional requirements. For a complete corporate liquidation or trust termination, attach a statement as to whether a final distribution of assets was made and the date it was made (if applicable).

Also, if the organization:

• Has ceased to exist, check the Final Return box in G at the top of page 1 of the return.
• Is terminating its private foundation status under section 507(b)(1)(B), see General Instructions U and V.

Relief from public inspection requirements. If the organization has terminated its private foundation status under section 507(b)(1)(A), it does not have to comply with the notice and public inspection requirements of their return for the termination year.

Filing date. See General Instruction J for the filing date.

Definitions. The term substantial contraction includes any partial liquidation or any other significant disposition of assets. However, this does not include transfers for full and adequate consideration or distributions of current income.

A significant disposition of assets does not include any disposition for a tax year if:

1. The total of the dispositions for the tax year is less than 25% of the fair market value of the net assets of the organization at the beginning of the tax year, and
2. The total of the related dispositions made during prior tax years (if a disposition is part of a series of related dispositions made during these prior tax years) is less than 25% of the fair market value of the net assets of the organization at the beginning of the tax year in which any of the series of related dispositions was made.

The facts and circumstances of the particular case will determine whether a significant disposition has occurred through a series of related dispositions. Ordinarily, a distribution described in section 170(b)(1)(E)(ii) (relating to private foundations making qualifying distributions out of corpus equal to 100% of contributions received during the foundation's tax year) will not be taken into account as a significant disposition of assets. See Regulations section 1.170A-9(g)(2).

U. Filing Requirements During Section 507(b)(1)(B) Termination

Although an organization terminating its private foundation status under section 507(b)(1)(B) may be regarded as a public charity for certain purposes, it is considered a private foundation for filing requirement purposes and it must file an annual return on Form 990-PF. The return must be filed for each year in the 60-month termination period, if that period has not expired before the due date of the return.

Regulations under section 507(b)(1) (B)(iii) specify that within 90 days after the end of the termination period the organization must supply information to the IRS establishing that it has terminated its private foundation status and, therefore, qualifies as a public charity. Send the information to:

Internal Revenue Service
TE/GE Division
Centralized Files Unit
P.O. Box 2508
Cincinnati, OH 45201

If information is furnished establishing a successful termination, then, for the final year of the termination period, the organization should comply with the filing requirements for the type of public charity it has become. See the Instructions for Form 990 and Schedule A (Form 990) for details on filing requirements. This applies even if the IRS has not confirmed that the organization has terminated its private foundation status by the time the return for the final year of the termination is due (or would be due if a return were required).

The organization will be allowed a reasonable period of time to file any private foundation returns required (for the last year of the termination period) but not previously filed if it is later determined that the organization did not terminate its private foundation status. Interest on any tax due will be charged from the original due date of the Form 990-PF, but penalties under sections 6651 and 6652 will not be assessed if the Form 990-PF is filed within the period allowed by the IRS.

V. Special Rules for Section 507(b)(1)(B) Terminations

If the organization is terminating its private foundation status under the 60-month provisions of section 507(b)(1)(B), special rules apply. (See General Instructions T and U.) Under these rules, the organization may file Form 990-PF without paying the tax based on investment income if it filed a consent under section 6501(c)(4) with its notification to the TE/GE Division at the Cincinnati address given in General Instruction U of its intention to begin a section 507(b)(1)(B) termination. The consent provides that the period of limitation on the assessment of excise tax under section 4940 or 4948 based on investment income for any tax year in the 60-month period will not expire until at least 1 year after the period for assessing a deficiency for the last tax year in which the 60-month period would normally expire. Any foundation not paying the tax when it files Form 990-PF must attach a copy of the signed consent.

If the foundation did not file the consent, the tax must be paid in the normal manner as explained in General Instructions O and P. The organization may file a claim for refund after completing termination or during the termination period. The claim for refund must be filed on time and the organization must supply information establishing that it qualified as a public charity for the period for which it paid the tax.

W. Rounding, Currency, and Attachments

Rounding off to whole-dollar amounts. You may show the money items on the return and accompanying schedules as whole-dollar amounts. To do so, drop any amount less than 50 cents and increase any amount from 50 cents through 99 cents to the next higher dollar.

Currency and language requirements. Report all amounts in U.S. dollars (state conversion rate used). Report all items in total, including amounts from both U.S. and non-U.S. sources. All information must be in English.

Attachments. Use the schedules on Form 990-PF. If you need more space use attachments that are the same size as the printed forms.

On each attachment, write:

• Form 990-PF,
• The tax year,
• The corresponding schedule number or letter,
• The organization's name and EIN, and
• The information requested using the format and line sequence of the printed form.

Also, show totals on the printed forms.

Completing the Heading

The following instructions are keyed to items in the Form 990-PF heading.

Name and Address

If the organization received a Form 990-PF package from the IRS with a peel-off label, please use it. If the name or address on the label is wrong, make corrections on the label. The address used must be that of the principal office of the foundation.

Include the suite, room, or other unit number after the street address. If the Post Office does not deliver mail to the street address and the organization has a P.O. box, show the box number instead of the street address.

A - Employer Identification Number

The organization should have only one employer identification number. If it has more than one number, notify the Internal Revenue Service Center at the appropriate address shown under General Instruction J. Explain what numbers the organization has, the name and address to which each number was assigned, and the address of the organization's principal office. The IRS will then advise which number to use.

B - Telephone Number

Enter a foundation telephone number (including the area code) that the public and government regulators may use to obtain information about the foundation's finances and activities. This information should be available at this telephone number during normal business hours. If the foundation does not have a telephone, enter a telephone number of a foundation official who can provide this information during normal business hours.

D2 - Foreign Organizations

If the foreign organization meets the 85% test of Regulations section 53.4948-1(b), then:

1. Check the box in D2 on page 1 of Form 990-PF,
2. Check the box at the top of Part XI,
3. Do not fill in Parts XI and XIII,
4. Do not fill in Part X unless it is claiming status as a private operating foundation, and
5. Attach the computation of the 85% test to Form 990-PF.

E - Section 507(b)(1)(A) Terminations

A private foundation that has terminated its status as such under section 507(b)(1)(A), by distributing all its net assets to one or more public charities without keeping any right, title, or interest in those assets, should check the box in E on page 1 of Form 990-PF. See General Instructions T and Q.

F - 60-Month Termination Under Section 507(b)(1)(B)

Check the box in F on page 1 of Form 990-PF if the organization is terminating its private foundation status under the 60-month provisions of section 507(b)(1)(B) during the period covered by this return. To begin such a termination, a private foundation must have given advance notice to the TE/GE Division at the Cincinnati address given on page 9 and provided the information outlined in Regulations section 1.507-2(b)(3). See General Instruction U for information regarding filing requirements during a section 507(b)(1)(B) termination.

See General Instruction V for information regarding payment of the tax based on investment income (computed in Part VI) during a section 507(b)(1)(B) termination.

H - Type of Organization

Check the box for Section 501(c)(3) exempt private foundation if the foundation has a ruling or determination letter from the IRS in effect that recognizes its exemption from Federal income tax as an organization described in section 501(c)(3) or if the organization's exemption application is pending with the IRS.

Check the Section 4947(a)(1) nonexempt charitable trust box if the trust is a nonexempt charitable trust treated as a private foundation. All others, check the Other taxable private foundation box.

I - Fair Market Value of All Assets

In block I on page 1 of Form 990-PF, enter the fair market value of all assets the foundation held at the end of the tax year.

This amount should be the same as the figure reported in Part II, column (c), line 16.

Part I - Analysis of Revenue and Expenses

Column Instructions

The total of amounts in columns (b), (c), and (d) may not necessarily equal the amounts in column (a).

The amounts entered in column (a) and on line 5b must be analyzed in Part XVI-A.

Column (a) - Revenue and Expenses per Books

Enter in column (a) all items of revenue and expense shown in the books and records that increased or decreased the net assets of the organization. However, do not include the value of services donated to the foundation, or items such as the free use of equipment or facilities, in contributions received. Also, do not include any expenses used to compute capital gains and losses on lines 6, 7, and 8 or expenses included in cost of goods sold on line 10b.

Column (b) - Net Investment Income

All domestic private foundations (including section 4947(a)(1) nonexempt charitable trusts) are required to pay an excise tax each tax year on net investment income.

Exempt foreign foundations are subject to an excise tax on gross investment income from U.S. sources. These foreign organizations should complete lines 3, 4, 5, 11, 12, and 27b of column (b) and report only income derived from U.S. sources. No other income should be included. No expenses are allowed as deductions.

Definitions

Gross investment income means the total amount of investment income that was received by a private foundation from all sources. However, it does not include any income subject to the unrelated business income tax. It includes interest, dividends, rents, payments with respect to securities loans (as defined in section 512(a)(5)), royalties received from assets devoted to charitable activities, income from notional principal contracts (as defined in Regulations section 1.863-7), and other substantially similar income from ordinary and routine investments excluded by section 512(b)(1). Therefore, interest received on a student loan is includible in the gross investment income of a private foundation making the loan.

Net investment income is the amount by which the sum of gross investment income and the capital gain net income exceeds the allowable deductions discussed later. Tax-exempt interest on governmental obligations and related expenses are excluded.

Investment income. Include in column (b) all or part of any amount from column (a) that applies to investment income. However, do not include in column (b) any interest, dividends, rents or royalties (and related expenses) that were reported on Form 990-T.

For example, investment income from debt-financed property unrelated to the organization's charitable purpose and certain rents (and related expenses) treated as unrelated trade or business income should be reported on Form 990-T. Income from debt-financed property that is not taxed under section 511 is taxed under section 4940. Thus, if the debt/basis percentage of a debt-financed property is 80%, only 80% of the gross income (and expenses) for that property is used to figure the section 511 tax on Form 990-T. The remaining 20% of the gross income (and expenses) of that property is used to figure the section 4940 tax on net investment income on Form 990-PF. (See Form 990-T and its instructions for more information.)

Investment expenses. Include in column (b) all ordinary and necessary expenses paid or incurred to produce or collect investment income from: interest, dividends, rents, amounts received from payments on securities loans (as defined in section 512(a)(5)), royalties, income from notional principal contracts, and other substantially similar income from ordinary and routine investments excluded by section 512(b)(1); or for the management, conservation, or maintenance of property held for the production of income that is taxable under section 4940.

If any of the expenses listed in column (a) are paid or incurred for both investment and charitable purposes, they must be allocated on a reasonable basis between the investment activities and the charitable activities so that only expenses from investment activities appear in column (b). Examples of allocation methods are given in the instructions for Part IX-A.

Limitation. The deduction for expenses paid or incurred in any tax year for producing gross investment income earned incident to a charitable function cannot be more than the amount of income earned from the function that is includible as gross investment income for the year.

For example, if rental income is incidentally realized in 2001 from historic buildings held open to the public, deductions for amounts paid or incurred in 2001 for the production of this income may not be more than the amount of rental income includible as gross investment income in column (b) for 2001.

Expenses related to tax-exempt interest. Do not include on lines 13-23 of column (b) any expenses paid or incurred that are allocable to tax-exempt interest that is excluded from lines 3
and 4.

Column (c) - Adjusted Net Income

Nonoperating private foundations should see item 1 under Nonoperating private foundations on this page to find out if they need to complete column (c).

Private operating foundations. All organizations that claim status as private operating foundations under section 4942(j)(3) or (5) must complete all lines of column (c) that apply, according to the general rules for income and expenses that apply to this column, the specific line instructions for lines 3-27c, the Special rule, and Examples 1 and 2 below.

General rules. In general, adjusted net income is the amount of a private foundation's gross income that is more than the expenses of earning the income. The modifications and exclusions explained below are applied to gross income and expenses in figuring adjusted net income.

For income and expenses, include on each line of column (c) only that portion of the amount from column (a) that is applicable to the adjusted net income computation.

Income. For column (c), include income from charitable functions, investment activities, short-term capital gains from investments, amounts set aside, and unrelated trade or business activities. Do not include gifts, grants, or contributions, or long-term capital gains or losses.

Expenses. Deductible expenses include the part of a private foundation's operating expenses that is paid or incurred to produce or collect gross income reported on lines 3-11 of column (c). If only part of the property produces income includible in column (c), deductions such as interest, taxes, and rent must be divided between the charitable and noncharitable uses of the property. If the deductions for property used for a charitable, educational, or other similar purpose are more than the income from the property, the excess will not be allowed as a deduction but may be treated as a qualifying distribution in Part I, column (d). See Examples 1 and 2 below.

Special rule. The expenses attributable to each specific charitable activity, limited by the amount of income from the activity, must be reported in column (c) on lines 13-26. If the expenses of any charitable activity exceed the income generated by that activity, only the excess of these expenses over the income should be reported in column (d).

Examples.

1. A charitable activity generated $5,000 of income and $4,000 of expenses. Report all of the income and expenses in column (c) and none in column (d).
2. A charitable activity generated $5,000 of income and $6,000 of expenses. Report $5,000 of income and $5,000 of expenses in column (c) and the excess expenses of $1,000 in column (d).

Nonoperating private foundations. The following rules apply to nonoperating private foundations.

1. If a nonoperating private foundation has no income from charitable activities that would be reportable on line 10 or line 11 of Part I, it does not have to make any entries in column (c).
2. If a nonoperating private foundation has income from charitable activities, it must report that income only on lines 10 and/or 11 in column (c). These foundations do not need to report other kinds of income and expenses (such as investment income and expenses) in column (c).
3. If a nonoperating private foundation has income that it reports on lines 10 and/or 11, report any expenses relating to this income following the general rules and the special rule. See Examples 1 and 2 above.

Column (d) - Disbursements for Charitable Purposes

Expenses entered in column (d) relate to activities that constitute the charitable purpose of the foundation.

For amounts entered in column (d):

• Use the cash receipts and disbursements method of accounting no matter what accounting method is used in keeping the books of the foundation.
• Do not include any amount or part of an amount that is included in column (b) or (c).
• Include on lines 13-25 all expenses, including necessary and reasonable administrative expenses, paid by the foundation for religious, charitable, scientific, literary, educational, or other public purposes, or for the prevention of cruelty to children or animals.
• Include a distribution of property at the fair market value on the date the distribution was made.
• Include only the part entered in column (a) that is allocable to the charitable purposes of the foundation.

  Example. An educational seminar produced $1,000 in income that was reportable in columns (a) and (c). Expenses attributable to this charitable activity were $1,900. Only $1,000 of expense should be reported in column (c) and the remaining $900 in expense should be reported in column (d).

Qualifying distributions. Generally, gifts and grants to organizations described in section 501(c)(3), that have been determined to be publicly supported charities (i.e., organizations that are not private foundations as defined in section 509(a)), are qualifying distributions only if the granting foundation does not control the public charity.

The total of the expenses and disbursements on line 26 is also entered on line 1a in Part XII to figure qualifying distributions.

Alternative to completing lines 13-25. If you want to provide an analysis of disbursements that is more detailed than column (d), you may attach a schedule instead of completing lines 13-25. The schedule must include all the specific items of lines 13-25, and the total from the schedule must be entered in column (d), line 26.

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