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

Part XIII - Undistributed Income

If you checked box D2 on page 1, do not fill in this part.

If the organization is a private operating foundation for any of the years shown in Part XIII, do not complete the portions of Part XIII that apply to those years. If there are excess qualifying distributions for any tax year, do not carry them over to a year in which the organization is a private operating foundation or to any later year. For example, if a foundation made excess qualifying distributions in 1999 and became a private operating foundation in 2001, the excess qualifying distributions from 1999 could be applied against the distributable amount for 2000 but not to any year after 2000.

The purpose of this part is to enable the foundation to comply with the rules for applying its qualifying distributions for the year 2001. In applying the qualifying distributions, there are three basic steps.

1. Reduce any undistributed income for 2000 (but not below zero).
2. The organization may use any part or all remaining qualifying distributions for 2001 to satisfy elections. For example, if undistributed income remained for any year before 2000, it could be reduced to zero or, if the foundation wished, the distributions could be treated as distributions out of corpus.
3. If no elections are involved, apply remaining qualifying distributions to the 2001 distributable amount on line 4d. If the remaining qualifying distributions are greater than the 2001 distributable amount, the excess is treated as a distribution out of corpus on line 4e.

If for any reason the 2001 qualifying distributions do not reduce any 2000 undistributed income to zero, the amount not distributed is subject to a 15% tax. If the 2000 income remains undistributed at the end of 2002, it could be subject again to the 15% tax. Also, see section 4942(b) for the circumstances under which a second-tier tax could be imposed.

Line 1 - Distributable amount. Enter the distributable amount for 2001 from Part XI, line 7.

Line 2 - Undistributed income. Enter the distributable amount for 2000 and amounts for earlier years that remained undistributed at the beginning of the 2001 tax year.

Line 2b. Enter the amount of undistributed income for years before 2000.

Line 3 - Excess distributions carryover to 2001. If the foundation has made excess distributions out of corpus in prior years, which have not been applied in any year, enter the amount for each year. Do not enter an amount for a particular year if the organization was a private operating foundation for any later year.

Lines 3a through 3e. Enter the amount of any excess distribution made on the line for each year listed. Do not include any amount that was applied against the distributable amount of an earlier year or that was already used to meet pass-through distribution requirements. (See the instructions for line 7.)

Line 3f. This amount can be applied in 2001.

Line 4 - Qualifying distributions. Enter the total amount of qualifying distributions made in 2001 from Part XII, line 4. The total of the amounts applied on lines 4a through 4e is equal to the qualifying distributions made in 2001.

Line 4a. The qualifying distributions for 2001 are first used to reduce any undistributed income remaining from 2000. Enter only enough of the 2001 qualifying distributions to reduce the 2000 undistributed income to zero.

Lines 4b and 4c. If there are any 2001 qualifying distributions remaining after reducing the 2000 undistributed income to zero, one or more elections can be made under Regulations section 53.4942(a)-3(d)(2) to apply all or part of the remaining qualifying distributions to any undistributed income remaining from years before 2000 or to apply to corpus.

Elections. To make these elections, the organization must file a statement with the IRS or attach a statement, as described in the above regulations section, to Form 990-PF. An election made by filing a separate statement with the IRS must be made within the year for which the election is made. Otherwise, attach a statement to the Form 990-PF filed for the year the election was made.

Where to enter. If the organization elected to apply all or part of the remaining amount to the undistributed income remaining from years before 2000, enter the amount on line 4b.

If the organization elected to treat those qualifying distributions as a distribution out of corpus, enter the amount on line 4c.

Entering an amount on line 4b or 4c without submitting the required statement is not considered a valid election.

Line 4d. Treat as a distribution of the distributable amount for 2001 any qualifying distributions for 2001 that remain after reducing the 2000 undistributed income to zero and after electing to treat any part of the remaining distributions as a distribution out of corpus or as a distribution of a prior year's undistributed income. Enter only enough of the remaining 2001 qualifying distributions to reduce the 2001 distributable amount to zero.

Line 4e. Any 2001 qualifying distributions remaining after reducing the 2001 distributable amount to zero should be treated as an excess distribution out of corpus. This amount may be carried over and applied to later years.

Line 5 - Excess qualifying distributions carryover applied to 2001. Enter any excess qualifying distributions from line 3, which were applied to 2001, in both the Corpus column and the 2001 column. Apply the oldest excess qualifying distributions first. Thus, the organization will apply any excess qualifying distributions carried forward from 1996 before those from later years.

Line 6a. Add lines 3f, 4c, and 4e. Subtract line 5 from the total. Enter the net total in the Corpus column.

Line 6c. Enter only the undistributed income from 1999 and prior years for which either a notice of deficiency under section 6212(a) has been mailed for the section 4942(a) first-tier tax, or on which the first-tier tax has been assessed because the organization filed a Form 4720 for a tax year that began before 2000.

Lines 6d and 6e. These amounts are taxable under the provisions of section 4942(a), except for any part that is due solely to misvaluation of assets to which the provisions of section 4942(a)(2) are being applied (see Part VII-B, line 2b). Report the taxable amount on Form 4720. If the exception applies, attach an explanation.

Line 6f. In the 2001 column, enter the amount by which line 1 is more than the total of lines 4d and 5. This is the undistributed income for 2001. The organization must distribute the amount shown by the end of its 2002 tax year so that it will not be liable for the tax on undistributed income.

Line 7 - Distributions out of corpus for 2001 pass-through distributions.

1. If the foundation is the donee and receives a contribution from another private foundation, the donor foundation may treat the contribution as a qualifying distribution only if the donee foundation makes a distribution equal to the full amount of the contribution and the distribution is a qualifying distribution that is treated as a distribution of corpus. The donee foundation must, no later than the close of the first tax year after the tax year in which it receives the contributions, distribute an amount equal in value to the contributions received in the prior tax year and have no remaining undistributed income for the prior year. For example, if private foundation X received $1,000 in tax year 2000 from foundation Y, foundation X would have to distribute the $1,000 as a qualifying distribution out of corpus by the end of 2001 and have no remaining undistributed income for 2000.
2. If a private foundation receives a contribution from an individual or a corporation and the individual is seeking the 50% contribution base limit on deductions for the tax year (or the individual or corporation is not applying the limit imposed on deductions for contributions to the foundation of capital gain property), the foundation must comply with certain distribution requirements.

   By the 15th day of the 3rd month after the end of the tax year in which the foundation received the contributions, the donee foundation must distribute as qualifying distributions out of corpus:

   1. An amount equal to 100% of all contributions received during the year in order for the individual contributor to receive the benefit of the 50% limit on deductions and
   2. Distribute all contributions of property only so that the individual or corporation making the contribution is not subject to the section 170(e)(1)(B)(ii) limitations.

If the organization is applying excess distributions from prior years (i.e., any part of the amount in Part XIII, line 3f) to satisfy the distribution requirements of section 170(b)(1)(E) or 4942(g)(3), it must make the election under Regulations section 53.4942(a)-3(c)(2). Also, see Regulations section 1.170A-9(g)(2).

Enter on line 7 the total distributions out of corpus made to satisfy the restrictions on amounts received from donors described above.

Line 8 - Outdated excess distributions carryover. Because of the 5-year carryover limitation under section 4942(i)(2), the organization must reduce any excess distributions carryover by any amounts from 1996 that were not applied in 2001.

Line 9 - Excess distributions carryover to 2002. Enter the amount by which line 6a is more than the total of lines 7 and 8. This is the amount the organization may apply to 2002 and following years. Line 9 can never be less than zero.

Line 10 - Analysis of line 9. In the space provided for each year, enter the amount of excess distributions carryover from that year that has not been applied as of the end of the 2001 tax year. If there is an amount on the line for 1997, it must be applied by the end of the 2002 tax year since the 5-year carryover period for 1997 ends in 2002.

Part XIV - Private Operating Foundations

All organizations that claim status as private operating foundations under section 4942(j)(3) or (5) for 2001 must complete Part XIV.

Certain elderly care facilities (section 4942(j)(5)). For purposes of section 4942 only, certain elderly care facilities may be classified as private operating foundations. To be so classified, they must be operated and maintained for the principal purpose explained in section 4942(j)(5) and also meet the endowment test described below.

If the foundation is a section 4942(j)(5) organization, complete only lines 1a, 1b, 2c, 2d, 2e, and 3b. Enter N/A on all other lines in the Total column for Part XIV.

Private operating foundation (section 4942(j)(3)). The term private operating foundation means any private foundation that spends at least 85% of the smaller of its adjusted net income or its minimum investment return directly for the active conduct of the exempt purpose or functions for which the foundation is organized and operated (the Income Test) and that also meets one of the three tests below.

1. Assets test. 65% or more of the foundation's assets are devoted directly to those activities or functionally related businesses, or both. Or 65% or more of the foundation's assets are stock of a corporation that is controlled by the foundation, and substantially all of the assets of the corporation are devoted to those activities or functionally related businesses.
2. Endowment test. The foundation normally makes qualifying distributions directly for the active conduct of the exempt purpose or functions for which it is organized and operated in an amount that is two-thirds or more of its minimum investment return.
3. Support test. The foundation normally receives 85% or more of its support (other than gross investment income as defined in section 509(e)) from the public and from five or more exempt organizations that are not described in section 4946(a)(1)(H) with respect to each other or the recipient foundation. Not more than 25% of the support (other than gross investment income) normally may be received from any one of the exempt organizations and not more than one-half of the support normally may be received from gross investment income.

See regulations under section 4942 for the meaning of directly for the active conduct of exempt activities for purposes of these tests.

Complying with these tests. A foundation may meet the income test and either the assets, endowment, or support test by satisfying the tests for any 3 years during a 4-year period consisting of the tax year in question and the 3 immediately preceding tax years. It may also meet the tests based on the total of all related amounts of income or assets held, received, or distributed during that 4-year period. A foundation may not use one method for satisfying the income test and another for satisfying one of the three alternative tests. Thus, if a foundation meets the income test on the 3-out-of-4-year basis for a particular tax year, it may not use the 4-year aggregation method for meeting one of the three alternative tests for that same year.

In completing line 3c(3) of Part XIV under the aggregation method, the largest amount of support from an exempt organization will be based on the total amount received for the 4-year period from any one exempt organization.

A new private foundation must use the aggregation method to satisfy the tests for its first tax year in order to be treated as a private operating foundation from the beginning of that year. It must continue to use the aggregation method for its 2nd and 3rd tax years to maintain its status for those years.

Part XV - Supplementary Information

• Complete this part only if the foundation had assets of $5,000 or more at any time during the year.
• This part does not apply to a foreign foundation that during its entire period of existence received substantially all (85% or more) of its support (other than gross investment income) from sources outside the United States.

Line 2. In the space provided (or in an attachment, if necessary), furnish the required information about the organization's grant, scholarship, fellowship, loan, etc., programs. In addition to restrictions or limitations on awards by geographical areas, charitable fields, and kinds of recipients, indicate any specific dollar limitations or other restrictions applicable to each type of award the organization makes. This information benefits the grant seeker and the foundation. The grant seekers will be aware of the grant eligibility requirements and the foundation should receive only applications that adhere to these grant application requirements.

If the foundation only makes contributions to preselected charitable organizations and does not accept unsolicited applications for funds, check the box on line 2.

Line 3. If necessary, attach a schedule for lines 3a and 3b that lists separately amounts given to individuals and amounts given to organizations.

Purpose of grant or contribution. Entries under this column should reflect the grant's or contribution's purpose and should be in greater detail than merely classifying them as charitable, educational, religious, or scientific activities.

For example, use an identification such as:

• Payments for nursing service,
• For fellowships, or
• For assistance to indigent families.

Entries such as grant or contribution under the column titled Purpose of grant or contribution are unacceptable. See Completed Example of Form 990-PF found in Package 990-PF, Returns for Private Foundations, for additional examples that describe the purpose of a grant or contribution.

Line 3a - Paid during year. List all contributions, grants, etc., actually paid during the year, including grants or contributions that are not qualifying distributions under section 4942(g). Include current year payments of set-asides treated as qualifying distributions in the current tax year or any prior year.

Line 3b - Approved for future payment. List all contributions, grants, etc., approved during the year but not paid by the end of the year, including the unpaid portion of any current year set-aside.

Part XVI-A - Analysis of Income-Producing Activities

In Part XVI-A, analyze revenue items that are also entered in Part I, column (a), lines 3-11, and on line 5b. Contributions reported on lines 1 and 2 of Part I are not entered in Part XVI-A. For information on unrelated business income, see the Instructions for Form 990-T and Pub. 598.

Columns (a) and (c). In column (a), enter a 6-digit business code, from the list in the Instructions for Form 990-T, to identify any income reported in column (b). In column (c), enter an exclusion code, from the list on page 29, to identify any income reported in column (d). If more than one exclusion code is applicable to a particular revenue item, select the lowest numbered exclusion code that applies. Also, if nontaxable revenues from several sources are reportable on the same line in column (d), use the exclusion code that applies to the largest revenue source.

Columns (b), (d), and (e). For amounts reported in Part XVI-A on lines 1-11, enter in column (b) any income earned that is unrelated business income (see section 512). In column (d), enter any income earned that is excluded from the computation of unrelated business taxable income by Code section 512, 513, or 514. In column (e), enter any related or exempt function income; that is, any income earned that is related to the organization's purpose or function which constitutes the basis for the organization's exemption.

Also enter in column (e) any income specifically excluded from gross income other than by Code section 512, 513, or 514, such as interest on state and local bonds that is excluded from tax by section 103. You must explain in Part XVI-B any amount shown in column (e).

Comparing Part XVI-A with Part I. The sum of the amounts entered on each line of lines 1-11 of columns (b), (d), and (e) of Part XVI-A should equal corresponding amounts entered on lines 3-11 of Part I, column (a), and on line 5b as shown below:

Line 1 - Program service revenue. On lines 1a-g, list each revenue-producing program service activity of the organization. For each program service activity listed, enter the gross revenue earned for each activity, as well as identifying business and exclusion codes, in the appropriate columns. For line 1g, enter amounts that are payments for services rendered to governmental units. Do not include governmental grants that are reportable on line 1 of Part I. Report the total of lines 1a-g on line 11 of Part I, along with any other income reportable on line 11.

Program services are mainly those activities that the reporting organization was created to conduct and that, along with any activities begun later, form the basis of the organization's current exemption from tax.

Program services can also include the organization's unrelated trade or business activities. Program service revenue also includes income from program-related investments (such as interest earned on scholarship loans) as defined in the instructions for Part IX-B.

Line 11. On lines 11a-e, list each Other revenue activity not reported on lines 1 through 10. Report the sum of the amounts entered for lines 11a-e, columns (b), (d), and (e), on line 11,
Part I.

Line 13. On line 13, enter the total of columns (b), (d), and (e) of line 12.

You may use the following worksheet to verify your calculations.

Part XVI-B - Relationship of Activities to the Accomplishment of Exempt Purposes

To explain how each amount in column (e) of Part XVI-A was related or exempt function income, show the line number of the amount in column (e) and give a brief description of how each activity reported in column (e) contributed importantly to the accomplishment of the organization's exempt purposes (other than by providing funds for such purposes). Activities that generate exempt-function income are activities that form the basis of the organization's exemption from tax.

Also, explain any income entered in column (e) that is specifically excluded from gross income other than by Code section 512, 513, or 514. If no amount is entered in column (e), do not complete Part XVI-B. Example. M, a performing arts association, is primarily supported by endowment funds. It raises revenue by charging admissions to its performances. These performances are the primary means by which the organization accomplishes its cultural and educational purposes.

M reported admissions income in column (e) of Part XVI-A and explained in Part XVI-B that these performances are the primary means by which it accomplishes its cultural and educational purposes.

Because M also reported interest from state bonds in column (e) of Part XVI-A, M explained in Part XVI-B that such interest was excluded from gross income by Code section 103.

Part XVII - Information Regarding Transfers To and Transactions and Relationships With Noncharitable Exempt Organizations

Part XVII is used to report direct and indirect transfers to (line 1a) and direct and indirect transactions with (line 1b) and relationships with (line 2) any other noncharitable exempt organization. A noncharitable exempt organization is an organization exempt under section 501(c) (that is not exempt under section 501(c)(3)), or a political organization described in section 527.

For purposes of these instructions, the section 501(c)(3) organization completing Part XVII is referred to as the reporting organization.

A noncharitable exempt organization is related to or affiliated with the reporting organization if either:

1. The two organizations share some element of common control or
2. A historic and continuing relationship exists between the two organizations.

A noncharitable exempt organization is unrelated to the reporting organization if:

1. The two organizations share no element of common control and
2. A historic and continuing relationship does not exist between the two organizations.

An element of common control is present when one or more of the officers, directors, or trustees of one organization are elected or appointed by the officers, directors, trustees, or members of the other. An element of common control is also present when more than 25% of the officers, directors, or trustees of one organization serve as officers, directors, or trustees of the other organization.

A historic and continuing relationship exists when two organizations participate in a joint effort to achieve one or more common purposes on a continuous or recurring basis rather than on the basis of one or more isolated transactions or activities. Such a relationship also exists when two organizations share facilities, equipment, or paid personnel during the year, regardless of the length of time the arrangement is in effect.

Line 1 - Reporting of certain transfers and transactions. Generally, report on line 1 any transfer to or transaction with a noncharitable exempt organization even if the transfer or transaction constitutes the only connection with the noncharitable exempt organization.

Related organizations. If the noncharitable exempt organization is related to or affiliated with the reporting organization, report all direct and indirect transfers and transactions except for contributions and grants it received.

Unrelated organizations. All transfers to an unrelated noncharitable exempt organization must be reported on line 1a. All transactions between the reporting organization and an unrelated noncharitable exempt organization must be shown on line 1b unless they meet the exception in the specific instructions for line 1b.

Line 1a - Transfers. Answer Yes to lines 1a(1) and 1a(2) if the reporting organization made any direct or indirect transfers of any value to a noncharitable exempt organization.

A transfer is any transaction or arrangement whereby one organization transfers something of value (cash, other assets, services, use of property, etc.) to another organization without receiving something of more than nominal value in return. Contributions, gifts, and grants are examples of transfers.

If the only transfers between the two organizations were contributions and grants made by the noncharitable exempt organization to the reporting organization, answer No.

Line 1b - Other transactions. Answer Yes for any transaction described on line 1b(1)-(6), regardless of its amount, if it is with a related or affiliated organization.

Unrelated organizations. Answer Yes for any transaction between the reporting organization and an unrelated noncharitable exempt organization, regardless of its amount, if the reporting organization received less than adequate consideration. There is adequate consideration when the fair market value of the goods and other assets or services furnished by the reporting organization is not more than the fair market value of the goods and other assets or services received from the unrelated noncharitable exempt organization. The exception described below does not apply to transactions for less than adequate consideration.

Answer Yes for any transaction between the reporting organization and an unrelated noncharitable exempt organization if the amount involved is more than $500. The amount involved is the fair market value of the goods, services, or other assets furnished by the reporting organization.

Exception. If a transaction with an unrelated noncharitable exempt organization was for adequate consideration and the amount involved was $500 or less, answer No for that transaction.

Line 1b(3). Answer Yes for transactions in which the reporting organization was either the lessor or the lessee.

Line 1b(4). Answer Yes if either organization reimbursed expenses incurred by the other.

Line 1b(5). Answer Yes if either organization made loans to the other or if the reporting organization guaranteed the other's loans.

Line 1b(6). Answer Yes if either organization performed services or membership or fundraising solicitations for the other.

Line 1c. Complete line 1c regardless of whether the noncharitable exempt organization is related to or closely affiliated with the reporting organization. For purposes of this line, facilities includes office space and any other land, building, or structure whether owned or leased by, or provided free of charge to, the reporting organization or the noncharitable exempt organization.

Line 1d. Use this schedule to describe the transfers and transactions for which Yes was entered on lines 1a-c above. You must describe each transfer or transaction for which the answer was Yes. You may combine all of the cash transfers (line 1a(1)) to each organization into a single entry. Otherwise, make a separate entry for each transfer or transaction.

Column (a). For each entry, enter the line number from line 1a-c. For example, if the answer was Yes to line 1b(3), enter b(3) in column (a).

Column (d). If you need more space, write see attached in column (d) and use an attached sheet for the description. If making more than one entry on line 1d, specify on the attached sheet which transfer or transaction you are describing.

Line 2 - Reporting of certain relationships. Enter on line 2 each noncharitable exempt organization that the reporting organization is related to or affiliated with, as defined above. If the control factor or the historic and continuing relationship factor (or both) is present at any time during the year, identify the organization on line 2 even if neither factor is present at the end of the year.

Do not enter unrelated noncharitable exempt organizations on line 2 even if transfers to or transactions with those organizations were entered on line 1. For example, if a one-time transfer to an unrelated noncharitable exempt organization was entered on line 1a(2), do not enter the organization on line 2.

Column (b). Enter the exempt category of the organization; for example, 501(c)(4).

Column (c). In most cases, a simple description, such as common directors or auxiliary of reporting organization will be sufficient. If you need more space, write see attached in column (c) and use an attached sheet to describe the relationship. If you are entering more than one organization on line 2, identify which organization you are describing on the attached sheet.

Signature

The return must be signed by the president, vice president, treasurer, assistant treasurer, chief accounting officer, or other corporate officer (such as tax officer) who is authorized to sign. A receiver, trustee, or assignee must sign any return that he or she is required to file for a corporation. If the return is filed for a trust, it must be signed by the authorized trustee or trustees. Sign and date the form and fill in the signer's title.

If an officer or employee of the organization prepares the return, the Paid Preparer's space should remain blank. If someone prepares the return without charge, that person should not sign the return.

Generally, anyone who is paid to prepare the organization's tax return must sign the return and fill in the Paid Preparer's Use Only area.

If you have questions about whether a preparer is required to sign the return, please contact an IRS office.

The paid preparer must complete the required preparer information and:

• Sign it, by hand, in the space provided for the preparer's signature. (Signature stamps and labels are not acceptable.)
• Give the organization a copy of the return in addition to the copy to be filed with the IRS.

If the box for question 13 of Part VII-A is checked (section 4947(a)(1) nonexempt charitable trust filing Form 990-PF instead of Form 1041), the paid preparer must also enter his or her social security number or, if applicable, employer identification number in the spaces provided. Otherwise, do not enter the preparer's social security or employer identification number.

We ask for the information on this form to carry out the Internal Revenue laws of the United States. You are required to give us the information. We need it to ensure that you are complying with these laws and to allow us to figure and collect the right amount of tax.

You are not required to provide the information requested on a form that is subject to the Paperwork Reduction Act unless the form displays a valid OMB control number. Books or records relating to a form or its instructions must be retained as long as their contents may become material in the administration of any Internal Revenue law.

The time needed to complete and file this form will vary depending on individual circumstances. The estimated average time is:

If you have comments concerning the accuracy of these time estimates or suggestions for making this form simpler, we would be happy to hear from you. You can write to the Tax Forms Committee, Western Area Distribution Center, Rancho Cordova, CA 95743-0001. Do not send the tax form to this address. Instead, see When and Where To File on page 5.

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