I. Domestic Taxable Private Foundations

(1) Taxable private foundations are former tax-exempt private foundations whose

exemptions were revoked. Unless terminated under Section 507, they remain private foundations, and under TE/GE jurisdiction. See Section 509(b) and Treas. Reg. 1.509(b)-1(b).

(2) Taxable private foundations are required to file Form 990-PF in addition to either

the Form 1120 or Form 1041.

(3) Taxable foundations remain subject to Chapter 42 taxes.

(4) A taxable foundation owes Section 4940 tax to the extent that this tax (plus

unrelated business income tax, computed as if it were still exempt), exceeds its income tax liability. See Section 4940(b). The foundation isn’t subject to the Form 990-T filing requirement, but may attach the Form 990-T, Exempt Organization Business Income Tax Return, to the Form 990-PF to show the computations.

(5) When computing the Section 4940 tax:

a. Compute the 1.39% tax via Form 990-PF.

b. Add the tax computed via Form 990-T.

c. Subtract the tax determined via Form 1120 or Form 1041.

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(6) Taxable foundations are subject to the penalty of Section 6710 for not making

required disclosures under Section 6113 of non-deductibility of contributions for the first five years after revocation. See IRM 20.1.8, Employee Plans and Exempt Organizations Miscellaneous Civil Penalties.

(7) If you find acts/failures to act that give rise to Chapter 42 taxes, consider

proposing involuntary termination under Section 507(a)(2).