J. Statute — Publication 5590 — Exempt Organizations

(1) The Form 990-PF initially controls all statutory limitations periods for assessment

and collection of taxes (or “statutes”) with respect to the excise taxes. (See Section 6501(l)(1) and Treas. Reg. 301.6501(n)-1(a).) The following table identifies the Code section, the taxable party, the return used to report the tax, and the year in which the tax is imposed.

Code Section	Liable Party	Tax Form	Tax year
4940(a)	PF	990-PF	On the same form, same year.
4941(a)(1)	Self-dealer	*4720	If individual: Year of Form 1040, U.S. Individual Income Tax Return, in which transaction occurs. All others: Year of Form 1041 (trust), 1065 (partnership), or 1120 (corporation) in which transaction falls. *
4941(a)(2)	FM	*4720	Form 1040 year in which transaction occurs.
4942(a)	PF	4720	Same year of Form 990-PF
4943(a)(1)	PF	4720	Same year of Form 990-PF
4944(a)(1)	PF	4720	Same year of Form 990-PF
4944(a)(2)	FM	*4720	Form 1040 year in which transaction occurs.
4945(a)(1)	PF	4720	Same year of Form 990-PF
4945(a)(2)	FM	*4720	Form 1040 year in which transaction occurs.
*Contact Area Counsel if considering asserting tax on indirect self-dealing against a disqualified person partner or other owner of the disqualified person entity (in addition to asserting tax on self-dealing against the entity).

(2) The rules for the length of statutory period for assessing Chapter 42 taxes are:

3 years	Form 990-PF filed disclosing the transaction (must adequately identify existence and nature of transaction). See Cline v. Commissioner, T.C. Memo. 1988- 144.	6501(a) and (e)(3)
6 years	Section 4940, 4948: Exceeds 25% of amount reported on return. Section 4941 - 4945: Transaction not disclosed on the return. Requires Area Counsel memo.	6501(e)(3)
Open ended	False or fraudulent return with intent to evade tax. Form 990-PF not filed (SFR). Requires Area Counsel memo for false or fraudulent returns.	6501(c)(1) and (c)(3), 6020(b)

(3) See table below for Section 4942 statute modifications:

4942 Subsection	Additional Time	Code Section Reference
4942(g)(3) Failure to distribute deficiency	+1 year to statute date	6501(l)(2)
4942(g)(2)(B)(ii) Cash distribution test set aside deficiency	+2 years to statute date	6501(l)(3)

(4) Prepare and obtain statute extensions for all parties to an excise tax. This entails

extensions on the foundation, disqualified persons, and foundation managers, if applicable. Use Form 872, Consent to Extend the Time to Assess Tax, to secure the extension.

Note: A statute extension for the foundation’s return does not extend the statute for a disqualified person or foundation manager. Separate statute extensions

must be secured for all parties. Refer to IRM 25.6.22 for further information regarding statute extensions.

Caution: Form 872-A, Special Consent to Extend the Time to Assess Tax, may be used as an alternative to allow an open-ended extension, until terminated by the submission of Form 872-T, Notice of Termination of Special Consent to Extend the Time to Assess Tax. Use Form 872-A only for cases with valid formal protests to Appeals.

(5) The statutory limitations period for Chapter 42 taxes reportable on Form 4720

ordinarily begins with the filing of Form 990-PF, whether or not Form 4720 is filed. If there are multiple acts/failures to act or taxable events over a period of years, the Forms 4720 will have separate statutes for each transaction. When extending the statute for the Form 4720, extend the statute for all the transactions. The example below, although illustrating statute dates with respect to self-dealing acts or transactions, is also useful for illustrating statute dates when a foundation makes a taxable expenditure. Note, however, that a taxable expenditure made by a foundation is one specific act and is not considered a continuing transaction.

Example: A private foundation with a fiscal year ending in August makes a series of self-dealing transactions in 2008, 2009, 2010, and 2011. Transactions occurred on November 1, 2008, June 1, 2009, September 1, 2009, October 1, 2009, March 15, 2010, September 15, 2010, and May 20, 2011. All the transactions are discrete transactions, except for the transaction on September 1, 2009, which is a continuing transaction (a loan). There has been no correction. The self-dealer’s fiscal year ends in December. The Forms 990-PF for 200908 through 201108 were filed February 20, 2010, March 10, 2011, and February 15, 2012, respectively. No Form 4720 is filed. Assume that the acts/transactions were disclosed on the Forms 990-PF filed. The table below shows how the statutes work for the Forms 990-PF and 4720, as of an extension request date of September 1, 2012:

Transaction	Form 990PF	Statute Begins	Form 4720	Statute Begins
11/1/2008	200908	2/20/2010	200812	2/20/2010
6/1/2009	200908	2/20/2010	200912	2/20/2010
9/1/2009 (loan)	201008	3/10/2011	200912	3/10/2011
10/1/2009	201008	3/10/2011	200912	3/10/2011

1/1/2010 (continuing loan transaction)	201008	3/10/2011	201012	3/10/2011
3/15/2010	201008	3/10/2011	201012	3/10/2011
9/15/2010	201108	2/15/2012	201012	2/15/2012
1/1/2011 (continuing loan transaction)	201108	2/15/2012	201112	2/15/2012
5/20/2011	201108	2/15/2012	201112	2/15/2012
1/1/2012 (continuing loan transaction)	201208	TBD	201212	TBD

Note: The filing of Form 990-PF for the year of the initial taxable act ordinarily starts the limitations period (or periods, if multiple acts during the tax year) for second tier tax as well as first tier tax, even though second tier tax does not arise until the end of the taxable period. See the example in Treas. Reg. 301.6501(n)1(c) regarding an act of self-dealing. Similarly, the second tier tax payable by a foundation manager is essentially on refusal to agree to correct, which does not arise until after a Thorne letter is sent, but again the limitations period begins with the return for the first tier tax.

(6) For discrete acts, if the statute expired for the year the act occurred, no

assessment can be made for any subsequent year. However, for continuing transactions under Section 4941, even if the statute expired for the year in which the original transaction occurred, tax for each open year may be asserted (because a new act is deemed to occur every year within the taxable period). Similarly, an excess business holding acquired in a closed year of the foundation that is still held by the foundation in one or more open years is subject to Section 4943 tax for an open year, assuming the holding is still an excess business holding.

(7) When preparing the extensions, reference the specific Code section in the type of

tax. Use “excise (Section 494X)”. If extending multiple excise tax code sections, state “excise (Sections 494X and 494Y)”. If extending both income and excise taxes, state “income and/or excise (Section 494X)”. It is recommended that a consent for both income and excise tax be used only when a private foundation may be liable for both excise tax under Section 4940 on its investment income and income tax (such as unrelated business income tax). This is because a regular Form 872 is used to extend the statute for these taxes, based on the

foundation’s taxable year and not taxable periods arising from taxable events (which require using a modified Form 872).

(8) Extensions for Section 4941 through Section 4945 taxes require a modification of

the Form 872. Replace the phrase “on any returns made by or for the above taxpayer(s) for the period(s) ended” with “from the above taxpayer(s) for the years that are fully or partially within the taxable period(s) that began”. Use the date of the first act or failure to act (or taxable event) for the start of the taxable period.

(9) If there are multiple acts in a single tax year that trigger Chapter 42 taxes, you

may list them on the modified Form 872.

(10) For each year in which acts or failures to act occur which give rise to Chapter 42

taxes, including for deemed or continuing transactions (such as loan transactions in which each year the loan is outstanding, a new or separate transaction is created), secure a modified Form 872. Separate consents for each year in which new or continuing transactions occurred should be obtained.

(11) As the Section 4940 tax is assessed on the Form 990-PF, prepare any statute

extensions for Section 4940 taxes using the regular Form 872. Associate the statute extension with the appropriate Form 990-PF.