Statute of Limitations

(1) The statute of limitations rules that apply to Section 4958 excise taxes are found in

Sections 6501(e)(3) and 6501(l).

(2) Period of Limitations - The period of limitations for assessing Section 4958

excise taxes against disqualified persons and organization managers begins:

a. When the ATEO files the information return (Form 990, Return of

Organization Exempt From Income tax, or Form 990-EZ, Short Form Return of Organization Exempt From Income Tax) for the period when the excess benefit transaction occurred, or

b. When the information return is due, whichever is later.

See Sections 6501(b)(1), 6501(b)(4), and 6501(l)(1). See also Treas. Reg. 301.6501(n)-1(a)(1) and 301.6501(n)-1(c).

Note: For a discussion of when a tax-exempt organization should file an information return (Form 990 or Form 990-EZ), see section III.B below for more information.

Note: The filing of Form 4720, Return of Certain Excise Taxes on Charities and Other Persons Under Chapters 41 and 42 of the Internal Revenue Code, by a disqualified person or by an organization manager, reporting an excess benefit transaction with an ATEO, doesn’t begin the period of limitations for assessing initial excise taxes against the disqualified person or the organization manager. See Treas. Reg. 301.6501(n)-1(b).

(3) The Form 990-N, Electronic Notice (e-Postcard) for Tax-Exempt Organizations Not

Required to File Form 990 or Form 990EZ, isn’t a return and doesn’t start the statute. See Treas. Regs. 1.6033-2(g)(1)(iii), 1.6033-2(g)(5) and 1.6033-6(c)(4).

(4) The period of limitations for assessing Section 4958 excise taxes against

disqualified persons and organization managers ends either three years or six years after it begins.

a. If an ATEO that engaged in an excess benefit transaction with a disqualified

person filed an information return (Form 990 or Form 990-EZ) for the period the excess benefit transaction occurred and reported the excess benefit

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transaction on this return or in an attached schedule or statement, the period of limitations for assessing Section 4958 excise taxes against a disqualified person or an organization manager is three years. See Section 6501(a), Treas. Reg. 301.6501(a)-1(a) and Treas. Reg. 301.6501(e)-1(c)(3)(ii).

b. If an ATEO that engaged in an excess benefit transaction with a disqualified

person filed an information return (Form 990 or Form 990-EZ) for the period when the excess benefit transaction occurred but didn’t report the excess benefit transaction on this return or in an attached schedule or statement, the period of limitations for assessing Section 4958 excise taxes against a disqualified person or an organization manager is six years. See Section 6501(e)(3) and Treas. Reg. 301.6501(e)-1(c)(3)(ii).

Note: Examiners must consult their manager and division counsel before making a six-year statute determination.

(5) No Limitations Period - If an ATEO that engaged in an excess benefit transaction

with a disqualified person didn’t file the required information return (Form 990 or Form 990-EZ) for the period when the excess benefit transaction occurred, no period of limitations for assessing the related excise taxes against a disqualified person or an organization manager exists. See Section 6501(c)(3) and Treas. Reg. 301.6501(n)-1(b).

a. As stated above, filing the Form 990-N does not start the statute of limitations

period and therefore no limitation period exists.

(6) Reporting - An excess benefit transaction is considered reported on an

information return (Form 990 or Form 990-EZ), or in a schedule or statement attached to the information return, if it’s disclosed in a manner sufficient to apprise the IRS of the existence and nature of the excess benefit transaction with a disqualified person and, if applicable, the participation by an organization manager. See Treas. Reg. 301.6501(e)-1(c)(3)(ii) and Rev. Rul. 69-247, 1969-1 C.B. 303.

a. The IRS has the burden of proving that the disclosure of information on an

information return (or in a schedule or statement attached to the information return) was insufficient to apprise the IRS of the existence and nature of an excess benefit transaction with a disqualified person and the participation by an organization manager.

(7) Since the period of limitations for assessing Section 4958 excise taxes against a

disqualified person or an organization manager is based on the information return (Form 990 or Form 990-EZ) of the ATEO, it’s different from the period of limitations for assessing income taxes against a disqualified person or an organization manager. See Section 6501(a).

(8) The IRS, disqualified persons and organization managers may agree to extend the

period of limitations for assessing Section 4958 excise taxes. See Section 6501(c)(4), Treas. Reg. 301.6501(c)-1(d) and IRM 25.6.22, Extension of Assessment Statute of Limitations by Consent (or its successor IRM).

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(9) Section 4958 excise taxes are payable by the disqualified person and the

organization manager. The consent must always be obtained from the person upon whom the tax is imposed even though the period of limitations is determined by the due date of the ATEO’s return (Form 990 or Form 990-EZ).

(10) To extend the period of limitations for assessment, use the taxable year of the

disqualified person or organization manager, not the ATEO. Use Form 872, Consent to Extend the Time to Assess Tax, or Form 872-A, Special Consent to Extend the Time to Assess Tax, for this purpose. See IRM 25.6.22.6.12 (or its successor).