Instructions for Form 990-PF (2006)

What's New

For 2006, the foundation must file its return electronically if it files at least 250 returns during the calendar year. See General Instruction J for more information.

The Pension Protection Act of 2006. The Pension Protection Act of 2006 (ACT) enacted several provisions relating to private foundations. The following are highlights of the changes.

A private foundation that files Form 990-T to report any tax on unrelated business income must make the return available for public inspection. See General Instruction Q.
Distributions from a nonoperating foundation made after August 17, 2006, to certain supporting organizations are not treated as qualifying distributions, and also may be treated as taxable expenditures. See the instructions for Part I, line 25 on page 15 and Part VII-B, line 5, on page 22 for more information.
Private foundations with controlled entities within the meaning of section 512(b)(13) must provide information regarding transfers to and from controlled entities. See Part VII-A, line 11a on page 20.
Private foundations receiving certain payments from controlled entities within the meaning of section 512(b)(13) under a binding written contract in effect on August 17, 2006, may exclude such payments from unrelated business income if received or accrued from January 1, 2006, through December 31, 2007. See Part VII-A, line 11b on page 22.
Private foundations that acquired a direct or indirect interest in an applicable insurance contract after August 17, 2006, must answer “Yes” and complete the additional forms discussed in Part VII-A, line 12 on page 22.
The Act expands the definition of net investment income generally to include capital gains and losses from the sale or other disposition of property regardless of how a private foundation uses the property. See the Part I, column (b) instructions on pages 11 and 18.
The Act increases excise tax rates and certain maximum limits on taxes under sections 4941-4945. See the instructions for Form 4720, Return of Certain Excise Taxes Under Chapters 41 and 42 of the Internal Revenue Code.

Taxpayer Increase Prevention and Reconciliation Act. Section 516 of the Taxpayer Increase Prevention and Reconciliation Act of 2005 subjects private foundations and their managers to excise taxes under new section 4965. See the instructions to Form 4720, Return of Certain Excise Taxes Under Chapters 41 and 42 of the Internal Revenue Code.

Private foundations that are parties to prohibited tax shelter transactions must answer “Yes” in Part VII-B, line 7a and file Form 8886-T and possibly Form 4720. See Part VII-B, lines 7a and 7b on page 23 for more information.

Publicly traded securities. There are new reporting requirements for publicly traded securities. For more information, see the Part IV instructions on page 18.

Credit for federal telephone excise tax paid. Tax-exempt organizations that paid the federal telephone excise tax on long distance or bundled service may be able to request a credit. See the 2006 Instructions for Form 990-T for more information.

Reminder

Form 990-PF, Part I, was revised in 2004 to reflect Notice 2004-35, 2004-19, I.R.B. 889, available at www.irs.gov/irb/2004-35_IRB/index.html regarding distributions received by private foundations from split interest trusts. Distributions received by a private foundation from an estate or trust, including split interest trusts, will not retain its character in the hands of the private foundation for the purposes of computing the private foundation's net investment income. Also, Part XI was revised in 2004 to reflect Notice 2004-36, 2004-19, I.R.B. 889, available at www.irs.gov/irb/2004-36_IRB/index.html concerning the treatment of certain distributions from split interest trusts described in section 4947(a)(2). Distributions from split interests trusts are no longer included in figuring a private foundation's distributable amount.

For prior years within the statute of limitations, and for which a refund of Section 4940 taxes paid is requested, private foundations must file an amended Form 990-PF. Write “Filed pursuant to Notice 2004-35” at the top of the first page.

To request a refund of section 4942 taxes paid, a private foundation must file an amended Form 990-PF and an amended Form 4720, Return of Certain Excise Taxes Under Chapters 41 and 42 of the Internal Revenue Code, for each year with a schedule showing the corrected amount of section 4942 liability. The front page of the returns should be marked “Filed pursuant to Notice 2004-36.” See General Instruction L of Form 990-PF for more information on filing amended returns.

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You can e-file your Form 990-PF; Form 940 and 941 employment tax returns; Form 1099 and other information returns. Visit www.irs.gov/efile for details.
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Instructions for Form 990-PF - Introductory Material