Printable 1040ez Tax Form1040ez GovIrs Gov Tax Forms 2012I Need Tax Instruction Booklet For 1040ezWhere Can I File 2011 Taxes OnlineCan You File State Taxes For Free2011 Income Tax Forms 1040ezStudent Tax FilingFile 2010 Taxes LateIrs Ez Tax Form 2011Irs Gov 1040x FormFile State Taxes For FreeTurbotax Deluxe Federal E File State 2011 For Pc DownloadState Tax Free1040 Ez FormsHow To File Taxes OnlineFree Efile For 2012 TaxesIrs Form 1040 2011What If I Did Not File 2011 TaxesNeed To File 2011 TaxesHrblockfreeNeed To Amend 2012 Tax ReturnAmendment Tax Return Form1040ez BookTaxes For Military Members2010 E File TaxesFree Turbo TaxFiling Late Taxes For 2011State Tax Filing Online For FreeWww Ir GovTax Form For Students2012 1040 Form2011 Tax Form 8889Hr Block Free EditionMilitary H And R BlockAmendment For TaxesTax Forms For StudentsFree State Efiling1040x FilingTaxes 2009
It1040ez 5. It1040ez Excise Taxes Table of Contents Introduction Topics - This chapter discusses: Useful Items - You may want to see: Prohibited Tax Shelter TransactionsEntity Level Tax Excess Benefit TransactionsTax on Disqualified Persons Tax on Organization Managers Excess Benefit Transaction Excess Business Holdings Taxable Distributions of Sponsoring Organizations Exception. It1040ez A donor advised fund does not include: Taxes on Prohibited Benefits Resulting From Donor Advised Fund Distributions Excise Taxes on Private Foundations Excise Taxes on Black Lung Benefit Trusts Excise Tax on Failure to Meet the Community Health Needs Assessment Requirements Introduction An excise tax may be imposed on certain tax-exempt organizations. It1040ez Topics - This chapter discusses: Prohibited tax shelter transactions Excess benefit transactions Excess business holdings Taxable distributions of sponsoring organizations Taxes on prohibited benefits distributed from donor advised funds Excise taxes on private foundations Excise taxes on 501(c)(21) black lung benefit trusts Excise Tax on Failure to Meet the Community Health Needs Assessment Requirements of Hospitals Useful Items - You may want to see: Forms (and Instructions) 4720 Return of Certain Excise Taxes Under Chapters 41 and 42 of the Internal Revenue Code See chapter 6 for more information about getting Form 4720. It1040ez Prohibited Tax Shelter Transactions Section 4965 imposes an excise tax on: Certain tax-exempt entities that are party to prohibited tax shelter transactions, and Any entity manager who approves or otherwise causes the entity to be a party to a prohibited tax shelter transaction and knows or has reason to know that the transaction is a prohibited tax shelter transaction. It1040ez Additionally, section 6033 provides new disclosure requirements on a tax-exempt entity that is a party to a prohibited tax shelter transaction. It1040ez Tax-exempt entities. It1040ez Tax-exempt entities that are subject to section 4965 include: Entities described in section 501(c), including but not limited to the following common types of entities: Instrumentalities of the United States described in section 501(c)(1); Churches, hospitals, museums, schools, scientific research organizations, and other charities described in section 501(c)(3); Civic leagues, social welfare organizations, and local associations of employees described in section 501(c)(4); Labor, agricultural, or horticultural organizations described in section 501(c)(5); Business leagues, chambers of commerce, trade associations, and other organizations described in section 501(c)(6); Voluntary employees' beneficiary associations (VEBAs) described in section 501(c)(9); Credit unions described in section 501(c)(14); Insurance companies described in section 501(c)(15); and Veterans' organizations described in section 501(c)(19). It1040ez Religious or apostolic associations or corporations described in section 501(d). It1040ez Entities described in section 170(c), including states, possessions of the United States, the District of Columbia, political subdivisions of states and political subdivisions of possessions of the United States (but not including the United States). It1040ez Indian tribal governments within the meaning of section 7701(a)(40). It1040ez Entity manager. It1040ez An entity manager is any person with authority or responsibility similar to that exercised by an officer, director, or trustee, and, for any act, the person that has authority or responsibility with respect to the prohibited transaction. It1040ez Prohibited tax shelter transaction. It1040ez A prohibited tax shelter transaction is any listed transaction, within the meaning of section 6707A(c)(2), and any prohibited reportable transactions. It1040ez A prohibited reportable transaction is a confidential transaction within the meaning of Regulations section 1. It1040ez 6011-4(b)(3), and a transaction with contractual protection within the meaning of Regulations section 1. It1040ez 6011-4(b)(4). It1040ez See the Instructions for Form 8886 for more information on listed transactions and prohibited reportable transactions. It1040ez Subsequently listed transaction. It1040ez Any transaction to which the tax-exempt entity is a party and is later determined to be a listed transaction after the entity has become a party to it, is a subsequently listed transaction. It1040ez Entity Level Tax Section 4965(a)(1) imposes an entity level excise tax on any tax-exempt entity described in 1, 2, 3, or 4 above that becomes a party to a prohibited tax shelter transaction or is a party to a subsequently listed transaction (defined earlier). It1040ez The excise tax imposed on a tax-exempt entity applies to tax years in which the entity becomes a party to the prohibited tax shelter transaction and any subsequent tax years. It1040ez The amount of the excise tax depends on whether the tax-exempt entity knew or had reason to know that the transaction was a prohibited tax shelter transaction at the time it became a party to the transaction. It1040ez To figure and report the excise tax imposed on a tax-exempt entity for being a party to a prohibited tax shelter transaction, file Form 4720. It1040ez For more information about this excise tax, including information about how it is figured, see the Instructions for Form 4720. It1040ez Manager Level Tax Section 4965(a)(2) imposes an excise tax on any tax-exempt entity manager who approves or otherwise causes the entity to be a party to a prohibited tax shelter transaction and knows (or has reason to know) that the transaction is a prohibited tax shelter transaction. It1040ez The excise tax, in the amount of $20,000, is assessed for each approval or other act causing the organization to be a party to the prohibited tax shelter transaction. It1040ez To report this tax, file Form 4720. It1040ez Excess Benefit Transactions Excise tax on excess benefit transactions. It1040ez A disqualified person who benefits from an excess benefit transaction, such as compensation, fringe benefits, or contract payments from certain section 501(c)(3), 501(c)(4), or 501(c)(29) organizations, must correct the transaction and may have to pay an excise tax under section 4958. It1040ez A manager of the organization may also have to pay an excise tax under section 4958. It1040ez These taxes are reported on Form 4720. It1040ez The excise taxes are imposed if an applicable tax-exempt organization provides an excess benefit to a disqualified person and that benefit exceeds the value of the benefit received in exchange. It1040ez There are three taxes under section 4958. It1040ez Disqualified persons are liable for the first two taxes and certain organization managers are liable for the third tax. It1040ez Taxes imposed on excess benefit transactions do not apply to a transaction under a written contract that was binding on September 13, 1995, and at all times thereafter before the transaction occurred. It1040ez Tax on Disqualified Persons An excise tax equal to 25% of the excess benefit is imposed on each excess benefit transaction between an applicable tax-exempt organization and a disqualified person. It1040ez The disqualified person who benefited from the transaction is liable for the tax. It1040ez See definition of Disqualified person, later at Disqualified person. It1040ez Additional tax on the disqualified person. It1040ez If the 25% tax is imposed and the excess benefit transaction is not corrected within the taxable period, an additional excise tax equal to 200% of the excess benefit is imposed on any disqualified person involved. It1040ez If a disqualified person makes a payment of less than the full correction amount, the 200% tax is imposed only on the unpaid portion of the correction amount. It1040ez If more than one disqualified person received an excess benefit from an excess benefit transaction, all such disqualified persons are jointly and severally liable for the taxes. It1040ez To avoid the 200% tax, a disqualified person must correct the excess benefit transaction during the taxable period. It1040ez The 200% tax is abated (refunded if collected) if the excess benefit transaction is corrected within a 90-day correction period beginning on the date a statutory notice of deficiency is issued. It1040ez Taxable period. It1040ez The taxable period means the period beginning with the date on which the excess benefit transaction occurs and ending on the earlier of: The date a notice of deficiency was mailed to the disqualified person for the initial tax on the excess benefit transaction, or The date on which the initial tax on the excess benefit transaction for the disqualified person is assessed. It1040ez Tax on Organization Managers If tax is imposed on a disqualified person for any excess benefit transaction, an excise tax equal to 10% of the excess benefit is imposed on an organization manager who knowingly participated in an excess benefit transaction, unless such participation was not willful and was due to reasonable cause. It1040ez This tax cannot exceed $20,000 ($10,000 for transactions entered in a tax year beginning before August 18, 2006), for each transaction. It1040ez There is also joint and several liability for this tax. It1040ez A person can be liable for both the tax paid by the disqualified person and the organization manager tax for a particular excess benefit transaction. It1040ez Organization Manager. It1040ez An organization manager is any officer, director, or trustee of an applicable tax-exempt organization, or any individual having powers or responsibilities similar to officers, directors, or trustees of the organization, regardless of title. It1040ez An organization manager is not considered to have participated in an excess benefit transaction where the manager has opposed the transaction in a manner consistent with the fulfillment of the manager's responsibilities to the organization. It1040ez For example, a director who votes against giving an excess benefit would ordinarily not be subject to the 10% tax. It1040ez A person participates in a transaction knowingly if the person: Has actual knowledge of sufficient facts so that, based solely upon those facts, such transaction would be an excess benefit transaction; Is aware that such a transaction under these circumstances may violate the provisions of federal tax law governing excess benefit transactions; and Negligently fails to make reasonable attempts to ascertain whether the transaction is an excess benefit transaction, or the manager is in fact aware that it is such a transaction. It1040ez Knowing does not mean having reason to know. It1040ez The organization manager ordinarily will not be considered knowing if, after full disclosure of the factual situation to an appropriate professional, the organization manager relied on the professional's reasoned written opinion on matters within the professional's expertise or if the manager relied on the fact that the requirements for the rebuttable presumption of reasonableness have been satisfied. It1040ez Participation by an organization manager is willful if it is voluntary, conscious, and intentional. It1040ez An organization manager's participation is due to reasonable cause if the manager has exercised responsibility on behalf of the organization with ordinary business care and prudence. It1040ez Excess Benefit Transaction An excess benefit transaction is a transaction in which an economic benefit is provided by an applicable tax-exempt organization, directly or indirectly, to or for the use of any disqualified person, and the value of the economic benefit provided by the organization exceeds the value of the consideration (including the performance of services) received for providing such benefit. It1040ez The excess benefit transaction rules apply to all transactions with disqualified persons, regardless of whether the amount of the benefit provided is determined in whole or in part by the revenues of one or more activities of the organization. It1040ez To determine whether an excess benefit transaction has occurred, all consideration and benefits exchanged between a disqualified person and the applicable tax-exempt organization, and all entities it controls, are taken into account. It1040ez For purposes of determining the value of economic benefits, the value of property, including the right to use property, is the fair market value. It1040ez Fair market value is the price at which property, or the right to use property, would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy, sell, or transfer property or the right to use property, and both having reasonable knowledge of relevant facts. It1040ez Donor advised fund transactions occurring after August 17, 2006. It1040ez For a donor advised fund, an excess benefit transaction includes a grant, loan, compensation, or other similar payment from the fund to a: Donor or donor advisor, Family member of a donor, or donor advisor, 35% controlled entity of a donor, or donor advisor, or 35% controlled entity of a family member of a donor, or donor advisor. It1040ez The excess benefit in this transaction is the amount of the grant, loan, compensation, or other similar payment. It1040ez For additional information, see the Instructions for Form 4720. It1040ez Supporting organization transactions occurring after July 25, 2006. It1040ez For any supporting organization, defined in section 509(a)(3), an excess benefit transaction includes grants, loans, compensation, or other similar payment provided by the supporting organization to a: Substantial contributor, Family member of a substantial contributor, 35% controlled entity of a substantial contributor, or 35% controlled entity of a family member of a substantial contributor. It1040ez Additionally, an excess benefit transaction includes any loans provided by the supporting organization to a disqualified person (other than an organization described in section 509(a)(1), (2), or (4)). It1040ez The excess benefit for substantial contributors and parties related to those contributors includes the amount of the grant, loan, compensation, or other similar payment. It1040ez For additional information, see the Instructions for Form 4720. It1040ez Excess benefit transaction rules generally do not apply to transactions between a supporting organization and its supported organization described in section 501(c)(4), (5), or (6) in furtherance of charitable purposes. It1040ez Date of Occurrence An excess benefit transaction occurs on the date the disqualified person receives the economic benefit from the organization for federal income tax purposes. It1040ez However, when a single contractual arrangement provides for a series of compensation or other payments to or for the use of a disqualified person during the disqualified person's tax year, any excess benefit transaction with respect to these payments occurs on the last day of the taxpayer's tax year. It1040ez In the case of benefits provided to a qualified pension, profit-sharing, or stock bonus plan, the transaction occurs on the date the benefit is vested. It1040ez In the case of the transfer of property subject to a substantial risk of forfeiture, or in the case of rights to future compensation or property, the transaction occurs on the date the property, or the rights to future compensation or property, is not subject to a substantial risk of forfeiture. It1040ez Where the disqualified person elects to include an amount in gross income in the tax year of transfer under section 83(b), the excess benefit transaction occurs on the date the disqualified person receives the economic benefit for federal income tax purposes. It1040ez Correcting the excess benefit. It1040ez An excess benefit transaction is corrected by undoing the excess benefit to the extent possible, and by taking any additional measures necessary to place the organization in a financial position not worse than what it would have been if the disqualified person were dealing under the highest fiduciary standards. It1040ez A disqualified person corrects an excess benefit by making a payment in cash or cash equivalents, excluding payment by a promissory note, equal to the correction amount to the applicable tax-exempt organization. It1040ez The correction amount equals the excess benefit plus the interest on the excess benefit. It1040ez The interest rate can be no lower than the applicable federal rate, compounded annually, for the month the transaction occurred. It1040ez A disqualified person can, with the agreement of the applicable tax-exempt organization, make a payment by returning the specific property previously transferred in the excess transaction. It1040ez In this case, the disqualified person is treated as making a payment equal to the lesser of: The fair market value of the property on the date the property is returned to the organization, or The fair market value of the property on the date the excess benefit transaction occurred. It1040ez If the payment resulting from the return of property is less than the correction amount, the disqualified person must make an additional cash payment to the organization equal to the difference. It1040ez If the payment resulting from the return of the property exceeds the correction amount described above, the organization can make a cash payment to the disqualified person equal to the difference. It1040ez Exception. It1040ez For a correction of an excess benefit transaction (discussed earlier), no amount repaid in a manner prescribed by the Secretary can be held in a donor advised fund. It1040ez Applicable Tax-Exempt Organization An applicable tax-exempt organization is a section 501(c)(3), 501(c)(4), or 501(c)(29) organization that is tax-exempt under section 501(a), or was such an organization at any time during a 5-year period ending on the day of the excess benefit transaction. It1040ez An applicable tax-exempt organization does not include: A private foundation as defined in section 509(a), A governmental entity that is: Exempt from (or not subject to) taxation without regard to section 501(a), or Not required to file an annual return, or A foreign organization, recognized by the IRS or by treaty, that receives substantially all of its support (other than gross investment income) from sources outside the United States. It1040ez An organization is not treated as a section 501(c)(3), 501(c)(4), or 501(c)(29) organization for any period covered by a final determination that the organization was not tax-exempt under section 501(a), but only if the determination was not based on private inurement or one or more excess benefit transactions. It1040ez Disqualified Person A disqualified person is: Any person (at any time during the 5-year period ending on the date of the transaction) in a position to exercise substantial influence over the affairs of the organization, A family member of an individual described in 1, and A 35% controlled entity. It1040ez For donor advised funds, sponsoring organizations, and certain supporting organizations occurring after August 17, 2006. It1040ez The following persons will be considered disqualified persons along with certain family members and 35% controlled entities associated with them. It1040ez Donors of donor advised funds, Investment advisors of sponsoring organizations, and Disqualified persons of a section 509(a)(3) supporting organization that supports the applicable tax-exempt organization. It1040ez For certain supporting organization transactions occurring after July 25, 2006. It1040ez Substantial contributors to supporting organizations will also be considered disqualified persons with respect to the supporting organizations, along with their family members and 35% controlled entities. It1040ez Investment advisor. It1040ez Investment advisor means for any sponsoring organization, any person compensated by such organization (but not an employee of such organization) for managing the investment of, or providing investment advice for, assets maintained in donor advised funds owned by such sponsoring organization. It1040ez Substantial contributor. It1040ez In general, a substantial contributor means any person who contributed or bequeathed an aggregate of more than $5,000 to the organization, if that amount is more than 2% of the total contributions and bequests received by the end of the organization's tax year in which the contribution or bequest is received. It1040ez A substantial contributor includes the grantor of a trust. It1040ez Family members. It1040ez Family members of a disqualified person include a disqualified person's spouse, brothers or sisters (whether by whole or half-blood), spouses of brothers or sisters (whether by whole or half-blood), ancestors, children (including a legally adopted child), grandchildren, great grandchildren, and spouses of children, grandchildren, and great grandchildren (whether by whole or half-blood). It1040ez 35% controlled entity. It1040ez A 35% controlled entity is: A corporation in which disqualified persons own more than 35% of the total combined voting power, A partnership in which such persons own more than 35% of the profits interest, or A trust or estate in which such persons own more than 35% of the beneficial interest. It1040ez In determining the holdings of a business enterprise, any stock or other interest owned directly or indirectly shall apply. It1040ez Persons having substantial influence. It1040ez Among those who are in a position to exercise substantial influence over the affairs of the organization are, for example, voting members of the governing body, and persons holding the power of: Presidents, chief executives, or chief operating officers. It1040ez Treasurers and chief financial officers. It1040ez Persons with a material financial interest in a provider-sponsored organization. It1040ez Persons not considered to have substantial influence. It1040ez Persons who are not considered to be in a position to exercise substantial influence over the affairs of an organization include: An employee who receives benefits that total less than the highly compensated amount in section 414(q)(1)(B)(i) and who does not hold the executive or voting powers mentioned earlier in the discussion on Disqualified Person, is not a family member of a disqualified person, and is not a substantial contributor, Tax-exempt organizations described in section 501(c)(3), and Section 501(c)(4) organizations with respect to transactions engaged in with other section 501(c)(4) organizations. It1040ez Facts and circumstances. It1040ez The determination of whether a person has substantial influence over the affairs of an organization is based on all the facts and circumstances. It1040ez Facts and circumstances that tend to show a person has substantial influence over the affairs of an organization include, but are not limited to, the following. It1040ez The person founded the organization. It1040ez The person is a substantial contributor to the organization under the section 507(d)(2)(A) definition, only taking into account contributions to the organization for the past 5 years. It1040ez The person's compensation is primarily based on revenues derived from activities of the organization that the person controls. It1040ez The person has or shares authority to control or determine a substantial portion of the organization's capital expenditures, operating budget, or compensation for employees. It1040ez The person manages a discrete segment or activity of the organization that represents a substantial portion of the activities, assets, income, or expenses of the organization, as compared to the organization as a whole. It1040ez The person owns a controlling interest (measured by either vote or value) in a corporation, partnership, or trust that is a disqualified person. It1040ez The person is a nonstock organization controlled directly or indirectly by one or more disqualified persons. It1040ez Facts and circumstances tending to show that a person does not have substantial influence over the affairs of an organization include, but are not limited to, the following. It1040ez The person has taken a bona fide vow of poverty as an employee or agent of a religious organization or on its behalf. It1040ez The person is an independent contractor whose sole relationship to the organization is providing professional advice (without having decision-making authority) with respect to transactions from which the independent contractor will not economically benefit either directly or indirectly aside from customary fees received for the professional advice rendered. It1040ez Any preferential treatment the person receives based on the size of the person's donation is also offered to others making comparable widely solicited donations. It1040ez The direct supervisor of the person is not a disqualified person. It1040ez The person does not participate in any management decisions affecting the organization as a whole or a discrete segment of the organization that represents a substantial portion of the activities, assets, income, or expenses of the organization, as compared to the organization as a whole. It1040ez In the case of multiple organizations affiliated by common control or governing documents, the determination of whether a person does or does not have substantial influence is made separately for each applicable tax-exempt organization. It1040ez A person may be a disqualified person with respect to transactions with more than one organization. It1040ez Reasonable Compensation. It1040ez Reasonable compensation is the value that would ordinarily be paid for like services by like enterprises under like circumstances. It1040ez The section 162 standard will apply in determining the reasonableness of compensation. It1040ez The fact that a bonus or revenue-sharing arrangement is subject to a cap is a relevant factor in determining reasonableness of compensation. It1040ez To determine the reasonableness of compensation, all items of compensation provided by an applicable tax-exempt organization in exchange for performance of services are taken into account in determining the value of compensation (except for economic benefits that are disregarded under the discussion Disregarded benefits , later). It1040ez Items of compensation include: All forms of cash and noncash compensation, including salary, fees, bonuses, severance payments, and deferred noncash compensation, The payment of liability insurance premiums for, or the payment or reimbursement by the organization of penalties, taxes, or certain expenses under section 4958, unless excludable from income as a de minimis fringe benefit under section 132(a)(4), All other compensatory benefits, whether or not included in gross income for income tax purposes, Taxable and nontaxable fringe benefits, except fringe benefits described in section 132, and Foregone interest on loans. It1040ez Intent to treat benefits as compensation. It1040ez An economic benefit is not treated as consideration for the performance of services unless the organization providing the benefit clearly indicates its intent to treat the benefit as compensation when the benefit is paid. It1040ez An applicable tax-exempt organization (or entity that it controls) is treated as clearly indicating its intent to provide an economic benefit as compensation for services only if the organization provides written substantiation that is contemporaneous with the transfer of the economic benefits under consideration. It1040ez Ways to provide contemporaneous written substantiation of its intent to provide an economic benefit as compensation include: The organization produces a signed written employment contract, The organization reports the benefit as compensation on an original Form W-2, Form 1099, or Form 990, or on an amended form filed before starting an IRS examination, or The disqualified person reports the benefit as income on the person's original Form 1040, or on an amended form filed before starting an IRS examination. It1040ez Exception. It1040ez If the economic benefit is excluded from the disqualified person's gross income for income tax purposes, the applicable tax-exempt organization is not required to indicate its intent to provide an economic benefit as compensation for services. It1040ez Rebuttable presumption that a transaction is not an excess benefit transaction. It1040ez Payments under a compensation arrangement are presumed to be reasonable and the transfer of property (or right to use property) is presumed to be at fair market value, if the following three conditions are met. It1040ez The transaction is approved in advance by an authorized body of the organization (or an entity it controls) which is composed of individuals who do not have a conflict of interest concerning the transaction. It1040ez Before making its determination, the authorized body obtained and relied upon appropriate data as to comparability. It1040ez (There is a special safe harbor for small organizations. It1040ez If the organization has gross receipts of less than $1 million, appropriate comparability data includes data on compensation paid by three comparable organizations in the same or similar communities for similar services. It1040ez ) The authorized body adequately documents the basis for its determination concurrently with making that determination. It1040ez The documentation should include: The terms of the approved transaction and the date approved, The members of the authorized body who were present during debate on the transaction that was approved and those who voted on it, The comparability data obtained and relied upon by the authorized body and how the data was obtained, Any actions by a member of the authorized body having conflict of interest, and Documentation of the basis of the determination before the later of the next meeting of the authorized body or 60 days after the final actions of the authorized body are taken, and approval of records as reasonable, accurate, and complete within a reasonable time thereafter. It1040ez Disregarded benefits. It1040ez The following economic benefits are disregarded for section 4958 purposes. It1040ez Nontaxable fringe benefits that are excluded from income under section 132. It1040ez Benefits provided to a volunteer for the organization if the benefit is provided to the general public in exchange for a membership fee or contribution of $75 or less. It1040ez Benefits provided to a member of an organization due to the payment of a membership fee or to a donor as a result of a deductible contribution, if a significant number of disqualified persons make similar payments or contributions and are offered a similar economic benefit. It1040ez Benefits provided to a person solely as a member of a charitable class that the applicable tax-exempt organization intends to benefit as part of the accomplishment of its exempt purpose. It1040ez A transfer of an economic benefit to or for the use of a governmental unit, as defined in section 170(c)(1), if exclusively for public purposes. It1040ez Special Exception for Initial Contracts Section 4958 does not apply to any fixed payment made to a person under an initial contract. It1040ez A fixed payment is an amount of cash or other property specified in the contract, or determined by a fixed formula that is specified in the contract, which is to be paid or transferred in exchange for the provision of specified services or property. It1040ez A fixed formula can, generally, incorporate an amount that depends upon future specified events or contingencies, as long as no one has discretion when calculating the amount of a payment or deciding whether to make a payment (such as a bonus). It1040ez An initial contract is a binding written contract between an applicable tax-exempt organization and a person who was not a disqualified person immediately before entering into the contract. It1040ez A binding written contract, providing it can be terminated or canceled by the applicable tax-exempt organization without the other party's consent (except as a result of substantial nonperformance) and without substantial penalty, is treated as a new contract, as of the earliest date any termination or cancellation would be effective. It1040ez Also, if the parties make a material change to a contract, which includes an extension or renewal of the contract (except for an extension or renewal resulting from the exercise of an option by the disqualified person), or a more than incidental change to the amount payable under the contract, it is treated as a new contract as of the effective date of the material change. It1040ez More information. It1040ez For more information, see the Instructions to Forms 990 and 4720. It1040ez Excess Business Holdings Private foundations are generally not permitted to hold more than a 20% interest in an unrelated business enterprise. It1040ez They may be subject to an excise tax on the amount of any excess business holdings. It1040ez For purposes of section 4943, for tax years beginning after August 17, 2006, donor advised funds and certain supporting organizations are considered private foundations. It1040ez Donor advised fund. It1040ez In general, a donor advised fund is a fund or account separately identified by reference to contributions of a donor or donors that is owned and controlled by a sponsoring organization and for which the donor has or expects to have advisory privileges concerning the distribution or investment of the funds. It1040ez Supporting organizations. It1040ez Only certain supporting organizations are subject to the excess business holdings tax under section 4943. It1040ez These include (1) Type III supporting organizations that are not functionally integrated and (2) Type II supporting organizations that accept any gift or contribution from a person who by himself or in connection with a related party controls the supported organization that the Type II supporting organization supports. It1040ez Taxes. It1040ez A private foundation that has excess holdings in a business enterprise may become liable for an excise tax based on the amount of holdings. It1040ez The initial tax is 10% (5% for tax years beginning before August 18, 2006) of the value of the excess holdings and is imposed on the last day of each tax year that ends during the taxable period. It1040ez The excess holdings are determined on the day during the tax year when they were the largest. It1040ez A foundation that fails to correct the excess business holdings becomes liable for an additional tax of 200% of the remaining excess business holdings as of the earlier of tax assessment or mailing of a notice of deficiency. It1040ez For more information on the tax on excess business holdings, see the Instructions for Form 4720. It1040ez Taxable Distributions of Sponsoring Organizations An excise tax is imposed on a sponsoring organization for each taxable distribution it makes from a donor advised fund. It1040ez An excise tax is also imposed on any fund manager of the sponsoring organization who agreed to the making of a distribution, knowing that it is a taxable distribution. It1040ez Taxable distribution. It1040ez A taxable distribution is any distribution from a donor advised fund to any natural person or to any other person if: The distribution is for any purpose other than one specified in section 170(c)(2)(B), or The sponsoring organization maintaining the donor advised fund does not exercise expenditure responsibility with respect to the distribution in accordance with section 4945(h). It1040ez However, a taxable distribution does not include a distribution from a donor advised fund to: Any organization described in section 170(b)(1)(A) (other than a disqualified supporting organization), The sponsoring organization of the donor advised fund, or Any other donor advised fund. It1040ez The tax on taxable distributions applies to distributions occurring in tax years beginning after August 17, 2006. It1040ez Sponsoring organization. It1040ez A sponsoring organization is a section 170(c) organization that is neither a government organization (as referred to in section 170(c)(1) and (2)(A)) nor a private foundation. It1040ez Donor advised fund. It1040ez A donor advised fund is a fund or account: Which is separately identified by reference to contributions of a donor or donors, Which is owned and controlled by a sponsoring organization, and For which the donor (or any person appointed or designated by the donor) has or expects to have advisory privileges concerning the distribution or investment of the funds held in the donor advised funds or accounts because of the donor's status as a donor. It1040ez Exception. It1040ez A donor advised fund does not include: A fund or account that makes distributions only to a single identified organization or governmental entity, or Any fund or account for a person described in 3 above that gives advice about which individuals receive grants for travel, study, or similar purposes, if the following three requirements are met: The person's advisory privileges are performed exclusively by such person in their capacity as a committee member of which all the committee members are appointed by the sponsoring organization, No combination of persons with advisory privileges, described in 3 above, or persons related to those in 3 above directly or indirectly control the committee, and All grants from the fund or account are awarded on an objective and nondiscriminatory basis according to a procedure approved in advance by the board of directors of the sponsoring organization. It1040ez The procedure must be designed to ensure that all grants meet the requirements of section 4945(g)(1), (2), or (3). It1040ez Disqualified supporting organization. It1040ez A disqualified supporting organization includes (1) a Type III supporting organization that is not functionally integrated and (2) any supporting organization where the donor or donor advisor (and any related parties) directly or indirectly controls a supported organization of the supporting organization. It1040ez Tax on sponsoring organization. It1040ez A tax of 20% of the amount of each taxable distribution is imposed on the sponsoring organization. It1040ez Tax on fund manager. It1040ez If a tax is imposed on a taxable distribution of the sponsoring organization, a tax of 5% of the distribution will be imposed on any fund manager who agreed to the distribution knowing that it was a taxable distribution. It1040ez Any fund manager who took part in the distribution and is liable for the tax must pay the tax. It1040ez The maximum amount of tax on all fund managers for any one taxable distribution is $10,000. It1040ez If more than one fund manager is liable for tax on a taxable distribution, all such managers are jointly and severally liable for the tax. It1040ez For more information on the tax on taxable distributions of sponsoring organizations, see the Instructions for Form 4720. It1040ez Taxes on Prohibited Benefits Resulting From Donor Advised Fund Distributions Prohibited benefit. It1040ez If any donor, donor advisor, or related party advises the sponsoring organization about making a distribution which results in a donor, donor advisor, or related party receiving (either directly or indirectly) a more than incidental benefit, then such benefit is a prohibited benefit. It1040ez The tax on prohibited benefits applies to distributions occurring in tax years beginning after August 17, 2006. It1040ez Donor advisor. It1040ez A donor advisor is any person appointed or designated by a donor to advise a sponsoring organization on the distribution or investment of amounts held in the donor's fund or account. It1040ez Related party. It1040ez A related party includes any family member or 35% controlled entity. It1040ez See the definition of those terms under Disqualified Person , earlier. It1040ez Tax on donor, donor advisor, or related person. It1040ez A tax of 125% of the benefit resulting from the distribution is imposed on both the party who advised as to the distribution (which might be a donor, donor advisor, or related party) and the party who received such benefit (which might be a donor, donor advisor, or related party). It1040ez The advisor and the party who received the benefit are jointly and severally liable for the tax. It1040ez Tax on fund managers. It1040ez If a tax is imposed on a prohibited benefit received by a donor, donor advisor, or related person, a tax of 10% of the amount of the prohibited benefit is imposed on any fund manager who agreed to the distribution knowing that it would confer a prohibited benefit. It1040ez Any fund manager who took part in the distribution and is liable for the tax must pay the tax. It1040ez The maximum amount of tax on all fund managers for any one taxable distribution is $10,000. It1040ez If more than one fund manager is liable for tax on a taxable distribution, all such managers are jointly and severally liable for the tax. It1040ez Exception. It1040ez If a person engaged in an excess benefit transaction and received a prohibited benefit for the same transaction, the person is taxed under section 4958, and no tax is imposed under section 4967 for a prohibited benefit. It1040ez For more information on taxes on prohibited benefits distributed from donor advised funds, see the Instructions for Form 4720. It1040ez Excise Taxes on Private Foundations There is an excise tax on the net investment income of most domestic private foundations. It1040ez Capital gains from appreciation are included in the tax base on private foundation net investment income. It1040ez This tax must be reported on Form 990-PF and must be paid annually at the time for filing that return or in quarterly estimated tax payments if the total tax for the year (section 4940 tax minus credits) is $500 or more. It1040ez Form 990-W is used to calculate the estimated tax. It1040ez In addition, there are several other rules that apply to excise taxes on private foundations. It1040ez These include: Restrictions on self-dealing between private foundations and their substantial contributors and other disqualified persons, Requirements that the foundation annually distribute income for charitable purposes, Limits on their holdings in any business enterprise (see Excess Business Holdings, earlier), Provisions that investments must not jeopardize the carrying out of exempt purposes, and Provisions to assure that expenditures further the organization's exempt purposes. It1040ez Violations of these provisions give rise to taxes and penalties against the private foundation and, in some cases, its managers, its substantial contributors, and certain related persons. It1040ez For more information on the excise taxes imposed on private foundations, see the Instructions for Form 4720 and the Instructions for Form 990-PF. It1040ez Excise Taxes on Black Lung Benefit Trusts A black lung benefit trust that makes any expenditures, payments, or investments other than those described in chapter 4 under 501(c)(21) - Black Lung Benefit Trusts must pay a tax equal to 10% of the amount of such expenditures. It1040ez If there are any acts of self-dealing between the trust and a disqualified person, a tax equal to 10% of the amount involved is imposed on the disqualified person. It1040ez Both of these excise taxes are reported on Schedule A (Form 990-BL). It1040ez See the Form 990-BL instructions for more information on these taxes and what has to be filed, even if the trust is excepted from filing. It1040ez Excise Tax on Failure to Meet the Community Health Needs Assessment Requirements For tax years beginning after March 23, 2012, new section 4959 imposes an excise tax on hospital organizations which fail to meet certain section 501(r) requirements for each of their hospital facilities. It1040ez These entities must meet section 501(r)(3) requirements at all times during their tax year. It1040ez Section 501(r)(3) requirements pertain to a hospital organization preparing a community health needs assessment (CHNA). It1040ez See Schedule H, Hospitals (Form 990), for details. It1040ez Prev Up Next Home More Online Publications
Forms and Schedules for Form 1040
Schedule A (Form 1040), Itemized Deductions
Use Schedule A (Form 1040) to figure your itemized deductions. In most cases, your federal income tax will be less if you take the larger of your itemized deductions or your standard deduction.
Schedule B (Form 1040), Interest and Ordinary Dividends
Use Schedule B to report your taxable interest or ordinary dividends.
Schedule C (Form 1040), Profit or Loss From Business
Use this schedule to report income or loss from a business you operated or a profession you practiced as a sole proprietor. An activity qualifies as a business if your primary purpose for engaging in the activity is for income or profit and you are involved in the activity with continuity and regularity.
Schedule C-EZ (Form 1040), Net Profit From Business
You can use Schedule C-EZ instead of Schedule C if you operated a business or practiced a profession as a sole proprietorship or qualified joint venture, or you were a statutory employee and you have met all the requirements listed in Schedule C-EZ, Part I.
Schedule D (Form 1040), Capital Gains and Losses
Use Schedule D (Form 1040) to report the sale or exchange of capital assets, gains from involuntary conversions of capital assets, capital gain distributions and nonbusiness bad debts.
Schedule E (Form 1040), Supplemental Income and Loss
Use Schedule E (Form 1040) to report income or loss from rental real estate, royalties, partnerships, S corporations, estates, trusts, and residual interests in REMICs.
Schedule EIC (Form 1040A or 1040), Earned Income Credit
After you have figured your earned income credit (EIC), use this schedule to give the IRS information about your qualifying child(ren).
Schedule F (Form 1040), Profit or Loss From Farming
Use Schedule F (Form 1040) to report farm income and expenses.
Schedule H (Form 1040), Household Employment Taxes
Use this schedule to report household employment taxes if you paid any one household employee cash wages of $1,800 or more during the calendar year, withheld federal income tax during the calendar year for any household employee, or paid total cash wages of $1,000 or more in any calendar quarter of the year or previous year to all household employees.
Schedule J (Form 1040), Income Averaging for Farmers and Fishermen
Use Schedule J (Form 1040) to elect to figure your income tax by averaging, over the previous 3 years (base years), all or part of your taxable income from your trade or business of farming or fishing.
Schedule R (Form 1040A or 1040), Credit for the Elderly or the Disabled
Use this schedule to figure the credit for the elderly or the disabled.
Schedule SE (Form 1040), Self-Employment Tax
Use this schedule to figure the tax due on net earnings from self-employment.
Form 1040-V, Payment Voucher for Form 1040
This form is a statement you send with your check or money order for any balance due on the “Amount you owe” line of your Form 1040, Form 1040A, or Form 1040EZ.
Form 1040X, Amended U.S. Individual Income Tax Return
Used by individual taxpayers to amend prior year tax returns.
Form 2106, Employee Business Expenses
Use this form if you are an employee deducting ordinary and necessary expenses for your job.
Form 2210, Underpayment of Estimated Tax by Individuals, Estates, and Trusts
Use this form to see if you owe a penalty for underpaying your estimated tax and, if you do, to figure the amount of the penalty.
Form 2441, Child and Dependent Care Expenses
If you paid someone to care for your child (under age 13) or other qualifying person so you (and your spouse if filing jointly) could work or look for work, you may be able to take the credit for child and dependent care expenses.
Form 2848, Power of Attorney and Declaration of Representative
Use Form 2848 to authorize an individual to represent you before the IRS. The individual you authorize must be a person eligible to practice before the IRS.
Form 3903, Moving Expenses
Use Form 3903 to figure your moving expense deduction for a move related to the start of work at a new principal place of work (workplace). If the new workplace is outside the United States or its possessions, you must be a U.S. citizen or resident alien to deduct your expenses.
Form 4562, Depreciation and Amortization
Use Form 4562 to claim your deduction for depreciation and amortization, make the election under section 179 to expense certain property, and provide information on the business/investment use of automobiles and other listed property.
Form 4868, Application for Automatic Extension of Time To File U.S. Individual Income Tax Return
A U.S. citizen or resident files this form to request an automatic extension of time to file a U.S. individual income tax return.
Form 4952, Investment Interest Expense Deduction
Use this form to figure the amount of investment interest expense you can deduct for the current year and the amount you can carry forward to future years.
Form 5329, Additional Taxes on Qualified Plans (Including IRAs) and Other Tax-Favored Accounts
Use Form 5329 to report additional taxes on IRAs, other qualified retirement plans, modified endowment contracts, Coverdell ESAs, QTPs, Archer MSAs, or HSAs.
Form 6251, Alternative Minimum Tax - Individuals
Use this form to figure the amount, if any, of your alternative minimum tax (AMT).
Form 8283, Noncash Charitable Contributions
Individuals, partnerships, and corporations file this form to report information about noncash charitable contributions when the amount of their deduction for all noncash gifts is more than $500.
Form 8582, Passive Activity Loss Limitations
Noncorporate taxpayers use this form to figure the amount of any passive activity loss (PAL) for the current tax year.
Form 8606, Nondeductible IRAs
Use this form to report nondeductible contributions you made to traditional IRAs;
distributions from traditional, SEP, or SIMPLE IRAs, if you have ever made nondeductible contributions to traditional IRAs; conversions from traditional, SEP, or SIMPLE IRAs to Roth IRAs; and distributions from Roth IRAs
Schedule 8812 (Form 1040A or 1040), Child Tax Credit
Use Part I of this schedule to document that any child for whom you entered an ITIN and for whom you also checked the "if qualifying child for child tax credit" box, is a resident of the United States because the child meets the substantial presence test and is not otherwise treated as a nonresident alien. Use Parts II–IV of Schedule 8812 to figure the additional child tax credit.
Form 8822, Change of Address
Use this form to notify the Internal Revenue Service of a change to your home mailing address.
Form 8829, Expenses for Business Use of Your Home
Use this form to figure the allowable expenses for business use of your home on Schedule C (Form 1040) and any carryover to next year of amounts not deductible this year.
Form 8863, Education Credits (American Opportunity and Lifetime Learning Credits)
Use this form to figure and claim your education credits, which are based on qualified education expenses paid to an eligible postsecondary educational institution.
Form 8949, Sales and Other Dispositions of Capital Assets
Use this form to reconcile amounts that were reported to you and the IRS on Form 1099-B or 1099-S (or substitute statement) with the amounts you report on your return.
Form 9465, Installment Agreement Request
Use form to request a monthly installment plan if you cannot pay the full amount you owe shown on your tax return (or on a notice we sent you).
Page Last Reviewed or Updated: 20-Feb-2014
It1040ez Tax Changes for Businesses Table of Contents 2001 ChangesNew 5-Year Carryback Rule for Net Operating Losses (NOLs) Electronic Form 1099 Tax Incentives for New York Liberty Zone Other 2001 Changes 2002 ChangesNonaccrual-Experience Method Issuance of Qualified Zone Academy Bonds Depletion Work Opportunity Credit Expanded in New York Liberty Zone Credit For Pension Plan Startup Costs Welfare-to-Work Credit Extended Work Opportunity Credit Extended Electric and Clean-Fuel Vehicles Renewable Electricity Production Credit Later ChangesSpecial Depreciation Allowance Extension of Placed in Service Date Special Liberty Zone Depreciation Allowance for New and Used Property Depreciation of Property Used on Indian Reservations Indian Employment Credit Extended 2001 Changes New 5-Year Carryback Rule for Net Operating Losses (NOLs) If you have an NOL from a tax year ending during 2001 or 2002, you must generally carry back the entire amount of the NOL to the 5 tax years before the NOL year (the carryback period). It1040ez However, you can still choose to use the previous carryback period. It1040ez You also can choose not to carry back an NOL and only carry it forward. It1040ez Individuals, estates, and trusts can file Form 1045, Application for Tentative Refund. It1040ez Corporations can file Form 1139, Corporation Application for Tentative Refund. It1040ez The instructions for these forms will be revised to reflect the new law. It1040ez Electronic Form 1099 For tax years ending after March 9, 2002, most Forms 1099 can be furnished electronically if the recipient consents, according to IRS regulations, to receive it that way. It1040ez Tax Incentives for New York Liberty Zone New tax benefits are provided for the parts of New York City damaged in the terrorist attacks on September 11, 2001. It1040ez These benefits apply to the newly created New York Liberty Zone, which is the area located on or south of Canal Street, East Broadway (east of its intersection with Canal Street), or Grand Street (east of its intersection with East Broadway), in the Borough of Manhattan. It1040ez Tax benefits for the New York Liberty Zone include the following. It1040ez A special depreciation allowance equal to 30% of the adjusted basis of qualified Liberty Zone property. It1040ez It is allowed for the year the property is placed in service. It1040ez No alternative minimum tax depreciation adjustment for qualified Liberty Zone property. It1040ez Classification of Liberty Zone leasehold improvement property as 5-year property. It1040ez Authorization of the issuance of tax-exempt New York Liberty bonds to finance the acquisition, construction, reconstruction, and renovation of nonresidential real property, residential rental property, and public utility property in the Liberty Zone. It1040ez An increased section 179 deduction for certain Liberty Zone property. It1040ez Extension of the replacement period from 2 years to 5 years for certain property involuntarily converted as a result of the terrorist attacks on September 11, 2001, but only if substantially all of the use of the replacement property is in New York City. It1040ez For more information about involuntary conversions, see Postponement of Gain in Publication 547, Casualties, Disasters, and Thefts. It1040ez In addition, for 2002 and 2003, the work opportunity credit is expanded by creating a new targeted group, consisting generally of employees who work in the Liberty Zone or, in certain cases, in New York City outside the Liberty Zone. It1040ez For more information, see Work Opportunity Credit Expanded in New York Liberty Zone under 2002 Changes, later. It1040ez For more information about the 30% special depreciation allowance, Liberty Zone leasehold improvement property, or increased section 179 deduction, see New York Liberty Zone Benefits, in chapter 5. It1040ez In addition, the tax benefits for the Liberty Zone will be covered in a new edition of Publication 954, Tax Incentives for Empowerment Zones and Other Distressed Communities, available later in 2002. It1040ez Other 2001 Changes Other changes are discussed in the following chapters. It1040ez Chapter 4 Car Expenses Chapter 5 Depreciation 2002 Changes Nonaccrual-Experience Method Under current law, if you perform services and use an accrual method of accounting, you do not accrue income which, based on experience, you expect to be uncollectible. It1040ez Beginning in 2002, this rule only applies if you perform services in the fields of health, law, engineering, architecture, accounting, actuarial science, performing arts, and consulting, or your average annual gross receipts for the 3 prior tax years does not exceed $5,000,000. It1040ez As under current law, the nonaccrual-experience method will not apply to amounts on which you charge interest or a late payment penalty. It1040ez For more information, see Nonaccrual-Experience Method in chapter 11 of Publication 535, Business Expenses. It1040ez Issuance of Qualified Zone Academy Bonds State and local governments issue qualified zone academy bonds to raise funds for the use of qualified zone academies. It1040ez The amount of bonds that may be issued was limited to $400 million each year for 1998, 1999, 2000, and 2001. It1040ez This provision has been extended to provide for an additional $400 million of bonds to be issued each year for 2002 and 2003. It1040ez For more information about qualified zone academy bonds, see Publication 954, Tax Incentives for Empowerment Zones and Other Distressed Communities. It1040ez Depletion The suspension of the taxable income limit on percentage depletion from the marginal production of oil and natural gas that was scheduled to expire for tax years beginning after 2001 has been extended to tax years beginning before 2004. It1040ez For more information on marginal production, see section 613A(c) of the Internal Revenue Code. It1040ez Work Opportunity Credit Expanded in New York Liberty Zone The work opportunity credit is expanded to include a new targeted group consisting generally of employees who perform substantially all their services: In the New York Liberty Zone (defined earlier under Tax Incentives for New York Liberty Zone, under 2001 Changes), or Elsewhere in New York City for a business that relocated from the Liberty Zone due to the destruction or damage of its place of business by the September 11, 2001, terrorist attack. It1040ez The credit is available to employers for wages paid to new employees and existing employees for work performed during 2002 or 2003. It1040ez Certain limits apply. It1040ez For more information about the work opportunity credit, see Publication 954, Tax Incentives for Empowerment Zones and Other Distressed Communities. It1040ez Credit For Pension Plan Startup Costs The credit for pension plan startup costs is now allowed for plans that become effective after December 31, 2001. It1040ez Previously, the credit was only allowed for plans established after December 31, 2001. It1040ez For more information on the credit, see Important Changes for 2002 in Publication 560, Retirement Plans for Small Business. It1040ez Welfare-to-Work Credit Extended The welfare-to-work credit that was scheduled to expire for wages paid to individuals who began working for you after 2001 has been extended to include wages paid to qualified individuals who begin work for you in 2002 or 2003. It1040ez For more information on the welfare-to-work credit, see Publication 954, Tax Incentives for Empowerment Zones and Other Distressed Communities. It1040ez Work Opportunity Credit Extended The work opportunity credit that was scheduled to expire for wages paid to individuals who began working for you after 2001 has been extended to include wages paid to qualified individuals who begin work for you in 2002 or 2003. It1040ez For more information about the work opportunity credit, see Publication 954, Tax Incentives for Empowerment Zones and Other Distressed Communities. It1040ez Electric and Clean-Fuel Vehicles The maximum clean-fuel vehicle deduction and qualified electric vehicle credit were scheduled to be 25% lower for 2002 and both were scheduled to be phased out completely by 2005. It1040ez The full deduction and credit are now allowed for qualified property placed in service in 2002 and 2003. It1040ez The phaseout of the deduction and the credit will begin in 2004, and no deduction or credit will be allowed for property placed in service after 2006. It1040ez For more information about electric and clean-fuel vehicles, see chapter 12 in Publication 535, Business Expenses. It1040ez Renewable Electricity Production Credit The renewable electricity production credit is extended to include electricity produced by facilities placed in service after 2001 and before 2004. It1040ez Later Changes Special Depreciation Allowance You can claim the special depreciation allowance (an additional 30% depreciation deduction) for new property that you acquire before September 11, 2004, and place in service for your business generally before January 1, 2005, if you meet the other requirements for qualified property covered in chapter 5. It1040ez Accordingly, you will generally no longer be able to claim the special depreciation allowance for the qualified property if you acquire it after September 10, 2004, or place it in service for your business after December 31, 2004. It1040ez However, you will be able to claim the special Liberty Zone depreciation allowance (an additional 30% depreciation deduction) for most qualified property if you place it in service in the Liberty Zone after December 31, 2004, and generally before January 1, 2007, provided you meet the other requirements for qualified Liberty Zone property covered in chapter 5. It1040ez Extension of Placed in Service Date To qualify for the special depreciation allowance, your property must meet certain tests, including the placed in service date test, as well as the other requirements covered in chapter 5 of this publication. It1040ez To meet the placed in service date test, your property must generally be placed in service for use in your trade or business or for the production of income after September 10, 2001, and before January 1, 2005. It1040ez However, certain property placed in service before January 1, 2006, may meet this test. It1040ez Transportation property and property with a recovery period of 10 years or longer meet the test if one of the following applies. It1040ez The property has an estimated production period of more than 2 years. It1040ez The property has an estimated production period of more than 1 year and it costs more than $1 million. It1040ez Transportation property is any tangible personal property used in the trade or business of transporting persons or property. It1040ez For property that qualifies for the special depreciation allowance solely because of the one-year extension of the placed in service date, only the part of the basis attributable to manufacture, construction, or production before September 11, 2004, is eligible for the special depreciation allowance. It1040ez Special Liberty Zone Depreciation Allowance for New and Used Property You can claim the special Liberty Zone depreciation allowance (an additional 30% depreciation deduction) for used property that you acquire after September 10, 2001, if the property meets the requirements listed under Qualified Liberty Zone Property in chapter 5 of this publication. It1040ez You will be able to claim the allowance for both new and used property that you acquire after September 10, 2004, provided the property meets the other requirements for qualified Liberty Zone property. It1040ez Depreciation of Property Used on Indian Reservations The special depreciation rules that apply to qualified property used on an Indian reservation were scheduled to expire for property placed in service after 2003. It1040ez These special rules have been extended to include property placed in service in 2004. It1040ez For more information about these rules, see Publication 946, How To Depreciate Property. It1040ez Indian Employment Credit Extended The Indian employment credit that was scheduled to expire for tax years beginning after 2003 has been extended to include a tax year beginning in 2004. It1040ez For more information about this credit, see Publication 954, Tax Incentives for Empowerment Zones and Other Distressed Communities. It1040ez Prev Up Next Home More Online Publications