Tax News

CCH (cch.taxgroup.com) reports:

  The IRS has issued guidance providing reliance criteria for private foundations and sponsoring organizations that maintain donor-advised funds in determining whether a potential grantee is an organization described in Code Sec. 509(a)(1),
(2) or (3) for purposes of the excise taxes imposed on grants to certain supporting organizations under
Code Secs. 4942, 4945 and 4966.

  The Pension Protection Act of 2006 (P.L. 109-280) enacted new rules regarding grants by private foundations to certain types of supporting organizations. Under previously issued guidance in Notice 2006-109, 2006-2 CB 1121, for purposes of Code Secs. 4942, 4945 and 4966, a grantor acting in good faith may rely on information from the IRS Business Master File (BMF) or the grantee's current IRS letter recognizing the grantee as exempt from federal income tax and indicating the grantee's public charity classification in determining whether the grantee is a public charity under Code Sec. 509(a)(1),
(2) or (3). The IRS subsequently posted a document on its website clarifying how a grantor may access BMF data and providing that a private foundation or sponsoring organization may use a third party to obtain BMF data as long as certain requirements are met.

  The new guidance provides that, in determining whether a public charity is classified under Code Sec. 509(a)(1),
(2) or (3), a private foundation or a sponsoring organization that maintains a donor advised fund, acting in good faith, may rely on either: (1) the grantee's current IRS letter recognizing the grantee as exempt from federal income tax and indicating the grantee's public charity classification; or (2) information from the BMF.

  A grantor may download the BMF directly from the IRS website and store the relevant information in hard copy or electronically. A grantor may also obtain the BMF information from a third party, so long as the following requirements are met:

  (1) The third party must provide a report to the grantor that includes the grantee's name, Employer Identification Number and public charity classification, a statement that the information is from the most current update of the BMF and the BMF revision date and the date and time the information was provided to the grantor; and

  (2) The report must be in a form that the grantor can store in hard copy or electronically.

  The portions of section 3.01 of Notice 2006-109, 2006-2 CB 1121, that relate to reliance for purposes of determining whether a grantee is a public charity under Code Sec. 509(a)(1),
(2) or (3), are superseded.

Rev. Proc. 2009-32, 2009FED ¶46,418

Other References:

 
Code Sec. 509

  CCH Reference - 2009FED ¶22,812.50

 
Code Sec. 4942

  CCH Reference - 2009FED ¶34,047.034

  CCH Reference - 2009FED ¶34,047.67

 
Code Sec. 4945

  CCH Reference - 2009FED ¶34,107.43

 
Code Sec. 4966

  CCH Reference - 2009FED ¶34,317C.01

  CCH Reference - 2009FED ¶34,317C.20

  Tax Research Consultant

  CCH Reference - TRC EXEMPT: 21,210

  CCH Reference - TRC EXEMPT: 24,400

  CCH Reference - TRC EXEMPT: 33,150