77922 Federal Register / Vol. 88, No. 218 / Tuesday, November 14, 2023 / Proposed Rules 

2016) (the ‘‘2016 proposed regulations’’) 

in the Federal Register. The 2016 

proposed regulations cross-reference 

temporary regulations in Treasury 

Decision 9795 (81 FR 88854, December 

8, 2016) (the ‘‘temporary regulations’’), 

which provided rules under section 987 

of the Internal Revenue Code relating to 

the determination and recognition of 

taxable income or loss and foreign 

currency gain or loss with respect to a 

qualified business unit. On May 13, 

2019, the Treasury Department and the 

IRS published Treasury Decision 9857 

(84 FR 20790, May 13, 2019), which 

finalized parts of the 2016 proposed 

regulations and withdrew one section of 

the temporary regulations. The 

temporary regulations that were not 

finalized or withdrawn expired on 

December 6, 2019. A notice of proposed 

rulemaking published in this issue of 

the Federal Register contains new 

proposed regulations under section 987 

and withdraws parts of the 2016 

proposed regulations. The parts of the 

2016 proposed regulations that remain 

outstanding include: (1) rules regarding 

the treatment of section 988 transactions 

of a section 987 QBU (see §§ 1.987–1, 

1.987–3, and 1.988–1 of the 2016 

proposed regulations); (2) rules 

regarding QBUs with the U.S. dollar as 

their functional currency (see §§ 1.987– 

1 and 1.987–6 of the 2016 proposed 

regulations); (3) rules regarding the 

translation of income used to pay 

creditable foreign income taxes (see 

§ 1.987–3 of the 2016 proposed 

regulations); and (4) rules requiring the 

deferral of certain section 988 loss that 

arises with respect to related-party loans 

(see § 1.988–2 of the 2016 proposed 

regulations). 

The Treasury Department and the IRS 

are considering finalizing these parts of 

the 2016 proposed regulations and, 

therefore, are reopening the comment 

period for 90 days. Comments that were 

previously submitted in accordance 

with the 2016 proposed regulations will 

be considered and do not need to be 

resubmitted. 

Comments and Requests for a Public 

Hearing: Before the parts of the 2016 

proposed regulations that remain 

outstanding are adopted as final 

regulations, consideration will be given 

to comments that are submitted timely 

to the IRS as prescribed in this Notice 

in the ‘‘Addresses’’ section. Any 

comments submitted will be made 

available at https://www.regulations.gov 

or upon request. 

A public hearing will be scheduled if 

requested in writing by any person who 

timely submits written comments. 

Requests for a public hearing are also 

encouraged to be made electronically. If 

a public hearing is scheduled, notice of 

the date and time for the public hearing 

will be published in the Federal 

Register. 

Oluwafunmilayo A. Taylor, 

Section Chief, Publications and Regulations 

Section, Associate Chief Counsel, (Procedure 

and Administration). 

[FR Doc. 2023–24650 Filed 11–9–23; 4:15 pm] 

BILLING CODE 4830–01–P 

DEPARTMENT OF THE TREASURY 

Internal Revenue Service 

26 CFR Part 53 

[REG–142338–07] 

RIN 1545–BI33 

Taxes on Taxable Distributions From 

Donor Advised Funds Under Section 

4966 

AGENCY: Internal Revenue Service (IRS), 

Treasury. 

ACTION: Notice of proposed rulemaking. 

SUMMARY: This document contains 

proposed regulations regarding excise 

taxes on taxable distributions made by 

a sponsoring organization from a donor 

advised fund (DAF), and on the 

agreement of certain fund managers to 

the making of such distributions. The 

proposed regulations would provide 

guidance regarding DAFs and taxable 

distributions. The proposed regulations 

generally would apply to certain 

organizations, including community 

foundations and other charitable 

organizations, that maintain one or more 

DAFs, and to other persons involved 

with the DAFs, including donors, 

donor-advisors, related persons, and 

certain fund managers. 

DATES: Written or electronic comments 

and requests for a public hearing must 

be received by January 16, 2024. 

ADDRESSES: Commenters are strongly 

encouraged to submit public comments 

electronically. Submit electronic 

submissions via the Federal 

eRulemaking Portal at https://

www.regulations.gov (indicate IRS and 

REG–142338–07) by following the 

online instructions for submitting 

comments. Requests for a public hearing 

must be submitted as prescribed in the 

‘‘Comments and Requests for a Public 

Hearing’’ section. Once submitted to the 

Federal eRulemaking Portal, comments 

cannot be edited or withdrawn. The 

Department of the Treasury (Treasury 

Department) and the IRS will publish 

for public availability any comment 

received to its public docket, whether 

submitted electronically or in hard 

copy. Send paper submissions to: 

CC:PA:01:PR (REG–142338–07), Room 

5203, Internal Revenue Service, P.O. 

Box 7604, Ben Franklin Station, 

Washington, DC 20044. 

FOR FURTHER INFORMATION CONTACT: 

Concerning the proposed regulations, 

Ward L. Thomas at (202) 317–5800 (not 

a toll-free number); concerning 

submission of comments and requests 

for a public hearing, contact Vivian 

Hayes by email at publichearings@

irs.gov (preferred) or by phone at (202) 

317–6901 (not a toll-free number). 

SUPPLEMENTARY INFORMATION: 

Background 

I. Overview 

Some charitable organizations 

(including community foundations) 

establish accounts to which donors may 

contribute and thereafter provide 

nonbinding advice or recommendations 

with regard to distributions from the 

account or the investment of assets in 

the account. Such accounts are 

commonly referred to as ‘‘donor advised 

funds’’ or ‘‘DAFs.’’ Sections 1231–1235 

of the Pension Protection Act of 2006 

(PPA), Public Law 109–280, 120 Stat. 

780, 1094–1102 (August 17, 2006), 

enacted various amendments to the 

Internal Revenue Code (Code) regarding 

DAFs. Among these, section 1232 of the 

PPA amended section 4958 of the Code 

to add special rules relating to excess 

benefit transactions with DAFs; section 

1231(b) of the PPA added section 4967 

to the Code, which imposes an excise 

tax on prohibited benefits resulting from 

distributions from DAFs; and section 

1231(a) of the PPA added section 4966 

of the Code, which imposes excise taxes 

on taxable distributions made by 

sponsoring organizations from a DAF, 

and on the agreement of certain fund 

managers to the making of such 

distributions. This notice of proposed 

rulemaking contains proposed 

amendments to 26 CFR part 53 

(Foundation and Similar Excise Taxes) 

under section 4966 (proposed 

regulations). 

II. Statutory Provisions 

A. Section 4958 

Section 4958 imposes an excise tax on 

any ‘‘excess benefit transaction,’’ which 

is defined generally under section 

4958(c)(1) as any transaction in which 

an economic benefit is provided, the 

value of which exceeds the value of any 

consideration received, by an applicable 

tax-exempt organization (including a 

section 501(c)(3) sponsoring 

organization of a DAF) directly or 

indirectly to or for the use of a 

disqualified person with respect to a 


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1For this purpose, a disqualified person is 

defined under section 4958(f) as a person who was, 

at any time during the five-year period ending on 

the date of the transaction, in a position to exercise 

substantial influence over the affairs of the 

organization, and certain related persons, with 

special rules for DAFs and section 509(a)(3) 

organizations. 

2Section 170(c)(2)(B) defines charitable 

contributions to include contributions to certain 

organizations for the following purposes: religious, 

charitable, scientific, literary, or educational 

purposes, or to foster national or international 

amateur sports competition (but only if no part of 

the organization’s activities involve the provision of 

athletic facilities or equipment), or for the 

prevention of cruelty to children or animals. 

transaction.1 This excise tax under 

section 4958 is paid by the disqualified 

person with respect to the transaction. 

A separate excise tax, paid by 

organization managers, is imposed on 

the participation of any organization 

manager in the transaction, knowing 

that it is an excess benefit transaction, 

unless such participation is not willful 

and is due to reasonable cause. 

Section 1232 of the PPA amended 

section 4958 to provide that, with 

respect to any transaction that involves 

a DAF, a disqualified person includes 

(1) any donor with respect to the DAF, 

(2) any donor-advisor with respect to 

the DAF, and (3) any member of the 

family, or any 35-percent controlled 

entity of a donor or donor-advisor or 

member of their families with respect to 

the DAF, each, a ‘‘related person,’’ and 

to provide that any grant, loan, 

compensation, or other similar payment 

from the DAF to such disqualified 

person is an excess benefit transaction. 

For purposes of this special rule for 

transactions involving DAFs, the excess 

benefit includes the entire amount of 

the grant, loan, compensation, or other 

similar payment. The PPA also 

amended section 4958 to treat as a 

disqualified person with respect to a 

transaction involving a sponsoring 

organization an investment advisor (or a 

family member or a 35-percent 

controlled entity of such person). 

B. Section 4966 

1. DAFs 

Section 4966(d)(2)(A) defines a 

‘‘DAF’’ generally as a fund or account 

(1) that is separately identified by 

reference to contributions of a donor or 

donors, (2) that is owned and controlled 

by a sponsoring organization, and (3) 

with respect to which a donor (or any 

person appointed or designated by the 

donor, namely, a donor-advisor) has, or 

reasonably expects to have, advisory 

privileges with respect to the 

distribution or investment of amounts 

held in the fund or account by reason 

of the donor’s status as a donor. 

Section 4966(d)(2)(B)(i) states that a 

DAF does not include a fund or account 

that makes distributions only to a single 

identified organization or governmental 

entity. Section 4966(d)(2)(B)(ii) states 

that a DAF does not include a fund or 

account with respect to which a donor 

or a donor-advisor provides advice 

regarding grants to individuals for 

travel, study, or similar purposes if (1) 

the donor’s, or the donor-advisor’s, 

advisory privileges are exercised 

exclusively in the donor’s or donoradvisor’s capacity as a member of a 

committee all the members of which are 

appointed by the sponsoring 

organization, (2) no combination of 

donor(s), donor-advisor(s), or persons 

related to such persons directly or 

indirectly control the committee, and (3) 

all grants are awarded on an objective 

and nondiscriminatory basis pursuant to 

a procedure approved in advance by the 

sponsoring organization’s board of 

directors, and the procedure is designed 

to ensure that the grants meet the 

requirements of section 4945(g)(1), (2), 

or (3). 

Section 4966(d)(2)(C) authorizes the 

Secretary of the Treasury or her delegate 

(Secretary) to exempt a fund or account 

from treatment as a DAF if it (1) is 

advised by a committee not directly or 

indirectly controlled by the donor or 

any donor-advisor (and any related 

parties), or (2) benefits a single 

identified charitable purpose. 

2. Sponsoring Organizations 

Section 4966(d)(1) defines a 

‘‘sponsoring organization’’ as an 

organization described in section 170(c) 

(including a foreign organization that 

otherwise would be described in section 

170(c)(2)), other than a private 

foundation (as defined in section 509(a)) 

or a governmental entity (as defined in 

section 170(c)(1)), that maintains one or 

more DAFs. 

3. Excise Tax on Taxable Distributions 

Section 4966(a)(1) imposes a 20 

percent excise tax on each taxable 

distribution, payable by the sponsoring 

organization with respect to the DAF. 

Section 4966(c)(1) defines a ‘‘taxable 

distribution’’ as including any 

distribution from a DAF to any natural 

person. Section 4966(c)(1) also defines a 

taxable distribution as including a 

distribution from a DAF to any other 

person if (1) the distribution is for any 

purpose other than a purpose specified 

in section 170(c)(2)(B),2 or (2) the 

sponsoring organization does not 

exercise expenditure responsibility with 

respect to the distribution in accordance 

with section 4945(h). 

Section 4966(c)(2) provides that a 

taxable distribution, however, does not 

include a distribution from a DAF to (1) 

any organization described in section 

170(b)(1)(A) (other than a disqualified 

supporting organization), (2) the 

sponsoring organization of such DAF, or 

(3) any other DAF. Section 4966(d)(4) 

defines a ‘‘disqualified supporting 

organization’’ as (1) a Type III 

supporting organization that is not 

functionally integrated and (2) any other 

supporting organization if the donor or 

any donor-advisor (and any related 

parties) with respect to a DAF directly 

or indirectly controls a supported 

organization of the supporting 

organization. 

4. Excise Tax on Agreement of Fund 

Manager 

Section 4966(a)(2) imposes a five 

percent excise tax on the agreement of 

a fund manager to the making of a 

taxable distribution knowing that it is a 

taxable distribution, payable by any 

fund manager who agreed to the making 

of the distribution. Section 4966(d)(3) 

defines a ‘‘fund manager’’ with respect 

to any sponsoring organization as (1) an 

officer, director, or trustee of such 

sponsoring organization (or an 

individual having powers or 

responsibilities similar to those of 

officers, directors, or trustees of the 

sponsoring organization), and (2) with 

respect to any act (or failure to act), the 

employees of the sponsoring 

organization having authority or 

responsibility with respect to each act 

(or failure to act). 

Section 4966(b) provides that, if more 

than one fund manager is liable under 

section 4966(a)(2), then all such persons 

are jointly and severally liable with 

respect to the distribution; however, the 

maximum amount of tax imposed by 

section 4966(a)(2) with respect to any 

one taxable distribution is $10,000. 

C. Section 4967 

The PPA also added section 4967, 

which imposes an excise tax on the 

advice that a donor, donor-advisor, or 

related person provides regarding a 

distribution from a DAF that results in 

such person or any other donor, donoradvisor, or related person receiving, 

directly or indirectly, a more than 

incidental benefit. This excise tax is 

paid by any donor, donor-advisor, or 

related person who advises the 

sponsoring organization as to the 

distribution or who receives the 

prohibited benefit. A separate excise 

tax, paid by the fund manager, is 

imposed on the agreement of any fund 

manager of the sponsoring organization 

to the making of the distribution, 


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77924 Federal Register / Vol. 88, No. 218 / Tuesday, November 14, 2023 / Proposed Rules 

3For example, section 5.01 of Notice 2006–109 

excludes from the definition of a DAF an employersponsored disaster relief fund that meets certain 

requirements. To be excluded, the fund must: (1) 

serve a single identified charitable purpose, which 

is to provide relief from one or more qualified 

disasters within the meaning of section 139(c)(1), 

(2), or (3); (2) serve a large or indefinite class, i.e., 

a charitable class; (3) select recipients of grants 

based on objective determinations of need; (4) select 

recipients of grants using either an independent 

selection committee or adequate substitute 

procedures to ensure that any benefit to the 

employer is incidental and tenuous; (5) make no 

payment from the fund to or for the benefit of any 

director, officer, or trustee of the sponsoring 

organization of the fund or for the benefit of any 

member of the fund’s selection committee; and (6) 

maintain adequate records that demonstrate the 

recipients’ needs for the disaster relief assistance. 

4The Treasury Department and the IRS anticipate 

that the other comments will be considered in the 

development of future guidance under other Code 

sections. 

5Section 53.4966–1(j) of the proposed regulations 

defines ‘‘related person,’’ by reference to section 

4958(f)(7)(B) and (C), as any family member (as 

defined in section 4958(f)(4)) or any 35-percent 

controlled entity (as defined in section 4958(f)(3) 

with appropriate substituted language). 

knowing that it would confer a 

prohibited benefit. Section 4967(b) 

provides that, with respect to any 

distribution, no tax can be imposed 

under section 4967 if a tax has been 

imposed under section 4958. 

III. Administrative Guidance 

In December 2006, the Treasury 

Department and the IRS issued Notice 

2006–109, 2006–2 C.B. 1121, to provide 

interim guidance on certain 

requirements enacted by the PPA, 

including those that affect DAFs.3

Notice 2006–109 also requested 

comments regarding the notice and 

suggestions for future guidance. 

In February 2007, the Treasury 

Department and the IRS issued Notice 

2007–21, 2007–1 C.B. 611, requesting 

comments in connection with a study 

conducted by the Treasury Department 

and the IRS on the organization and 

operation of DAFs and supporting 

organizations, as required by section 

1226 of the PPA. 

In December 2017, the Treasury 

Department and the IRS issued Notice 

2017–73, 2017–51 I.R.B. 562, describing 

approaches being considered to address 

certain issues regarding DAFs and 

requesting comments on those 

approaches. In particular, Notice 2017– 

73 stated, among other things, that the 

Treasury Department and the IRS are 

considering developing proposed 

regulations under section 4967 that 

would, if finalized, provide that (1) 

certain distributions from a DAF that 

pay for the purchase of tickets that 

enable a donor, donor-advisor, or 

related person under section 4958(f)(7) 

to attend or participate in a charitysponsored event result in a more than 

incidental benefit to such person under 

section 4967, and (2) certain 

distributions from a DAF that the 

distributee charity treats as fulfilling a 

pledge made by a donor, donor-advisor, 

or related person, do not result in a 

more than incidental benefit under 

section 4967 if certain requirements are 

met. 

In response to these three notices, the 

Treasury Department and the IRS 

received 118 comments, 74 of which 

concerned DAFs and taxable 

distributions.4 After consideration of the 

comments received, the Treasury 

Department and the IRS are proposing 

these regulations regarding the excise 

taxes payable by sponsoring 

organizations of DAFs and fund 

managers on taxable distributions under 

section 4966. The major areas of 

comment relating to section 4966 are 

discussed in the Explanation of 

Provisions. 

Explanation of Provisions 

1. Definition of Donor Advised Fund 

In accordance with section 

4966(d)(2)(A), the proposed regulations 

would define a DAF generally as a fund 

or account (1) that is separately 

identified by reference to contributions 

of a donor or donors, (2) that is owned 

and controlled by a sponsoring 

organization, and (3) with respect to 

which at least one donor or donoradvisor has, or reasonably expects to 

have, advisory privileges with respect to 

the distribution or investment of 

amounts held in such fund or account 

by reason of the donor’s status as a 

donor. Unless otherwise excepted, a 

fund or account that meets all three 

prongs of the definition would be a 

DAF. 

A sponsoring organization is 

proposed to be defined in accordance 

with section 4966(d)(1) as any 

organization that (1) is described in 

section 170(c) (other than a 

governmental unit described in section 

170(c)(1)), without the requirement 

under section 170(c)(2)(A) that it be 

created or organized in the United 

States or in any possession thereof, or 

under the law of the United States, any 

State, the District of Columbia, or any 

possession of the United States; (2) is 

not a private foundation; and (3) 

maintains one or more DAFs. 

A. Separate Identification by Reference 

to Contributions of a Donor or Donors 

Section 4966(d)(2)(A)(i) states that a 

DAF must be separately identified by 

reference to contributions of a donor or 

donors. In general, the proposed 

regulations would provide that a fund or 

account is separately identified by 

reference to contributions of a donor or 

donors if the sponsoring organization 

maintains a formal record of 

contributions to the fund or account 

relating to a donor or donors. A formal 

record exists regardless of whether the 

sponsoring organization commingles the 

assets attributed to the fund or account 

with other assets of the sponsoring 

organization, as long as the sponsoring 

organization tracks contributions of a 

donor or donors to the fund or account. 

A contribution would be defined as any 

gift, bequest, or similar payment or 

transfer, whether in cash or in-kind, to 

or for the use of a sponsoring 

organization. 

If the sponsoring organization does 

not maintain a formal record of 

contributions to a fund or account, then 

whether a fund or account is separately 

identified would be based on all the 

facts and circumstances. 

The proposed regulations would 

provide that facts and circumstances 

that are relevant in determining that a 

fund or account is separately identified 

by reference to contributions of a donor 

or donors include: (1) the fund or 

account balance reflects items such as 

contributions, dividends, interest, 

distributions, administrative expenses, 

and gains and losses (realized or 

unrealized); (2) the fund or account is 

named after one or more donors, donoradvisors, or related persons (as defined 

by proposed § 53.4966–1(j)); 5 (3) the 

sponsoring organization refers to the 

fund or account as a DAF; (4) the 

sponsoring organization has an 

agreement or understanding with one or 

more donors or donor-advisors that such 

fund or account is a DAF; (5) one or 

more donors or donor-advisors regularly 

receive a fund or account statement 

from the sponsoring organization; and 

(6) the sponsoring organization 

generally solicits advice from the 

donor(s) or donor-advisor(s) before 

making distributions from the fund or 

account. The Treasury Department and 

the IRS request comments on these and 

any additional factors that would be 

relevant in determining whether a fund 

or account is separately identified by 

reference to contributions of a donor or 

donors. 

Several commenters asked that funds 

or accounts funded by certain types of 

organizations, such as public charities, 

private foundations, or governmental 

entities, be excluded from the definition 

of a DAF. The proposed regulations 

define a donor generally as any person 

described in section 7701(a)(1) that 


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Federal Register / Vol. 88, No. 218 / Tuesday, November 14, 2023 / Proposed Rules 77925 

6Because public charities and governmental units 

are not treated as donors, it also follows that if only 

they have advisory privileges with respect to a 

fund, the fund would not be a DAF even if there 

are other donors. See § 53.4966–3(e)(4) (Example 4) 

of these proposed regulations. 

contributes to a fund or account of a 

sponsoring organization. However, the 

proposed regulations would explicitly 

exclude from the definition of donor (1) 

any public charity described in section 

509(a)(1), (2), or (3) (other than a 

disqualified supporting organization) 

and (2) any governmental unit described 

in section 170(c)(1). A fund or account 

that is separately identified by reference 

to contributions solely from either of 

these types of entities would not be 

treated as separately identified by 

reference to contributions from a donor 

and thus would not be a DAF.6 Because 

private foundations and disqualified 

supporting organizations could use a 

DAF to circumvent the payout and other 

requirements that are applicable to 

those organizations, the proposed 

regulations would not exclude private 

foundations or disqualified supporting 

organizations from the definition of 

donor. 

B. Advisory Privileges 

Under section 4966(d)(2)(A)(iii), for a 

fund or account to constitute a DAF, (1) 

at least one donor or donor-advisor must 

have, or reasonably expect to have, 

advisory privileges with respect to the 

distribution or investment of amounts 

held in such fund or account, and (2) 

such advisory privileges must arise by 

reason of (in other words, because of) 

the donor’s status as a donor. The 

proposed regulations generally would 

provide that the existence of such 

advisory privileges depends on the facts 

and circumstances, including the 

conduct (and any agreement or 

understanding) of both the donor(s) or 

donor-advisor(s) and the sponsoring 

organization. A donor (or donor-advisor) 

may have, or reasonably expect to have, 

advisory privileges even in the absence 

of the actual provision of advice. 

Advisory privileges would include 

those arising from service on an 

advisory committee. The proposed 

regulations also would presume that 

advisory privileges of a donor or donoradvisor arise by reason of the donor’s 

status as a donor, except where 

specifically provided otherwise. 

Commenters recommended that, for 

advisory privileges to exist, advice must 

include a specified amount and a named 

recipient. Commenters also suggested 

that, in the absence of written evidence, 

advisory privileges should not be 

inferred unless there are at least three 

separate successive occasions where the 

sponsoring organization accepts the 

donor’s advice. Commenters further 

requested that a sponsoring 

organization’s proposal to distribute a 

certain amount to a certain distributee, 

subject to the donor’s approval, be 

viewed as the donor’s exercise of the 

advisory privilege only if the donor 

approves the proposal. 

The Treasury Department and the IRS 

believe that the commenters’ 

recommendations would define 

advisory privileges too narrowly. 

Instead, the proposed regulations would 

provide that the presence of any of the 

following four facts is sufficient to 

establish that a donor or donor-advisor 

has advisory privileges by reason of the 

donor’s status as a donor, regardless of 

whether they are exercised: (1) the 

sponsoring organization allows a donor 

or donor-advisor to provide nonbinding 

recommendations regarding 

distributions from, or regarding the 

investment of assets held in, a fund or 

account; (2) a written agreement states 

that a donor or donor-advisor has 

advisory privileges; (3) a written 

document or any marketing material of 

the sponsoring organization made 

available to a donor or donor-advisor 

indicates that a donor or donor-advisor 

may provide advice to the sponsoring 

organization regarding the distribution 

or investment of amounts held by a 

sponsoring organization (for example, a 

pre-approved list of investment options 

or distributees that the sponsoring 

organization provides to a donor or 

donor-advisor); or (4) the sponsoring 

organization generally solicits advice 

from a donor or donor-advisor regarding 

the distribution or investment of 

amounts held in a fund or account. 

However, the proposed regulations 

would also provide four special rules 

relating to advisory privileges. First, if at 

least one donor or donor-advisor has, or 

reasonably expects to have, advisory 

privileges with respect to a fund or 

account or any portion of a fund or 

account, then advisory privileges by 

reason of the donor’s status as a donor 

exist with respect to that fund or 

account even if there are multiple 

donors to the fund or account. 

Second, there would be special rules 

for advisory privileges arising from 

service on an advisory committee, as 

discussed in section 1.D of this 

Explanation of Provisions of this 

preamble. 

Third, advice provided solely in a 

person’s capacity as an officer, director, 

employee (or in a similar capacity) of a 

sponsoring organization would not by 

itself give rise to advisory privileges by 

reason of a donor’s status as a donor. 

However, if, by reason of the person’s 

contribution to a fund or account, an 

officer, director, or employee of the 

sponsoring organization is allowed to 

advise on how to distribute or invest 

amounts in the fund or account, the 

person would be considered to have 

advisory privileges by reason of the 

donor’s status as a donor with respect to 

that fund or account. 

Lastly, unless the special rule for 

officers, directors, and employees of a 

sponsoring organization applies, if a 

donor to a fund or account is the sole 

person with advisory privileges with 

respect to a fund or account, the 

advisory privileges would be deemed to 

be by reason of the donor’s status as a 

donor. This bright-line rule would 

provide clarity and enhance 

administrability. The Treasury 

Department and the IRS request 

comments regarding whether there are 

additional circumstances in which 

application of the bright-line rule is not 

warranted. 

Commenters asked that guidance 

clarify that advisory privileges do not 

include certain legally enforceable 

rights of the donor with respect to a 

contribution. If a restriction is placed on 

a gift at the time the gift is made and 

there is no provision for subsequent 

discretion regarding the restriction, then 

the restriction should not give rise to 

advisory privileges. For example, a 

donor’s mere earmarking of a donation 

(at the time of donation) for a particular 

fund or program of the recipient charity, 

without more, does not create an 

advisory privilege. Whether the terms of 

a gift agreement create a DAF depends 

on the restrictions set forth in the 

agreement. The Treasury Department 

and the IRS request comments on the 

circumstances in which a gift agreement 

or advisory rights retained by a donor 

could create a DAF. 

C. Donor-Advisor 

Consistent with section 

4966(d)(2)(A)(iii), the proposed 

regulations would define donor-advisor 

as a person appointed or designated by 

a donor to have advisory privileges 

regarding the distribution or investment 

of assets held in a fund or account of a 

sponsoring organization. If a donoradvisor delegates any of the donoradvisor’s advisory privileges to another 

person, that person also would be a 

donor-advisor. No particular form of 

appointment or designation would be 

necessary under the proposed 

regulations. 

A donor-advisor generally would 

include a person suggested or 

recommended by a donor to have 

advisory privileges if the sponsoring 

organization provides such privileges. 


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7Section 4958(f)(8)(B) defines investment 

advisor, with respect to any sponsoring 

organization, as any person (other than an employee 

of such organization) compensated by the 

organization for managing the investment of, or 

providing investment advice with respect to, assets 

maintained in DAFs owned by the organization. 

However, this rule would not apply if 

(1) the donor recommends an 

investment advisor who is properly 

viewed as providing services to the 

sponsoring organization as a whole, 

rather than providing services to the 

DAF, as described in this section 1.C of 

this Explanation of Provisions of this 

preamble, or (2) the donor recommends 

a person to serve on a committee of the 

sponsoring organization that advises as 

to distributions or investments of 

amounts in a fund or account if the 

recommendation is based on objective 

criteria related to the expertise of the 

member in the particular field of 

interest or purpose of the fund or 

account, the committee consists of three 

or more individuals and a majority of 

the committee is not recommended by 

the donor or donor-advisor, and the 

recommended person is not a related 

person with respect to the 

recommending donor or donor-advisor, 

as discussed in section 1.D of this 

Explanation of Provisions of this 

preamble. 

The proposed regulations include 

three special rules with respect to 

donor-advisors. First, a person (other 

than a person or governmental unit 

excepted from status as a donor) who 

establishes a fund or account and 

advises as to the distribution or 

investment of amounts in that fund or 

account would be treated as a donoradvisor with respect to that fund or 

account, regardless of whether the 

person contributes to the fund or 

account. For example, if a person 

establishes a memorial or fundraising 

fund to which the person does not 

contribute, but does provide advice 

regarding distributions from the fund, 

the person would be considered a 

donor-advisor. The donors to the fund 

have implicitly designated the advisor 

to have advisory privileges. 

Second, an investment advisor 

described in section 4958(f)(8)(B) 7 that 

manages the investment of, or provides 

investment advice with respect to, both 

assets maintained in a DAF and the 

personal assets of a donor to that DAF 

(personal investment advisor) would be 

a donor-advisor with respect to the DAF 

while serving in that dual capacity, 

regardless of whether the donor 

appointed, designated, or recommended 

the personal investment advisor. 

However, recognizing that a personal 

investment advisor may more generally 

advise the sponsoring organization, the 

proposed regulations would provide 

that a personal investment advisor will 

not be considered a donor-advisor if the 

personal investment advisor is properly 

viewed as providing services to the 

sponsoring organization as a whole, 

rather than providing services to the 

DAF. For example, if an investment 

advisor contracts with a sponsoring 

organization to provide services to all of 

its 1,000 DAFs, and the sponsoring 

organization reasonably charges the 

investment advisor’s fees uniformly to 

all of those DAFs, the investment 

advisor would properly be viewed as 

providing services to the sponsoring 

organization as a whole. 

The Treasury Department and the IRS 

request comments on additional 

circumstances that would indicate that 

a personal investment advisor is 

properly viewed as providing services to 

the sponsoring organization as a whole, 

rather than providing services to the 

DAF, as well as additional 

circumstances in which a personal 

investment advisor should not be 

considered a donor-advisor. 

One commenter suggested that an 

investment advisor recommended by a 

donor to the sponsoring organization 

should not be treated as a donor-advisor 

if the investment advisor is regulated by 

State and Federal agencies, because 

agency oversight makes it unlikely that 

the investment advisor would 

manipulate the assets of the DAF for 

personal gain. The commenter stated 

that an investment advisor that was 

considered a donor-advisor could not 

receive compensation from a DAF 

because that would be an excess benefit 

transaction under section 4958(c)(2). 

While the commenter believes that it 

is unlikely that a regulated investment 

advisor would manipulate the assets of 

the DAF for personal gain, the Treasury 

Department and the IRS view the close 

relationship between a donor and his or 

her personal investment advisor as 

giving the donor influence over 

investment decisions with respect to 

assets held in the DAF comparable to 

that of a donor-advisor. Moreover, the 

Treasury Department and the IRS are 

concerned about potential conflicts of 

interest. Specifically, sponsoring 

organizations may allow the 

appointment of a donor’s personal 

investment advisor as an advisor 

regarding the investment of DAF funds 

in order to encourage investment 

advisors to promote their clients’ giving 

through a DAF, rather than directly to 

a public charity (other than the 

sponsoring organization). In fact, a 

counterincentive may be created for 

both donors and their personal 

investment advisors to not advise 

distributions out of their DAFs to 

operating charities. Another significant 

concern is that a more than incidental 

benefit may occur if the investment 

advisor charges the donor a reduced fee 

for managing the donor’s personal assets 

because the investment advisor also 

manages the assets the donor 

contributed to the DAF. 

The Treasury Department and the IRS 

agree that a personal investment advisor 

that is considered a donor-advisor 

would be subject to the excess benefit 

transaction rules of section 4958(c)(2) if 

he or she received a grant, loan, 

compensation, or similar payment from 

the DAF. 

Third, advisory committee members 

recommended by a donor and appointed 

by the sponsoring organization would 

be donor-advisors, except as discussed 

in section 1.D of this Explanation of 

Provisions of this preamble. 

D. Advisory Committees 

The Treasury Department and the IRS 

generally would regard service on a 

committee of a sponsoring organization 

that advises as to distributions from or 

investments of assets of a fund or 

account as a form of advisory privilege 

with respect to that fund or account in 

determining whether the fund is a DAF, 

even though the sponsoring 

organization controls the selection of 

committee members consistent with its 

ownership and control of the fund or 

account in accordance with section 

4966(d)(2)(A)(ii). Recognizing that a 

fund or account, including a multipledonor fund, as discussed in section 1.E 

of this Explanation of Provisions of this 

preamble, may sometimes be advised by 

an advisory committee that includes one 

or more donors, donor-advisors, related 

persons, or persons recommended by 

donors or donor-advisors to serve on the 

advisory committee, the proposed 

regulations would provide two special 

rules relating to advisory privileges 

arising from service on an advisory 

committee. Under these two special 

rules, a fund or account could be 

advised by a committee that may 

include one or more donors, donoradvisors, related persons, or persons 

recommended by donors or donoradvisors, without being a DAF. 

First, when a sponsoring organization 

appoints a donor, donor-advisor, or 

related person to serve on an advisory 

committee, the donor, donor-advisor, or 

related person generally would have 

advisory privileges by reason of the 

donor’s status as a donor. However, the 

proposed regulations would provide 

that a sponsoring organization’s 

appointment of a donor, donor-advisor, 


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8For example, if a donor is a significant 

contributor, a family member who is appointed to 

the committee also is considered a significant 

contributor, regardless of whether the family 

member actually contributed to the fund. 

9Section 4966 does not define the term ‘‘related 

parties’’ and otherwise uses the term ‘‘persons.’’ 

Furthermore, another provision applicable to donor 

advised funds, section 4958, defines certain 

‘‘persons’’ in connection with a DAF for purposes 

Continued 

or related person to be on a committee 

that advises as to distributions or 

investments of amounts in the fund or 

account will not be deemed to result in 

advisory privileges by reason of the 

donor’s status as a donor if (1) the 

appointment is based on objective 

criteria related to the expertise of the 

appointee in the particular field of 

interest or purpose of the fund or 

account; (2) the committee consists of 

three or more individuals, not more 

than one-third of whom are related 

persons with respect to any of the 

others; and (3) the appointee is not a 

significant contributor to the fund or 

account, taking into account 

contributions by related persons with 

respect to the appointee,8 at the time of 

appointment. If an appointee or related 

person is not a significant contributor to 

a fund or account at the time of 

appointment but becomes one shortly 

afterwards, the IRS may find that the 

person has advisory privileges based on 

the facts and circumstances. The 

Treasury Department and the IRS 

request comments on what constitutes a 

significant contributor for purposes of 

this exception. 

Second, when a donor (or donoradvisor) recommends someone to serve 

on an advisory committee advising as to 

the distribution or investment of funds 

in the fund or account, that person 

would be considered a donor-advisor if 

the sponsoring organization appoints 

the recommended person to serve on the 

advisory committee. However, the 

proposed regulations would allow a 

donor (or donor-advisor) to recommend 

a person to serve as a member of an 

advisory committee of the sponsoring 

organization for the fund or account and 

not be considered to be a donor-advisor 

if (1) the recommendation is based on 

objective criteria related to the expertise 

of the member in the particular field of 

interest or purpose of the fund or 

account; (2) the committee consists of 

three or more individuals, and a 

majority of the committee is not 

recommended by the donor or donoradvisor; and (3) the recommended 

person is not a related person with 

respect to the recommending donor or 

donor-advisor. 

The Treasury Department and the IRS 

request comments on the proposed 

advisory committee exceptions, 

including additional circumstances in 

which advisory privileges arising from 

advisory committees should not result 

in the creation of a DAF. 

E. Multiple-Donor Funds or Accounts 

Several commenters suggested 

excepting a fund or account to which 

multiple unrelated donors contributed 

from the definition of DAF. Commenters 

expressed concern that failing to 

provide an exception would affect 

charitable giving practices encouraged 

by alumni organizations or professional 

associations, as well as discourage the 

use of funds or accounts to incubate 

potential public charities. One 

commenter suggested that imposing 

various conditions, including that the 

fund or account have at least three 

unrelated donors; that the donations be 

aggregated into a single consolidated 

account balance; that no written or oral 

understanding exists that donors have 

advisory privileges corresponding to the 

amounts they donated to the fund or 

account; and that no single donor or 

group of related donors gave more than 

35 percent of all donations, would 

prevent the vast majority of potential 

abuses of multiple-donor fund status 

while allowing most giving circles and 

giving pools maintained at public 

charities to avoid DAF status. Other 

commenters suggested that, without 

various safeguards, an exception for 

multiple-donor funds or accounts may 

permit abuses. 

The Treasury Department and the IRS 

anticipate that, in most circumstances, a 

multiple-donor fund or account would 

be separately identified by reference to 

contributions of a specific donor or 

donors. However, even if separately 

identified, a multiple-donor fund or 

account would not be a DAF if no donor 

or donor-advisor has, or reasonably 

expects to have, advisory privileges 

with respect to the distribution or 

investment of amounts held in the fund 

or account by reason of the donor’s 

status as a donor. Furthermore, section 

4966(d)(2)(B) and the proposed 

regulations include several special rules 

that may permit a multiple-donor fund 

or account to be excepted from 

definition as a DAF even if it doesn’t 

meet one of the exceptions discussed in 

section 2 of this Explanation of 

Provisions of this preamble (such as 

funds or accounts making distributions 

only to a single identified organization 

or funds or accounts making certain 

grants to individuals for travel, study, or 

other similar purposes). 

First, as indicated in section 1.A. of 

this Explanation of Provisions of this 

preamble, the proposed regulations 

would exclude certain entities from the 

definition of ‘‘donor.’’ Specifically, the 

proposed regulations would define 

donor to exclude any public charity 

described in section 509(a)(1), (2), or (3) 

(other than a disqualified supporting 

organization) and (2) any governmental 

unit described in section 170(c)(1). If a 

fund or account has multiple donors but 

only a public charity or governmental 

unit has the right to exercise advisory 

privileges, then no donor, as defined by 

the proposed regulations, would have 

advisory privileges with respect to the 

distribution or investment of amounts 

held in the fund or account by reason 

of the donor’s status as a donor. Thus, 

the fund or account would not be a 

DAF. 

Second, as discussed in section 1.D of 

this Explanation of Provisions of this 

preamble, the proposed regulations 

would provide two special rules relating 

to advisory privileges arising from 

service on an advisory committee. These 

two rules would allow certain multipledonor funds or accounts to be advised 

by a committee that may include one or 

more donors, donor-advisors, related 

persons, or persons recommended by 

donors or donor-advisors, without being 

a DAF. 

The Treasury Department and the IRS 

request comments on whether and in 

what circumstances additional types of 

exceptions are warranted to allow 

multiple-donor funds or accounts to be 

excluded from the definition of DAF. 

The Treasury Department and the IRS 

are particularly interested in comments 

addressing how any exception for 

multiple-donor funds or accounts can be 

crafted to prevent circumvention of the 

provisions of section 4966 while still 

being administrable for both sponsoring 

organizations and the IRS. 

2. Exceptions to the Definition of Donor 

Advised Fund 

Consistent with section 4966(d)(2)(B), 

the proposed regulations generally 

would provide that a DAF does not 

include any fund or account that makes 

(1) distributions only to a single 

identified organization, or (2) certain 

grants to individuals for travel, study, or 

other similar purposes. These 

exceptions are discussed in sections 

2.A. and 2.B. of this Explanation of 

Provisions of this preamble. 

In addition, under section 

4966(d)(2)(C), the Secretary has 

discretionary authority to exempt a fund 

or account from the definition of DAF 

if the fund or account is advised by a 

committee not directly or indirectly 

controlled by the donor or donoradvisor (and any related parties 9) or if 


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77928 Federal Register / Vol. 88, No. 218 / Tuesday, November 14, 2023 / Proposed Rules 

of excess benefit transactions. For consistency and 

administrability across the provisions applicable to 

DAFs, the proposed regulations use the term 

‘‘related persons’’ rather than ‘‘related parties’’ and 

define ‘‘related persons’’ as those persons described 

in section 4958(f)(7)(B) and (C). 

the fund or account benefits a single 

identified charitable purpose. The 

proposed regulations would provide 

two exceptions to the definition of DAF 

under this discretionary authority: (1) 

an exception for disaster relief funds 

consistent with the exception originally 

set forth in Notice 2006–109, with some 

modifications, and (2) an exception for 

certain scholarship funds whose 

committee is nominated by a section 

501(c)(4) organization with a broadbased membership. 

The Treasury Department and the IRS 

request comments on whether other 

funds should be excepted from the 

definition of DAF using the authority 

under section 4966(d)(2)(C) and what, if 

any, restrictions should apply to ensure 

that the intent of section 4966 is 

achieved. 

A. Single Identified Organization 

Exception 

Section 4966(d)(2)(B)(i) states that a 

fund or account that makes distributions 

only to a single identified organization 

or governmental entity is not a DAF. 

Several commenters suggested that a 

single identified organization should 

include an organization that is not 

described in section 501(c)(3), including 

a for-profit business and an organization 

described in section 501(c)(4), so long as 

the distributions to the organization or 

business are made for a charitable 

purpose described in section 

170(c)(2)(B). The proposed regulations 

would provide that a fund or account 

will not be considered a DAF if, along 

with meeting the other requirements 

discussed in this section 2.A, it is 

established to make (and actually does 

make) distributions solely to a single 

identified organization that is either: (1) 

an organization described in sections 

170(c)(2) and 509(a)(1), (2), or (3) (other 

than a disqualified supporting 

organization), or (2) a governmental 

entity described in section 170(c)(1) if 

the distribution is made exclusively for 

public purposes. The Treasury 

Department and the IRS are concerned 

that expanding the exception to include 

other types of organizations may allow 

circumvention of other tax provisions, 

such as the private foundation and 

charitable contribution deduction rules. 

Thus, the exception would not apply if 

the single identified organization is a 

private foundation, disqualified 

supporting organization, foreign 

organization, or non-charitable 

organization. 

If the single identified organization 

loses its exempt status or ceases 

operating, the proposed regulations 

would provide rules similar to the rules 

found in § 1.509(a)–4(d)(4)(i)(a) 

(allowing a supporting organization to 

substitute a new supported 

organization). A sponsoring 

organization would be permitted to 

substitute another single identified 

organization if the substitution is 

conditioned upon the occurrence of a 

loss of exemption, substantial failure or 

abandonment of operations, or a 

dissolution or reorganization that results 

in the named single identified 

organization ceasing to exist, and the 

event is beyond the direct or indirect 

control of donor(s), donor-advisor(s), or 

related persons. 

Commenters suggested that the 

exception for a fund or account that 

makes distributions to a single 

identified organization should 

encompass distributions made to 

support that organization’s activities 

and that a fund restricted to a specific 

charitable project should be considered 

a fund or account that makes 

distributions to a single identified 

organization. Commenters suggested 

that a fund should therefore be able to 

support the programs or activities of a 

single identified organization by making 

distributions to individuals directly (as 

long as the distributions are limited to 

those within the charitable class served 

by that single identified organization), 

or by receiving, holding and disbursing 

funds for a specific project or program 

conducted by the single identified 

organization, including making 

distributions to third parties for goods, 

services, and incidental grant-making 

limited to a particular project or 

program. For example, commenters 

suggested that the exception should 

apply to a scholarship fund that a donor 

establishes at a university and that 

provides scholarships and other grants 

solely to students at that university 

whom the donor has a role in selecting. 

Under the proposed regulations, the 

sponsoring organization would be 

permitted to make distributions to the 

single identified organization for the 

single identified organization’s activities 

(and only activities other than 

administering DAFs or grant-making) 

and, thus, to make distributions to fund 

a specific charitable project (other than 

administering DAFs or grant making) of 

the single identified organization. 

However, the sponsoring organization 

could not make distributions directly to 

third parties on behalf of the single 

identified organization, such as by 

making distributions to third parties for 

goods, services, or incidental grantmaking for a particular project or 

program, because the statute requires 

that the fund or account make 

distributions only to the single 

identified organization. 

Because a fund or account that falls 

within the single identified organization 

exception is not subject to the rules 

applicable to DAFs, the proposed 

regulations would provide that 

distributions to the single identified 

organization may not be used to 

administer DAFs or to make grants. In 

addition, the proposed regulations 

would provide that a fund or account 

will not be treated as making 

distributions only to a single identified 

organization if (1) a donor, donoradvisor, or related person has or 

reasonably expects to have, the ability to 

advise regarding distributions from the 

single identified organization to other 

individuals or entities, or (2) a 

distribution from the fund or account 

will provide, directly or indirectly, a 

more than incidental benefit (within the 

meaning of section 4967) to a donor, 

donor-advisor, or related person with 

respect to the fund or account. Thus, for 

example, if a donor establishes a fund 

to make distributions only to a single 

public charity, and the donor is on the 

Board of the public charity, then the 

fund would not be able to meet this 

exception because the donor has the 

ability to advise some or all of the 

distributions from the public charity to 

other entities. 

Recognizing that a sponsoring 

organization may lack direct knowledge 

regarding the activities of the donor, 

donor-advisor, or related person with 

regard to the single identified 

organization, however, the proposed 

regulations would allow a sponsoring 

organization to rely on a certification 

from the donor that (1) no donor, donoradvisor, or related person has or 

reasonably expects to have, the ability to 

advise regarding distributions from the 

single identified organization to other 

individuals or entities, and (2) no 

distribution from the fund or account 

will provide, directly or indirectly, a 

more than incidental benefit (within the 

meaning of section 4967) to a donor, 

donor-advisor, or related person with 

respect to the fund or account, as long 

as the sponsoring organization lacks 

knowledge to the contrary. 

The Treasury Department and the IRS 

request comments on whether 

additional guidance is needed on 

situations in which a fund or account is 

established at a public charity and the 

written agreement establishing the fund 

or account provides that the contributed 


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amounts can only be used to support 

programs within that public charity, but 

the donor retains advisory privileges 

with respect to the public charity’s use 

or investment of some or all of the 

funds. Section 4966(c)(2)(B) excepts 

from the definition of ‘‘taxable 

distribution’’ any distribution from a 

DAF to the sponsoring organization of 

the DAF; accordingly, any fund or 

account established at a public charity 

that is used to support operating 

programs of the public charity (rather 

than to make distributions to third 

parties) would not have any taxable 

distributions, if the fund or account 

were a DAF. For example, a donor who 

established a fund or account at a 

university could advise that 

contributions previously made to the 

fund or account be distributed to the 

university’s scholarship program. 

However, if the donor were to want to 

have a role in advising on the selection 

of scholarship recipients then, to avoid 

a taxable distribution, the donor’s 

involvement would need to meet the 

exception provided in section 

4966(d)(2)(B)(ii) (discussed in section 

2.B. of this Explanation of Provisions of 

this preamble). 

B. Statutory Scholarship Exception 

Under section 4966(d)(2)(B)(ii) the 

term ‘‘donor advised fund’’ does not 

include a fund or account that 

exclusively makes grants for travel, 

study, or other similar purposes, 

provided certain requirements are met. 

Consistent with section 

4966(d)(2)(B)(ii), the proposed 

regulations would provide that, under 

this exception from the definition of a 

DAF, a donor or donor-advisor may 

provide advice as to which individuals 

receive grants for travel, study, or other 

similar purposes from a fund or account 

if (1) the person provides the advice 

exclusively in the person’s capacity as 

a member of the selection committee; (2) 

all the members of the selection 

committee are appointed by the 

sponsoring organization; (3) no 

combination of donor(s), donoradvisor(s), or related persons controls, 

directly or indirectly, the committee; 

and (4) all grants from the fund or 

account are awarded on an objective 

and nondiscriminatory basis pursuant to 

a written procedure approved in 

advance by the board of directors of the 

sponsoring organization and the 

procedure is designed to ensure that all 

grants meet the requirements of 

paragraph (1), (2), or (3) of section 

4945(g) and the regulations thereunder. 

The requirements in the regulations 

under section 4945(g) include the 

requirements that the group from which 

grantees are selected will ordinarily be 

sufficiently large to constitute a 

charitable class; that the members of the 

selection committee will not be in a 

position to derive a private benefit if 

certain potential grantees are selected 

over others; and that the sponsoring 

organization will maintain adequate 

records regarding the identification and 

selection of individual grantees. If a 

fund or account satisfies the 

requirements of the exception, a 

sponsoring organization may award a 

scholarship from the fund or account to 

an individual without subjecting the 

sponsoring organization or its fund 

managers to excise taxes under section 

4966. 

The proposed regulations would 

provide that whether a combination of 

donor(s), donor-advisor(s), or related 

persons controls, directly or indirectly, 

the selection committee is determined 

by looking to the substance, rather than 

the form, of any arrangement. Direct 

control would exist if donor(s), donoradvisor(s), or related persons, either 

alone or together, (1) can require the 

committee to take or refrain from taking 

any action; (2) control 50 percent or 

more of the total voting power of the 

committee; or (3) have the right to 

exercise veto power over the 

committee’s decisions. Whether indirect 

control exists is determined by the facts 

and circumstances, including the nature 

of any relationships among members of 

the selection committee and with any 

donor, donor-advisor, or related person. 

For example, a committee would be 

‘‘indirectly controlled’’ by a 

combination of donor(s), donoradvisor(s), or related persons if a 

majority of the selection committee is 

currently engaged by the donor, donoradvisor, or any related person in any 

employment or fiduciary capacity, 

whether as an employee or independent 

contractor, or recommended by a donor 

or donor-advisor and appointed to the 

selection committee based on other than 

objective criteria regarding the person’s 

expertise, or a combination thereof. 

One commenter recommended that a 

sponsoring organization be permitted to 

set reasonable uniform procedures for 

appointing members to selection 

committees, taking into account the size 

of the sponsoring organization, the 

number of grants from the scholarship 

fund, and other relevant facts and 

circumstances, rather than requiring 

action by the entire board. The proposed 

regulations would provide that, in 

appointing the members of the selection 

committee, a sponsoring organization 

may act through its board of directors, 

trustees, or other governing body, a 

committee appointed by its governing 

body, or an appropriate officer of the 

sponsoring organization. 

The Treasury Department and the IRS 

are concerned that some employers may 

seek to use this statutory scholarship 

exception to grant employer-related 

scholarships in a manner that would 

otherwise not be considered a 

scholarship or fellowship grant subject 

to the provisions of section 117(a), or 

that would otherwise be a taxable 

expenditure under section 4945, by 

having a sponsoring organization 

administer their scholarship programs. 

See, e.g., Rev. Proc. 76–47, 1976–2 C.B. 

670, and Rev. Proc. 80–39, 1980–2 C.B. 

772. The Treasury Department and the 

IRS request comments on whether 

additional guidance is needed to 

prevent avoidance of the employerrelated scholarship rules or to address 

any potential private benefit arising 

from employer-related scholarship 

programs. 

C. Exception for Certain Scholarship 

Funds Established by Certain Section 

501(c)(4) Organizations 

Several commenters asked for 

guidance relating to a scholarship fund 

of a sponsoring organization that 

receives contributions from a taxexempt membership organization, such 

as a section 501(c)(4) social welfare 

organization. The commenters stated 

that, for example, Rotary Club 

scholarship funds are often established 

at community foundations and that 

these scholarship funds do not fit 

within the statutory scholarship 

committee exception provided by 

section 4966(d)(2)(B)(ii) because 

members of the section 501(c)(4) 

organization who may be donors to the 

fund comprise a majority of the 

scholarship selection committee. These 

commenters asked that the proposed 

regulations provide an additional 

exception allowing members of a 

section 501(c)(4) organization who are 

otherwise unrelated to one another to 

control the scholarship selection 

committee, particularly since it is 

difficult to find non-members willing to 

serve on the committee. The 

commenters noted that requiring Rotary 

Clubs to form a section 501(c)(3) 

organization to make distributions for 

Rotary scholarships would be an 

inefficient use of charitable resources 

and that sponsoring organizations can 

provide expertise on objective and 

charitable standards for selecting 

scholarship recipients. 

The proposed regulations would 

provide an exception to the definition of 

DAF for a fund or account established 

by a broad-based membership 

organization described in section 


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77930 Federal Register / Vol. 88, No. 218 / Tuesday, November 14, 2023 / Proposed Rules 

10Section 6033(b)(14), added in 2008, requires 

every section 501(c)(3) organization required to file 

an annual information return to furnish annually 

such information as the Secretary may require with 

respect to disaster relief activities. 

501(c)(4) if six conditions are met. The 

conditions would substantially mirror 

the conditions in the statutory 

scholarship exception, except that 

donors may control the committee. 

First, the fund or account’s single 

identified charitable purpose must be to 

make grants to individuals for 

scholarships described in section 

4945(g)(1). 

Second, the selection of recipients of 

scholarships from the fund or account 

must be made by a selection committee 

the members of which are nominated by 

the section 501(c)(4) organization and 

approved in writing by the sponsoring 

organization. This requirement would 

allow the section 501(c)(4) organization 

to have input on the members of the 

selection committee, but would leave 

the final decision to the sponsoring 

organization that owns and controls the 

assets of the fund or account. 

Third, the fund or account must serve 

a charitable class. 

Fourth, like the statutory scholarship 

exception, recipients of grants from the 

fund or account must be selected on an 

objective and nondiscriminatory basis, 

pursuant to a written procedure, 

approved in advance by the sponsoring 

organization’s board of directors, that is 

designed to ensure that all the grants 

meet the requirements of section 

4945(g)(1) and the regulations under 

section 4945 (other than advance 

approval by the IRS). 

Fifth, no distribution may be made 

from the fund or account to (1) any 

director, officer, or trustee of the 

sponsoring organization of the fund, (2) 

any member of the fund’s selection 

committee, (3) any member, honorary 

member, or employee of the section 

501(c)(4) organization, or (4) any person 

related to anyone described in (1), (2), 

or (3). 

Finally, the fund or account must 

maintain adequate records that 

demonstrate the recipients were 

selected on an objective and 

nondiscriminatory basis. 

The Treasury Department and the IRS 

are concerned that not requiring the 

section 501(c)(4) organization to have a 

broad-based membership could allow a 

small group of persons to set up a 

section 501(c)(4) organization and use a 

fund or account at a sponsoring 

organization to grant scholarships to 

their selected recipients with taxdeductible contributions, circumventing 

the DAF rules. Given this concern, the 

Treasury Department and the IRS 

request comments on how to identify a 

broad-based membership organization 

described in section 501(c)(4), including 

factors such as the organization’s 

number of members, criteria for 

selecting members, membership rights, 

and geographic coverage. 

The Treasury Department and the IRS 

also request comments on whether and 

under what circumstances other 

organizations, such as section 501(c)(5) 

and 501(c)(6) organizations, use similar 

types of committee-advised scholarship 

funds and whether the exception should 

be extended to those organizations, 

recognizing that section 501(c)(4) 

organizations are formed to promote 

social welfare whereas section 501(c)(5) 

and section 501(c)(6) organizations are 

formed to further different purposes. 

D. Disaster Relief Exception 

Several commenters asked that the 

proposed regulations provide, 

consistent with Notice 2006–109, that 

an employer-sponsored disaster relief 

fund is not a DAF. Commenters also 

recommended that the exception be 

extended to disaster relief funds outside 

of the employment context and that the 

exception be extended to emergency 

hardship situations outside of the 

disaster relief context. 

Since the determination of the 

existence of a qualified disaster under 

section 139 is not controlled by the 

sponsoring organization or the fund or 

account’s advisory committee, the 

proposed regulations would exempt a 

non-employment based disaster relief 

fund. Thus, the proposed regulations 

would provide that both an employersponsored disaster relief fund and a 

disaster relief fund outside of the 

employment context are not DAFs, as 

long as the requirements of section 139 

are met. In contrast, since the 

determination of the existence of an 

emergency hardship is controlled by the 

sponsoring organization or the fund or 

account’s advisory committee, the 

proposed regulations would not extend 

the exception to emergency hardship 

funds. 

To meet the disaster relief exception 

in the proposed regulations, six 

conditions must be met. The conditions 

substantially mirror the provisions in 

Notice 2006–109 (and the special rules 

generally for charitable assistance in 

qualified disasters) and the provisions 

of the statutory scholarship exception 

and the exception for certain 

scholarship funds established by section 

501(c)(4) organizations. 

First, the fund or account’s single 

identified charitable purpose must be to 

provide relief from one or more 

qualified disasters within the meaning 

of section 139(c)(1), (2), or (3). 

Second, the fund or account must 

serve a charitable class. 

Third, recipients of grants from the 

fund or account must be made by a 

selection committee not controlled by 

donors, donor-advisors, or related 

persons and for which all the members 

are appointed by the sponsoring 

organization. Alternatively, if the fund 

or account gives preference or priority 

to employees (or their family members) 

of an employer to receive grants, the 

majority of the selection committee 

must consist of persons who are not in 

a position to exercise substantial 

influence over the affairs of the 

employer (or adequate substitute 

procedures exist to ensure that any 

benefit to the employer is incidental and 

tenuous). 

Fourth, the selection committee must 

select grant recipients based on 

objective and nondiscriminatory 

determinations of need pursuant to a 

written procedure approved in advance 

by the board of directors of the 

sponsoring organization. 

Fifth, no distribution from the fund or 

account may result in more than an 

incidental benefit to (1) any director, 

officer, or trustee of the sponsoring 

organization of the fund or account; (2) 

any member of the fund or account’s 

selection committee; or (3) any person 

related to a director, officer, or trustee 

of the sponsoring organization or a 

member of the selection committee. 

Lastly, the sponsoring organization 

must maintain records that (1) 

demonstrate the need of the recipients 

for the disaster relief assistance 

provided, and (2) satisfy the 

requirements of section 6033(b)(14).10

3. Taxable Distributions 

Section 4966(c)(1) defines a taxable 

distribution as any distribution from a 

DAF to (1) any natural person, or (2) any 

other person unless the distribution is 

for a purpose specified in section 

170(c)(2)(B) and the sponsoring 

organization exercises expenditure 

responsibility with respect to the 

distribution in accordance with section 

4945(h). 

Section 4966(c)(2) excepts from the 

term ‘‘taxable distribution’’ any 

distribution from a DAF to (1) any 

organization described in section 

170(b)(1)(A) (other than a disqualified 

supporting organization), (2) the 

sponsoring organization of the DAF, or 

(3) any other DAF. The Treasury 

Department and the IRS expect that 

most distributions from DAFs are to 

organizations described in section 

170(b)(1)(A) (but not to disqualified 


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supporting organizations) and thus are 

not taxable distributions. 

The proposed regulations incorporate 

the statutory definition of taxable 

distribution. In addition, the proposed 

regulations would set forth an antiabuse rule providing that, if a series of 

distributions through intermediary 

distributees undertaken pursuant to a 

plan achieves a result that is 

inconsistent with the purposes of 

section 4966, the distributions are 

treated as a single distribution for 

purposes of section 4966. For example, 

if a donor advises a distribution, that the 

sponsoring organization subsequently 

makes, from a DAF to Charity X and the 

donor or the sponsoring organization 

arranges for Charity X to use the funds 

to make distributions to an individual 

recommended by the donor, the 

distribution would be a taxable 

distribution from the sponsoring 

organization to an individual. 

Several commenters recommended 

that the term ‘‘distribution’’ be narrowly 

defined to include only a gratuitous 

transfer. These commenters requested 

that a purchase of goods or services by 

a sponsoring organization using funds 

from a DAF for charitable activity or 

fundraising would not be considered a 

distribution. One commenter asked that 

the term ‘‘distribution’’ be defined the 

same as the term ‘‘grant’’ in section 4945 

and that it not include payments from 

a sponsoring organization using funds 

from a DAF to vendors for goods or 

services or employee compensation. 

The proposed regulations do not 

adopt these suggestions and would 

construe the term ‘‘distribution’’ 

broadly. In particular, the proposed 

regulations would provide that the term 

‘‘distribution’’ generally means any 

grant, payment, disbursement, or 

transfer, whether in cash or in kind, 

from a DAF. In addition, the proposed 

regulations would provide that any use 

of DAF assets that results in a more than 

incidental benefit to a donor, donoradvisor, or related person is a deemed 

distribution and thus generally would 

be a taxable distribution. The Treasury 

Department and the IRS note that 

distributions resulting in a more than 

incidental benefit to a donor, donoradvisor, or related person may also 

result in tax under section 4967. See 

Notice 2017–73, 2017–51 I.R.B. 562. 

However, the proposed regulations 

would provide that (1) investments and 

(2) reasonable investment and grantrelated fees generally are not 

distributions under this definition 

(unless they result in a more than 

incidental benefit as noted above). 

Investments generally would not be 

treated as distributions under the 

proposed regulations because they 

typically merely reflect a change from 

one form of property to another. The 

Treasury Department and the IRS would 

consider investments for this purpose as 

including both debt and equity 

instruments held for the purpose of 

obtaining income or funds, including 

investments made partly for charitable 

purposes as described in Notice 2015– 

62, 2015–39 I.R.B. 411. However, an 

investment would not, for example, 

include a zero-interest loan, as there is 

no purpose of, or provision for, 

obtaining income or funds from the 

zero-interest loan. The Treasury 

Department and the IRS anticipate that 

a zero-interest loan would be a 

distribution under the proposed 

regulations and, unless made to a 

section 170(b)(1)(A) organization other 

than a disqualified supporting 

organization, would require expenditure 

responsibility by the sponsoring 

organization in order not to be a taxable 

distribution. The Treasury Department 

and the IRS request comments on how 

to further distinguish distributions from 

investments. 

Reasonable investment and grantrelated fees paid from DAF assets 

generally would not be considered 

distributions; however, an unreasonable 

grant-related or investment fee would be 

a deemed distribution and, thus, would 

be a taxable distribution. The Treasury 

Department and the IRS expect that 

whether a fee is reasonable would be 

determined by all the facts and 

circumstances. For example, an expense 

charged uniformly or ratably across all 

DAFs generally would be considered a 

reasonable fee and not a distribution. In 

addition, an expense charged solely to 

a particular DAF (such as an expense 

arising from an expenditure 

responsibility grant from the fund) may 

be reasonable, depending on the facts 

and circumstances. However, the 

proposed regulations would provide 

that an expense charged solely to a 

particular DAF that is paid, directly or 

indirectly, to a donor, donor-advisor, or 

related person with respect to the DAF, 

is a deemed distribution subject to 

sections 4966, 4958, and/or 4967. 

A. Distributions to Section 170(b)(1)(A) 

Organizations 

Section 4966(c)(2)(A) provides that a 

distribution to any organization 

described in section 170(b)(1)(A) (other 

than a disqualified supporting 

organization) is not a taxable 

distribution. Similar to existing 

guidance under § 53.4945–5(a)(4), the 

proposed regulations would provide 

several categories of organizations 

treated as described in section 

170(b)(1)(A) for purposes of section 

4966(c)(2)(A). 

First, an organization would be 

considered an organization described in 

section 170(b)(1)(A) if it is described in 

both sections 170(b)(1)(A) and 170(c)(2) 

(other than a disqualified supporting 

organization), without the requirement 

under section 170(c)(2)(A) that it be 

created or organized in the United 

States or in any possession thereof, or 

under the law of the United States, any 

State, the District of Columbia, or any 

possession of the United States. Thus, 

for example, a taxable organization that 

operates a for-profit school would not be 

treated as described in section 

170(b)(1)(A) because the organization 

would not be described in section 

170(c)(2). 

Second, an organization that is a 

governmental unit described in section 

170(b)(1)(A)(v) and 170(c)(1) (or an 

agency or instrumentality thereof, 

including an organization described in 

section 511(a)(2)(B)) would be 

considered an organization described in 

section 170(b)(1)(A), as long as the 

distribution to it is made for exclusively 

public purposes. 

Third, a foreign government (or an 

agency or instrumentality thereof), or an 

international organization designated as 

such by Executive Order under 22 

U.S.C. 288 would be treated as an 

organization described in section 

170(b)(1)(A), as long as the distribution 

to it is made exclusively for purposes 

described in section 170(c)(2)(B). 

One commenter asked that guidance 

expressly provide that DAFs may make 

grants to foreign organizations based on 

the same equivalency determinations 

that private foundations use for 

purposes of determining whether a 

foreign organization is the equivalent of 

a domestic public charity. The proposed 

regulations would adopt this suggestion. 

Consistent with Rev. Proc. 2017–53, 

2017–40 I.R.B. 263 (providing 

guidelines for equivalency 

determinations by, among others, 

sponsoring organizations of DAFs), the 

proposed regulations would provide 

that, prior to the distribution, a 

sponsoring organization may make a 

good faith determination that a foreign 

organization is described in sections 

501(c)(3) and 170(b)(1)(A) (other than a 

disqualified supporting organization) 

using procedures similar to those 

procedures permitted for private 

foundation grantors under § 53.4945– 

5(a)(5). Those procedures provide that a 

determination will ordinarily be a good 

faith determination if it is based on 

current written advice from a qualified 

practitioner and the organization 

reasonably relied in good faith on the 


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77932 Federal Register / Vol. 88, No. 218 / Tuesday, November 14, 2023 / Proposed Rules 

11 In defining a disqualified supporting 

organization, the proposed regulations use the 

definitions of supporting organization types under 

the section 509(a)(3) regulations. 

12See note 7. 

13The Treasury Department and the IRS also note 

that allowing distributions from a DAF for lobbying 

or political campaign activity would contravene the 

charitable contribution deduction rules and private 

foundation restrictions. 

written advice. If a sponsoring 

organization makes a good faith 

determination that a foreign 

organization is described in sections 

501(c)(3) and 170(b)(1)(A) (other than a 

disqualified supporting organization), 

the sponsoring organization would not 

need to exercise expenditure 

responsibility with respect to a 

distribution to that organization. 

B. Disqualified Supporting 

Organizations 

Section 4966(d)(4)(A)(i) defines any 

Type III non-functionally integrated 

supporting organization as a 

disqualified supporting organization 

with respect to any distribution.11

Section 4966(d)(4)(A)(ii)(I) disqualifies 

any other type of supporting 

organization if the donor or any donoradvisor (and any related parties) 12

directly or indirectly controls a 

supported organization (as defined in 

section 509(f)(3)) of the supporting 

organization. The Treasury Department 

and the IRS request comments on 

whether other entities should be 

included in the definition of 

disqualified supporting organization, 

using the authority under section 

4966(d)(4)(A)(ii)(II) to designate other 

supporting organizations as 

disqualified, because a distribution to 

such organization is inappropriate if 

expenditure responsibility is not 

exercised to ensure the distribution is 

for a purpose specified in section 

170(c)(2)(B). 

C. Distributions to Non-Section 

170(b)(1)(A) Organizations or to 

Disqualified Supporting Organizations 

Under section 4966(c)(1)(B), a 

distribution to any entity not described 

in section 170(b)(1)(A), or to a 

disqualified supporting organization, 

will be a taxable distribution unless (1) 

the distribution is for a purpose 

specified in section 170(c)(2)(B) 

(generally, is for a charitable purpose), 

and (2) the sponsoring organization 

exercises expenditure responsibility 

with respect to the distribution in 

accordance with section 4945(h). 

i. Non-Charitable Purposes 

The proposed regulations would 

provide that purposes described in 

section 170(c)(2)(B) are treated as such 

whether or not carried out by an 

organization described in section 170(c). 

However, a distribution to be used for 

an activity prohibited under section 

501(c)(3), or for an activity that would 

cause loss of tax exemption if it were a 

substantial part of a section 501(c)(3) 

organization’s total activities, is not for 

a purpose specified in section 

170(c)(2)(B). Thus, a distribution used 

for political campaign intervention 

activity or attempts to influence 

legislation would be considered to be 

for a purpose not specified in section 

170(c)(2)(B) 13 and, thus, if made 

directly or to an entity not described in 

section 170(b)(1)(A), or to a disqualified 

supporting organization, would be a 

taxable distribution. 

The proposed regulations would also 

include a requirement, similar to the 

requirement in § 53.4945–6(c)(2), that a 

grant to an organization (other than one 

that is described in section 501(c)(3) and 

not in section 509(a)(4)) will not be 

considered to be for a purpose specified 

in section 170(c)(2)(B) unless the 

grantee agrees to separately account for 

grant funds (either by separately 

accounting for grant funds on its books 

or by segregating the grant funds). (Such 

grant funds must also be used for 

charitable purposes, consistent with the 

expenditure responsibility rules 

discussed in section 3.C.ii of this 

Explanation of Provisions of this 

preamble.) 

ii. Expenditure Responsibility 

Section 4966(c)(1)(B)(ii) requires 

sponsoring organizations to exercise 

expenditure responsibility in 

accordance with section 4945(h) for 

certain distributions. Thus, the 

proposed regulations cross-reference the 

section 4945(h) expenditure 

responsibility regulations applicable to 

private foundations, with one 

modification. In lieu of the requirements 

found in § 53.4945–5(b)(3)(iv)(c) and 

(b)(4)(iv)(c) (pertaining to the recipient’s 

permitted use of the funds), the 

distributee would be required to agree 

not to: (1) make a grant to an 

organization that does not comply with 

the expenditure responsibility 

requirements, (2) make a grant to a 

natural person, or (3) make a grant, loan, 

compensation, or other similar payment 

(as described in section 4958(c)(2)) to a 

donor, donor-advisor, or related person 

with respect to the DAF from which the 

distribution that is the subject of the 

agreement is made. For purposes of 

these rules pertaining to the secondary 

use of distributions, the definition of 

‘‘grant’’ set forth in § 53.4945–4(a)(2) 

would apply, rather than the broader 

definition of ‘‘distribution’’ found in 

proposed § 53.4966–1(e). If the 

definition of ‘‘distribution’’ found in 

proposed § 53.4966–1(e) applied, 

distributees would be required to 

exercise expenditure responsibility in 

the purchase of goods and services, 

which is not intended under the 

proposed rule. 

The Treasury Department and the IRS 

request comments on this modification 

to the expenditure responsibility rules 

and whether additional guidance is 

needed. 

4. Taxes on Taxable Distributions 

Consistent with section 4966(a)(1), the 

proposed regulations would provide 

that an excise tax equal to 20 percent of 

the amount of the taxable distribution is 

imposed on each taxable distribution 

from a DAF. This excise tax is paid by 

the sponsoring organization of the DAF. 

The provisions of proposed § 53.4966–2 

are generally similar to those of 

§ 53.4958–1 and other chapter 42 excise 

tax regulations relating to the 

calculation of the tax on the 

organization and its managers. 

In addition, consistent with section 

4966(a)(2), the proposed regulations 

would provide that each fund manager 

who knowingly agrees to the making of 

a taxable distribution is liable for an 

excise tax equal to five percent of the 

amount of the taxable distribution, up to 

a maximum of $10,000 for any one 

taxable distribution. If more than one 

fund manager is liable for the excise tax, 

all such persons would be jointly and 

severally liable for that tax. The 

proposed regulations, consistent with 

section 4966(d)(3), would define a fund 

manager as (1) an officer, director, or 

trustee of the sponsoring organization, 

or any individual with authority or 

responsibility similar to that exercised 

by an officer, director, or trustee of an 

organization, regardless of title, and (2) 

with respect to any act (or failure to act), 

the employee having authority or 

responsibility (either individually or as 

a member of a collective body) for such 

act (or failure to act). An example of a 

failure to act by a fund manager 

resulting in a taxable distribution would 

be a failure to exercise expenditure 

responsibility if required. 

The proposed regulations would 

provide that the agreement of any fund 

manager to the making of a taxable 

distribution consists of any 

manifestation of approval of the 

distribution that is sufficient to 

constitute an exercise of the fund 

manager’s authority to approve, or 

authority to exercise discretion in 

recommending approval of, the making 

of the distribution by the sponsoring 


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organization, whether or not it is the 

final or decisive act on behalf of the 

sponsoring organization. 

A fund manager generally would be 

considered to have agreed to the making 

of a distribution with knowledge that it 

is a taxable distribution only if the 

manager (1) is in fact aware that it is a 

taxable distribution; or (2) has 

knowledge of facts sufficient to 

determine that, based on those facts, the 

distribution would be a taxable 

distribution and negligently fails to 

make reasonable attempts to ascertain 

whether the distribution is a taxable 

distribution. A fund manager generally 

would not be considered to have 

negligently failed to make reasonable 

attempts to ascertain whether a 

distribution is a taxable distribution if 

the distribution is made to an 

organization listed as an organization 

described in section 170(b)(1)(A) (other 

than a supporting organization) on the 

IRS’s search tool, Tax Exempt 

Organization Search (Pub 78 data) (or if, 

with respect to a supporting 

organization, it gathers information to 

determine that the organization is not a 

disqualified supporting organization). 

The Treasury Department and the IRS 

request comments on whether guidance 

is needed regarding a fund manager’s 

reliance on professional advice. 

Proposed Applicability Date 

These regulations are proposed to be 

applicable to taxable years ending after 

the date of publication of the Treasury 

decision adopting these rules as final 

regulations in the Federal Register. A 

taxpayer may rely on these proposed 

regulations for taxable years ending 

before the date the Treasury decision 

adopting these regulations as final 

regulations is published in the Federal 

Register. 

The guidance these proposed 

regulations would provide with respect 

to disaster relief funds generally would 

be consistent with the guidance 

provided in section 5.01 of Notice 2006– 

109. However, in certain instances these 

proposed regulations would modify the 

guidance provided in Section 5.01 of 

Notice 2006–109. For taxable years 

ending before the date the Treasury 

decision adopting these regulations as 

final regulations is published in the 

Federal Register, taxpayers may rely on 

the guidance provided in section 5.01 of 

Notice 2006–109 or, alternatively, on 

these proposed regulations, including 

for periods prior to November 14, 2023. 

Special Analyses 

I. Regulatory Planning and Review 

Pursuant to the Memorandum of 

Agreement, Review of Treasury 

Regulations under Executive Order 

12866 (June 9, 2023), tax regulatory 

actions issued by the IRS are not subject 

to the requirements of section 6 of 

Executive Order 12866, as amended. 

Therefore, a regulatory impact 

assessment is not required. 

II. Paperwork Reduction Act 

The collections of information 

contained in this notice of proposed 

rulemaking have been submitted to the 

Office of Management and Budget for 

review in accordance with the 

Paperwork Reduction Act of 1995 (44 

U.S.C. 3507(d)). Comments on the 

collections of information should be 

sent to the Office of Management and 

Budget, Attn: Desk Officer for the 

Department of Treasury, Office of 

Information and Regulatory Affairs, 

Washington, DC 20503, with copies to 

the Internal Revenue Service, Attn: IRS 

Reports Clearance Officer, 

SE:W:CAR:MP:T:T:SP, Washington, DC 

20224. Comments on the collection of 

information should be received by 

January 16, 2024. Comments are 

specifically requested concerning: 

Whether the proposed collections of 

information are necessary for the proper 

performance of the functions of the 

Internal Revenue Service, including 

whether the information will have 

practical utility; 

The accuracy of the estimated burden 

associated with the proposed collections 

of information (see below); 

How the quality, utility, and clarity of 

the information to be collected may be 

enhanced; 

How the burden of complying with 

the proposed collections of information 

may be minimized, including through 

the application of automated collection 

techniques or other forms of information 

technology; and 

Estimates of capital or start-up costs 

and costs of operation, maintenance, 

and purchase of service to provide 

information. 

The collections of information in 

these proposed regulations are as 

follows. Section 53.4966–4(a)(4)(ii) 

allows a sponsoring organization to rely 

on a certification from the donor that all 

distributions satisfy the special rules 

relating to the single identified 

organization exception. Section 

53.4966–4(b), (c), and (d) require an 

organization with a fund excepted from 

the definition of a DAF to maintain 

records regarding recipients and the 

selection process for recipients. Section 

53.4966–4(c) also requires the 

organization to approve in writing the 

selection committee whose members are 

nominated by a section 501(c)(4) 

organization. Section 53.4966–5(c) 

allows a sponsoring organization to 

avoid a taxable distribution to certain 

foreign organization distributees if it 

makes a good faith determination 

regarding their tax-exempt status. 

Section 53.4966–5(a)(1)(ii)(B) requires a 

sponsoring organization to exercise 

expenditure responsibility with respect 

to certain distributions. 

The expected recordkeepers are 

sponsoring organizations of DAFs 

described in section 4966(d)(1), other 

organizations described in section 

4966(d)(1)(A) and (B) that maintain 

funds excepted from the definition of a 

DAF under section 4966(d)(2)(B) or (C) 

(and certain donors to funds described 

in section 4966(d)(2)(B)(i)), foreign 

organization distributees that are the 

subject of equivalency determinations 

by sponsoring organizations, and 

recipients of expenditure responsibility 

distributions. 

Estimated number of recordkeepers: 

13,961. 

Estimated average annual burden per 

recordkeeper: 3 hours, 47 minutes. 

Estimated total annual recordkeeping 

burden: 52,874 hours. 

Estimated annual frequency of 

responses: occasional. 

An agency may not conduct or 

sponsor, and a person is not required to 

respond to, a collection of information 

unless it displays a valid control 

number assigned by the Office of 

Management and Budget. 

Books or records relating to a 

collection of information must be 

retained as long as their contents may 

become material in the administration 

of any internal revenue law. Generally, 

tax returns and tax return information 

are confidential, as required by 26 

U.S.C. 6103. 

III. Regulatory Flexibility Act 

Pursuant to the Regulatory Flexibility 

Act (5 U.S.C. chapter 6), it is hereby 

certified that these proposed regulations 

will not have a significant economic 

impact on a substantial number of small 

entities. This certification is based on 

the fact that the proposed regulations 

will not impact a substantial number of 

small entities. Based on IRS Statistics of 

Income data for 2019, there are 

1,365,744 active nonprofit charitable 

organizations, of which 1,624 selfidentified as sponsoring organizations of 

donor advised funds (DAFs). Another 82 

organizations reported no DAFs but one 

or more funds similar to DAFs, for a 

total of 1,706 organizations reporting 

DAFs or funds similar to DAFs. Any 

economic impact stems from the 

collection of information under 

§§ 53.4966–4(a)(4)(ii); 53.4966–4(c)(2), 

(4), and (6); 53.4966–4(d)(4) and (6); and 


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77934 Federal Register / Vol. 88, No. 218 / Tuesday, November 14, 2023 / Proposed Rules 

53.4966–5(a)(1)(ii)(B) and (c)(2). The 

universe of sponsoring organizations 

that would be affected by the collection 

of information under §§ 53.4966– 

4(a)(4)(ii); 53.4966–4(c)(2), (4), and (6); 

53.4966–4(d)(4) and (6); and 53.4966– 

5(a)(1)(ii)(B) and (c)(2) is a small subset 

of all sponsoring organizations, since 

those provisions apply to limited 

exceptions to DAF status, to foreign 

organizations determined to be the 

equivalent of a U.S. public charity, or to 

organizations receiving distributions for 

which expenditure responsibility is 

exercised. Thus, the number of 

organizations that will be affected by the 

collection of information under 

§§ 53.4966–4(a)(4)(ii); 53.4966–4(c)(2), 

(4), and (6); 53.4966–4(d)(4) and (6); and 

53.4966–5(a)(1)(ii)(B) and (c)(2) will not 

be substantial. In 2019, of the 1,365,744 

active nonprofit charitable 

organizations, 1,706 organizations 

reported 988,718 DAFs and 72,144 nonDAF funds similar to DAFs. We estimate 

that of the 72,144 non-DAF funds 

reported for 2019, 1.5 percent or 1082 

will be section 501(c)(4) scholarship 

funds subject to the collection of 

information in § 53.4966–4(c)(2), (4), 

and (6), and that these funds will be 

maintained by a significantly small 

subset of the 1,706 total organizations 

reporting DAFs or funds similar to 

DAFs. In 2019, 0.3 percent of the 

1,365,744 active nonprofit charitable 

organizations reported disaster relief 

preparedness as their primary mission. 

Thus, we estimate that 0.3 percent or 

five of the 1,706 organizations may 

sponsor disaster relief funds subject to 

the collection of information in 

§ 53.4966–4(d)(4) and (6). Any costs 

incurred in meeting the collections of 

information applicable to section 

501(c)(4) scholarship funds and disaster 

relief funds would be considerably less 

than the costs incurred in establishing 

and running a separate section 501(c)(3) 

organization, which would be the 

alternative means of providing the same 

benefits through a nonprofit charitable 

organization. In addition, based on IRS 

Statistics of Income data for 2019, of the 

1,624 self-identified sponsoring 

organizations, an estimated 446 

organizations made grants to foreign 

organizations pursuant to equivalency 

determinations subject to the collection 

in § 53.4966–5(c)(2). An indeterminate 

number of foreign organizations 

receiving grants from the 446 grantmaking organizations also would be 

subject to the collection of information 

in § 53.4966–5(c)(2). The provisions of 

§ 53.4966–5(c)(2) relieve both 

sponsoring organizations and foreign 

organizations of the statutory 

expenditure responsibility requirements 

under section 4966(c)(1)(B)(ii) that 

would otherwise apply to grants to 

foreign organizations and that most 

organizations prefer to avoid. Based on 

the 2019 annual returns of private 

foundations, we estimate that very few 

sponsoring organizations make grants 

requiring expenditure responsibility. 

For these reasons, pursuant to the 

Regulatory Flexibility Act (5 U.S.C. 

Chapter 6), the Secretary hereby certifies 

that this rule will not have significant 

economic impact on a substantial 

number of small entities. 

Notwithstanding this certification, the 

Treasury Department and the IRS invite 

comments on the impact this rule may 

have on small entities. 

Pursuant to section 7805(f) of the 

Code, this proposed rule has been 

submitted to the Chief Counsel for the 

Office of Advocacy of the Small 

Business Administration for comment 

on its impact on small entities. 

IV. Unfunded Mandates Reform Act 

Section 202 of the Unfunded 

Mandates Reform Act of 1995 (UMRA) 

requires that agencies assess anticipated 

costs and benefits and take certain other 

actions before issuing a final rule that 

includes any Federal mandate that may 

result in expenditures in any one year 

by a State, local, or tribal government, 

in the aggregate, or by the private sector, 

of $100 million in 1995 dollars, updated 

annually for inflation. In 2022, that 

threshold is approximately $190 

million. The proposed regulations do 

not propose any rule that would include 

any Federal mandate that may result in 

expenditures by State, local, or tribal 

governments, or by the private sector in 

excess of that threshold. 

V. Executive Order 13132: Federalism 

Executive Order 13132 (Federalism) 

prohibits an agency from publishing any 

rule that has federalism implications if 

the rule either imposes substantial, 

direct compliance costs on State and 

local governments, and is not required 

by statute, or preempts State law, unless 

the agency meets the consultation and 

funding requirements of section 6 of the 

Executive Order. The proposed 

regulations do not propose rules that 

would have federalism implications, 

impose substantial direct compliance 

costs on State and local governments, or 

preempt State law within the meaning 

of the Executive Order. 

Comments and Requests for a Public 

Hearing 

Consideration will be given to any 

comments that are submitted timely to 

the IRS as prescribed in this preamble 

under the ADDRESSES heading. The 

Treasury Department and the IRS 

request comments on all aspects of the 

proposed regulations, and specifically 

request comments on the clarity of the 

proposed rules and how they can be 

made easier to understand, as well as on 

the proposed transition relief, including 

whether and in what circumstances 

additional transition guidance or relief 

may be necessary. All comments 

submitted will be made available at 

https://www.regulations.gov or upon 

request. 

A public hearing will be scheduled if 

requested in writing by any person that 

timely submits electronic or written 

comments. Requests for a public hearing 

are encouraged to be made 

electronically. If a public hearing is 

scheduled, notice of the date, time, and 

place of the hearing will be published 

in the Federal Register. Announcement 

2023–16, 2023–20 I.R.B. 854 (May 15, 

2023), provides that public hearings will 

be conducted in person, although the 

IRS will continue to provide a 

telephonic option for individuals who 

wish to attend or testify at a hearing by 

telephone. Any telephonic hearing will 

be made accessible to people with 

disabilities. 

Statement of Availability of IRS 

Documents 

Announcement 2023–16, Notices 

2006–109, 2007–21, 2015–62, and 2017– 

73, and Revenue Procedures 76–47, 80– 

39, and 2017–53 are published in the 

Internal Revenue Bulletin (or 

Cumulative Bulletin) and are available 

from the Superintendent of Documents, 

U.S. Government Printing Office, 

Washington, DC 20402, or by visiting 

the IRS website at http://www.irs.gov. 

Drafting Information 

The principal author of these 

regulations is Ward L. Thomas, Office of 

Associate Chief Counsel (Employee 

Benefits, Exempt Organizations, and 

Employment Taxes). However, other 

personnel from the IRS and the Treasury 

Department participated in their 

development. 

List of Subjects in 26 CFR Part 53 

Excise taxes, Foundations, 

Investments, Lobbying, Reporting and 

recordkeeping requirements. 

Proposed Amendments to the 

Regulations 

Accordingly, the Treasury Department 

and the IRS propose to amend 26 CFR 

part 53 as follows: 


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PART 53—FOUNDATION AND SIMILAR 

EXCISE TAXES 

■ Paragraph 1. The authority citation 

for part 53 continues to read, in part, as 

follows: 

Authority: 26 U.S.C. 7805 * * * 

■ Par. 2. Sections 53.4966–0 through 

53.4966–6 are added to read as follows: 

Sec. 

* * * * * 

53.4966–0 Outline of regulations. 

53.4966–1 Definitions. 

53.4966–2 Taxes on taxable distributions. 

53.4966–3 Definition of donor advised 

fund. 

53.4966–4 Exceptions to the definition of 

donor advised fund. 

53.4966–5 Taxable distributions. 

53.4966–6 Applicability date. 

* * * * * 

§ 53.4966–0 Outline of regulations. 

This section lists the paragraphs in 

§§ 53.4966–1 through 53.4966–6. 

§ 53.4966–1 Definitions. 

(a) In general. 

(b) Contribution. 

(c) Disqualified supporting organization. 

(d) Distributee. 

(e) Distribution. 

(1) In general. 

(2) Deemed distribution. 

(f) Donor. 

(g) Donor advised fund. 

(h) Donor-advisor. 

(1) In general. 

(2) Person who establishes fund or account. 

(3) Personal investment advisors. 

(i) In general. 

(ii) Exception. 

(4) Donor-recommended advisory committee 

member. 

(i) Fund manager. 

(1) In general. 

(2) Delegation of authority. 

(j) Related persons. 

(k) Section 4966 regulations. 

(l) Sponsoring organization. 

(m) Taxable distribution. 

§ 53.4966–2 Taxes on taxable distributions. 

(a) In general. 

(b) Taxes paid by the sponsoring 

organization. 

(c) Taxes paid by fund managers. 

(1) In general. 

(2) Agreement. 

(3) Knowledge. 

(4) Joint and several liability. 

(5) Limit on liability for managers. 

§ 53.4966–3 Definition of donor advised 

fund. 

(a) In general. 

(b) Separate identification by reference to 

contributions of a donor or donors. 

(1) In general. 

(2) Facts and circumstances tending to show 

that a fund or account is separately 

identified. 

(3) Commingling. 

(c) Advisory privileges. 

(1) In general. 

(i) Facts and circumstances. 

(ii) Application to entire fund or account. 

(iii) Donor, donor-advisor, or related person 

appointed to an advisory committee. 

(A) In general. 

(B) Exception. 

(iv) Officers, etc. of sponsoring organization. 

(v) Deemed advisory privileges. 

(2) Facts sufficient to find advisory 

privileges. 

(d) Substance over form. 

(e) Examples. 

§ 53.4966–4 Exceptions to the definition of 

donor advised fund. 

(a) Funds or accounts that make distributions 

only to a single identified organization. 

(1) In general. 

(2) Single identified organization. 

(3) Distributions to a single identified 

organization. 

(4) Special rules. 

(i) In general. 

(ii) Certifications. 

(5) Substitution for specified organization. 

(6) Examples. 

(b) Certain funds or accounts that grant 

scholarships. 

(1) In general. 

(2) Control of committee. 

(i) In general. 

(ii) Direct control. 

(iii) Indirect control. 

(3) Appointing members of the selection 

committee. 

(4) Examples. 

(c) Certain scholarship funds established by 

certain section 501(c)(4) organizations. 

(d) Certain disaster relief funds. 

§ 53.4966–5 Taxable distributions. 

(a) Taxable distributions. 

(1) In general. 

(2) Non-taxable distributions. 

(3) Special rule. 

(b) Distribution for purpose not specified in 

section 170(c)(2)(B). 

(1) In general. 

(2) Grants to noncharitable organizations. 

(c) Organizations described in section 

170(b)(1)(A). 

(1) In general. 

(2) Certain foreign organizations. 

(d) Expenditure responsibility. 

(1) In general. 

(2) Special rules. 

(i) Non-applicability of certain Code 

provisions. 

(ii) Substituted terms. 

(iii) Additional modifications. 

§ 53.4966–6 Applicability date. 

§ 53.4966–1 Definitions. 

(a) In general. The definitions in 

paragraphs (b) through (m) of this 

section apply for purposes of section 

4966 of the Internal Revenue Code 

(Code) and the section 4966 regulations. 

(b) Contribution. The term 

contribution means any gift, bequest, or 

similar payment or transfer, whether in 

cash or in-kind, to or for the use of a 

sponsoring organization. 

(c) Disqualified supporting 

organization. With respect to any 

distribution, the term disqualified 

supporting organization means— 

(1) Any Type III supporting 

organization, as defined in section 

4943(f)(5)(A) of the Code and the 

regulations under section 509(a)(3) of 

the Code, that is not a functionally 

integrated Type III supporting 

organization, as defined in section 

4943(f)(5)(B) and the regulations under 

section 509(a)(3) (see § 1.509(a)–4(i) of 

this chapter); and 

(2) Any other supporting organization 

described in section 509(a)(3) if a donor 

or donor-advisor with respect to the 

donor advised fund (either alone or 

together with related persons) directly 

or indirectly controls a supported 

organization (as defined in section 

509(f)(3)) of the supporting organization. 

For purposes of this paragraph (c), a 

supported organization will be 

considered controlled by a donor or 

donor-advisor with respect to the donor 

advised fund if that donor or donoradvisor, either alone or by aggregating 

votes or positions of authority with 

related persons, may require the 

supported organization to perform any 

act that significantly affects its 

operations or may prevent the 

supported organization from performing 

any such act. The supported 

organization will be considered to be 

controlled directly or indirectly by a 

donor or donor-advisor with respect to 

the donor advised fund, either alone or 

together with related persons, if the 

voting power of such persons is 50 

percent or more of the total voting 

power of the governing body of such 

supported organization or if one or more 

of such persons have the right to 

exercise veto power over the actions of 

the governing body of the supported 

organization. However, all pertinent 

facts and circumstances will be taken 

into consideration in determining 

whether one or more persons do in fact 

directly or indirectly control the 

supported organization. 

(d) Distributee. The term distributee 

means any person, governmental entity, 

or donor advised fund receiving a 

distribution. 

(e) Distribution—(1) In general. The 

term distribution means any grant, 

payment, disbursement, or transfer, 

whether in cash or in kind, from a donor 

advised fund. Except as provided in 

paragraph (e)(2) of this section, 

investments and reasonable investment 

or grant-related fees are not considered 

distributions. 

(2) Deemed distribution. A 

distribution includes any use of donor 

advised fund assets that results in a 

more than incidental benefit (within the 

meaning of section 4967) to a donor, 

donor-advisor, or related person. In 

addition, a distribution includes an 

expense charged solely to a particular 

donor advised fund that is paid, directly 


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77936 Federal Register / Vol. 88, No. 218 / Tuesday, November 14, 2023 / Proposed Rules 

or indirectly, to a donor, donor-advisor, 

or related person with respect to the 

donor advised fund. 

(f) Donor. The term donor means any 

person described in section 7701(a)(1) of 

the Code that makes a contribution to a 

fund or account of a sponsoring 

organization, other than a contributor 

that is a governmental unit described in 

section 170(c)(1) of the Code or an 

organization described in section 

509(a)(1), (2), or (3) that is not a 

disqualified supporting organization. 

(g) Donor advised fund. See 

§ 53.4966–3 for the definition of donor 

advised fund. See § 53.4966–4 for 

exceptions to the definition of donor 

advised fund. 

(h) Donor-advisor—(1) In general. The 

term donor-advisor means a person 

appointed or designated by a donor to 

have advisory privileges regarding the 

distribution or investment of assets held 

in a fund or account of a sponsoring 

organization. If a donor-advisor 

delegates any of the donor-advisor’s 

advisory privileges to another person, or 

appoints or designates another donoradvisor, that person is also a donoradvisor. No particular form of 

appointment or designation is 

necessary. Except as provided in 

paragraphs (h)(3)(ii) and (h)(4) of this 

section, a donor-advisor includes a 

person recommended by a donor or 

donor-advisor to have advisory 

privileges if the sponsoring organization 

provides such privileges. 

(2) Person who establishes fund or 

account. A person (other than a person 

or governmental unit excepted from 

status as a donor under paragraph (f) of 

this section) who establishes a fund or 

account and advises as to the 

distribution or investment of amounts in 

that fund or account will be treated as 

a donor-advisor with respect to that 

fund or account, regardless of whether 

the person contributes to the fund or 

account. 

(3) Personal investment advisors—(i) 

In general. An investment advisor 

defined in section 4958(f)(8)(B) of the 

Code who manages the investment of, or 

provides investment advice with respect 

to, both the assets maintained in a donor 

advised fund and the personal assets of 

a donor to that donor advised fund 

(personal investment advisor) will be 

treated as a donor-advisor with respect 

to the donor advised fund while serving 

in that dual capacity regardless of 

whether the donor appointed, 

designated, or recommended the 

personal investment advisor. 

(ii) Exception. A personal investment 

advisor is not considered a donoradvisor if the personal investment 

advisor is properly viewed as providing 

services to the sponsoring organization 

as a whole, rather than providing 

services to the donor advised fund. 

(4) Donor-recommended advisory 

committee member. A person 

recommended by a donor or donoradvisor and appointed by the 

sponsoring organization to serve as a 

member of a committee of the 

sponsoring organization that advises as 

to distributions or investments of 

amounts in a fund or account is a donoradvisor unless— 

(i) The recommendation is based on 

objective criteria related to the expertise 

of the member in the particular field of 

interest or purpose of the fund or 

account; 

(ii) The committee consists of three or 

more individuals, and a majority of the 

committee is not recommended by the 

donor or donor-advisor; and 

(iii) The recommended person is not 

a related person with respect to the 

recommending donor or donor-advisor. 

(i) Fund manager—(1) In general. The 

term fund manager means, with respect 

to any sponsoring organization— 

(i) An officer, director, or trustee of 

the sponsoring organization or any 

person having authority or 

responsibility similar to that exercised 

by an officer, director, or trustee of a 

sponsoring organization; or 

(ii) With respect to any act (or failure 

to act) resulting in a taxable 

distribution, the employee who has final 

authority or responsibility (either 

individually or as a member of a 

collective body) for the act (or failure to 

act). 

(2) Delegation of authority. A person 

has authority or responsibility similar to 

that exercised by an officer, director, or 

trustee of a sponsoring organization 

within the meaning of paragraph (i)(1)(i) 

of this section if, with respect to an act 

(or failure to act) resulting in a taxable 

distribution, he or she has been 

delegated final authority or 

responsibility with respect to the act by 

an officer, director, or trustee of the 

sponsoring organization or by the 

governing body of the sponsoring 

organization. For example, an 

investment manager is a fund manager 

with respect to a taxable distribution if 

the sponsoring organization’s governing 

body delegated to the investment 

manager the final authority to make 

certain investment decisions and, in the 

exercise of that authority, the manager 

committed the sponsoring organization 

to making a taxable distribution. To be 

considered to have authority or 

responsibility similar to that exercised 

by an officer, director, or trustee of a 

sponsoring organization within the 

meaning of paragraph (i)(1)(i) of this 

section, a person need not be an 

employee of the sponsoring 

organization. A person does not have 

authority or responsibility similar to 

that exercised by an officer, director, or 

trustee of a sponsoring organization 

within the meaning of paragraph (i)(1)(i) 

of this section if the person is merely 

implementing a decision made by a 

superior. 

(j) Related persons. With respect to 

any individual, the term related person 

means a family member of the 

individual (as defined in section 

4958(f)(4)). With respect to any person 

or persons, the term related person also 

means a 35-percent controlled entity (as 

defined in section 4958(f)(3) by 

substituting such person or persons or 

their family members for persons 

described in subparagraph (A) or (B) of 

paragraph (1) in section 

4958(f)(3)(A)(i)). See section 

4958(f)(7)(B) and (C). 

(k) Section 4966 regulations. The term 

section 4966 regulations means this 

section and §§ 53.4966–2 through 

53.4966–6. 

(l) Sponsoring organization. The term 

sponsoring organization means any 

organization that— 

(1) Is described in section 170 (other 

than a governmental unit described in 

section 170(c)(1)), without the 

requirement under section 170(c)(2)(A) 

that it be created or organized in the 

United States or in any possession 

thereof, or under the law of the United 

States, any State, the District of 

Columbia, or any possession of the 

United States; 

(2) Is not a private foundation (as 

defined in section 509(a) and the 

regulations under section 509(a)); and 

(3) Maintains one or more donor 

advised funds. 

(m) Taxable distribution. See 

§ 53.4966–5 for the definition of taxable 

distribution. 

§ 53.4966–2 Taxes on taxable 

distributions. 

(a) In general. Section 4966 of the 

Internal Revenue Code imposes two 

excise taxes with respect to taxable 

distributions from a donor advised fund. 

Paragraph (b) of this section describes 

the excise tax under section 4966(a)(1) 

imposed on a sponsoring organization of 

a donor advised fund. Paragraph (c) of 

this section describes the excise tax 

under section 4966(a)(2) imposed on a 

fund manager who knowingly agrees to 

a taxable distribution. 

(b) Taxes paid by the sponsoring 

organization. For each taxable 

distribution, the excise tax imposed by 

section 4966(a)(1) is equal to 20 percent 

of the amount of the taxable distribution 


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Federal Register / Vol. 88, No. 218 / Tuesday, November 14, 2023 / Proposed Rules 77937 

from a donor advised fund. The tax 

imposed by section 4966(a)(1) (20- 

percent section 4966 tax) is paid by the 

sponsoring organization of the donor 

advised fund. 

(c) Taxes paid by fund managers—(1) 

In general. For each taxable distribution 

with respect to which section 4966(a)(1) 

imposes an excise tax, the excise tax 

imposed by section 4966(a)(2) is equal 

to five percent of the amount of the 

taxable distribution on the agreement of 

any fund manager who agreed to the 

making of the taxable distribution with 

knowledge that it is a taxable 

distribution as described in paragraph 

(c)(3) of this section. The tax imposed 

by section 4966(a)(2) (five-percent 

section 4966 tax) is paid by the fund 

manager or managers who agreed to the 

making of the taxable distribution. 

(2) Agreement. The agreement of any 

fund manager to the making of a taxable 

distribution consists of any 

manifestation of approval of the 

distribution that is sufficient to 

constitute an exercise of the fund 

manager’s authority to approve, or to 

exercise discretion in recommending 

approval of, the making of the 

distribution by the sponsoring 

organization, whether or not the 

manifestation of approval is the final or 

decisive approval on behalf of the 

sponsoring organization. 

(3) Knowledge. For purposes of 

section 4966(a)(2), a fund manager 

agrees to the making of a distribution 

with knowledge that it is a taxable 

distribution only if the manager either— 

(i) Is in fact aware that it is a taxable 

distribution; or 

(ii) Has knowledge of facts sufficient 

to determine that, based on those facts, 

the distribution would be a taxable 

distribution and negligently fails to 

make reasonable attempts to ascertain 

whether the distribution is a taxable 

distribution. 

(4) Joint and several liability. In any 

case in which more than one fund 

manager is liable for the five-percent 

section 4966 tax, all such fund managers 

are jointly and severally liable for the 

five-percent section 4966 taxes imposed 

with respect to that distribution. 

(5) Limit on liability for managers. 

The maximum aggregate amount of fivepercent section 4966 tax collectible for 

any one taxable distribution is $10,000. 

§ 53.4966–3 Definition of donor advised 

fund. 

(a) In general. Except as provided in 

§ 53.4966–4, the term donor advised 

fund means a fund or account— 

(1) That is separately identified by 

reference to contributions of a donor or 

donors in accordance with paragraph (b) 

of this section; 

(2) That is owned and controlled by 

a sponsoring organization; and 

(3) With respect to which at least one 

donor or donor-advisor has, or 

reasonably expects to have, advisory 

privileges with respect to the 

distribution or investment of amounts 

held in the fund or account by reason 

of the donor’s status as a donor in 

accordance with paragraph (c) of this 

section. 

(b) Separate identification by 

reference to contributions of a donor or 

donors—(1) In general. A fund or 

account is separately identified by 

reference to contributions of a donor or 

donors if the sponsoring organization 

maintains a formal record of 

contributions to the fund or account 

relating to a donor or donors. If there is 

no formal record, whether a fund or 

account is separately identified by 

reference to contributions of a donor or 

donors is based on all the facts and 

circumstances. 

(2) Facts and circumstances tending 

to show that a fund or account is 

separately identified. Facts and 

circumstances that are relevant in 

determining that a fund or account is 

separately identified by reference to 

contributions of a donor or donors 

include— 

(i) The fund or account balance 

reflects items such as contributions, 

dividends, interest, distributions, 

administrative expenses, and gains and 

losses (realized or unrealized); 

(ii) The fund or account is named 

after one or more donors, donoradvisors, or related persons; 

(iii) The sponsoring organization 

refers to the fund or account as a donor 

advised fund; 

(iv) The sponsoring organization has 

an agreement or understanding with one 

or more donors or donor-advisors that 

the fund or account is a donor advised 

fund; 

(v) One or more donors or donoradvisors regularly receive a fund or 

account statement from the sponsoring 

organization; and 

(vi) The sponsoring organization 

generally solicits advice from the 

donor(s) or donor-advisor(s) before it 

makes distributions from the fund or 

account. 

(3) Commingling. A fund or account 

does not fail to be a donor advised fund 

merely because the sponsoring 

organization commingles the assets 

attributed to the fund or account with 

other assets of the sponsoring 

organization, as long as the sponsoring 

organization treats the fund or account 

as attributable to contributions of a 

donor or donors. 

(c) Advisory privileges—(1) In 

general—(i) Facts and circumstances. 

Under section 4966(d)(2)(A)(iii) of the 

Internal Revenue Code (Code), at least 

one donor or donor-advisor must have, 

or reasonably expect to have, advisory 

privileges by reason of the donor’s 

status as a donor. A donor or donoradvisor may have, or reasonably expect 

to have, advisory privileges even in the 

absence of actual provision of advice. 

The existence of advisory privileges, or 

the reasonable expectation thereof, is 

based on all the facts and 

circumstances, which in turn depend on 

the conduct (and any agreement or 

understanding) of both the donor(s) or 

donor-advisor(s) and the sponsoring 

organization. Advisory privileges 

include those arising from service on an 

advisory committee. If a donor or donoradvisor has, or reasonably expects to 

have, advisory privileges as defined in 

this paragraph (c), then the advisory 

privileges are deemed to be by reason of 

the donor’s status as a donor except as 

otherwise provided in this paragraph 

(c). 

(ii) Application to entire fund or 

account. If at least one donor or donoradvisor has, or reasonably expects to 

have, advisory privileges with respect to 

a fund or account or any portion of a 

fund or account, advisory privileges by 

reason of the donor’s status as a donor 

exist with respect to that fund or 

account even if there are multiple 

donors to the fund or account. 

(iii) Donor, donor-advisor, or related 

person appointed to an advisory 

committee—(A) In general. A 

sponsoring organization’s appointment 

of a donor, donor-advisor, or related 

person to be on a committee of persons 

that advises as to distributions or 

investments of amounts in the fund or 

account will be deemed to result in 

advisory privileges by reason of the 

donor’s status as a donor unless– 

(1) The appointment is based on 

objective criteria related to the expertise 

of the appointee in the particular field 

of interest or purpose of the fund or 

account; 

(2) The committee consists of three or 

more individuals, not more than onethird of whom are related persons with 

respect to any member of the committee; 

and 

(3) The appointee is not a significant 

contributor to the fund or account, 

taking into account contributions by 

related persons with respect to the 

appointee, at the time of appointment. 

(B) Exception. An appointee may be 

deemed to have advisory privileges by 

reason of a donor’s status as a donor 


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77938 Federal Register / Vol. 88, No. 218 / Tuesday, November 14, 2023 / Proposed Rules 

based on the facts and circumstances, 

such as if the appointee was not a 

significant contributor to a fund or 

account at the time of appointment but 

became a significant contributor shortly 

thereafter. 

(iv) Officers, etc. of sponsoring 

organization. Advice provided solely in 

a person’s capacity as an officer, 

director, employee (or in a similar 

capacity) of a sponsoring organization 

does not by itself give rise to advisory 

privileges by reason of a donor’s status 

as a donor. However, if an officer, 

director, or employee of the sponsoring 

organization is allowed to advise how to 

distribute or invest amounts in a fund 

or account because of such person’s 

contributions to the fund or account, 

such person will be considered to have 

advisory privileges by reason of the 

person’s status as a donor with respect 

to that fund or account. 

(v) Deemed advisory privileges. 

Except as provided in paragraph 

(c)(1)(iv) of this section, if a donor is the 

sole person with advisory privileges 

with respect to a fund or account, the 

advisory privileges will be deemed to be 

by reason of the donor’s status as a 

donor. 

(2) Facts sufficient to find advisory 

privileges. A donor or donor-advisor has 

advisory privileges by reason of the 

donor’s status as a donor, regardless of 

whether they are exercised, if— 

(i) The sponsoring organization allows 

a donor or donor-advisor to provide 

nonbinding recommendations regarding 

distributions from, or regarding the 

investment of assets held in, a fund or 

account; 

(ii) A written agreement between the 

sponsoring organization and a donor or 

a donor-advisor states that a donor or 

donor-advisor has advisory privileges; 

(iii) A written document or any 

marketing material made available to a 

donor or donor-advisor indicates that a 

donor or donor-advisor may provide 

advice to the sponsoring organization 

regarding the distribution or investment 

of amounts held by a sponsoring 

organization (for example, a preapproved list of investment options or 

distributees that the sponsoring 

organization provides to a donor or 

donor-advisor); or 

(iv) The sponsoring organization 

generally solicits advice from a donor or 

donor-advisor regarding the distribution 

or investment of amounts held in a fund 

or account. 

(d) Substance over form. The 

Commissioner may look to the 

substance of an arrangement, not merely 

its form, in determining whether the 

arrangement is a donor advised fund. 

(e) Examples. The following examples 

illustrate the principles of this section 

(in each example, assume that the funds 

or accounts at issue are owned and 

controlled by the sponsoring 

organization): 

(1) Example 1. A, B, and C are 

unrelated donors who jointly establish 

Fund X at sponsoring organization Y. A, 

B, and C each make equal contributions 

to Fund X and each have advisory 

privileges with respect to all of the 

assets in Fund X. Y sends A monthly 

account statements showing Fund X’s 

account balance and any transactions in 

the account. A shares information about 

Fund X with B and C when asked or as 

needed. Fund X is separately identified 

by reference to contributions of donors 

and is a donor advised fund. 

(2) Example 2. Assume the same facts 

as paragraph (e)(1) of this section 

(Example 1), except that A makes 70 

percent of the contributions, B 20 

percent, and C 10 percent, with each 

having advisory privileges with respect 

to all of the assets in Fund X. Fund X 

is separately identified by reference to 

contributions of donors and is a donor 

advised fund. 

(3) Example 3. In Year 1, X, a 

governmental entity described in 

section 170(c)(1), and Y, a public charity 

described in section 509(a)(1) of the 

Code, establish and fully fund Fund M 

at sponsoring organization A. Fund M is 

separately identified with respect to X 

and Y. However, because neither X nor 

Y is a donor, Fund M is not separately 

identified by reference to contributions 

of a donor or donors and is not a donor 

advised fund. 

(4) Example 4. Assume the same facts 

as paragraph (e)(3) of this section 

(Example 3), except that in Year 2 

individual donors contribute to Fund M. 

Only X and Y have advisory privileges 

with respect to the distribution or 

investment of amounts held in Fund M. 

Because no donor or donor-advisor has 

advisory privileges with respect to Fund 

M, Fund M is not a donor advised fund. 

(5) Example 5. F, an individual, is a 

donor to Fund T, a multiple-donor fund 

at sponsoring organization X. F is also 

a director of X who provides investment 

advice that affects all funds at X in his 

capacity as a director. F will not be 

considered to have advisory privileges 

with respect to Fund T solely because 

of F’s duties as director of X. 

(6) Example 6. Assume the same facts 

as paragraph (e)(5) of this section 

(Example 5), except that by reason of F’s 

contribution to Fund T, F is appointed 

to a committee that advises how to 

distribute or invest amounts in Fund T. 

F has advisory privileges with respect to 

Fund T by reason of F’s status as a 

donor. 

(7) Example 7. Sponsoring 

organization Y has established Fund P, 

which is dedicated to the relief of 

poverty in City Z. Fund P is advised by 

a 5-member committee selected by Y 

from residents of City Z, potentially 

including donors to Fund P. The 

committee is comprised of community 

leaders and other persons with special 

knowledge or experience in the relief of 

poverty. Each committee member serves 

for a term of three years and cannot 

serve more than two terms. No 

committee member is related to another 

committee member and no committee 

member is (together with related 

persons with respect to any committee 

member) a significant contributor to 

Fund P. Over 100 citizens of City Z have 

contributed to Fund P. Y maintains a 

formal record of donors to Fund P and 

amounts contributed, and thus Fund P 

is separately identified by reference to 

contributions of donors. However, 

under the circumstances, no person who 

serves on the advisory committee of 

Fund P is deemed to have advisory 

privileges by reason of a donor’s status 

as a donor. Fund P is not a donor 

advised fund. 

(8) Example 8. Fifteen unrelated 

individuals establish Fund Q at 

sponsoring organization T. Each 

individual contributes to Fund Q, and 

these individuals constitute a committee 

appointed by T to advise on investments 

and distributions from Fund Q. T 

regularly issues a statement to one of the 

committee members (who shares the 

information with the others) showing 

the account balance and any 

transactions with Fund Q. Fund Q is a 

donor advised fund. 

(9) Example 9. Assume the same facts 

as in paragraph (e)(8) of this section 

(Example 8), except that the advisory 

committee consists of three of the 

donors, rotated annually. Fund Q is a 

donor advised fund. 

(10) Example 10. N, an individual, 

establishes Fund O at W, a sponsoring 

organization. Fund O serves as a 

memorial to N’s daughter, and receives 

many contributions from unrelated 

individuals. N is the only person with 

advisory privileges and thus is a donor 

advisor. Fund O is a donor advised 

fund. 

(11) Example 11. F, an individual, 

establishes Fund R at T, a sponsoring 

organization, to provide scholarship 

grants for the advancement of science at 

local secondary schools. F is the sole 

donor to Fund R. Pursuant to F’s 

recommendation, an advisory 

committee consisting of five persons is 

solely responsible for advising T with 


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respect to the distribution and 

investment of amounts held in Fund R. 

F recommends (and T appoints) two 

individuals who are the heads of the 

science departments of those schools, 

neither of whom is related to F. T 

independently appoints the other three 

committee members, none of whom are 

recommended by donors or related to 

donors. The persons recommended by F 

for committee membership are not 

donor-advisors because F’s 

recommendations are for individuals 

who are not related persons with respect 

to F, who, based on objective criteria, 

have expertise in the field of interest of 

Fund R, the committee consists of more 

than two individuals, and a majority of 

the committee is not recommended by 

F. Because no donor or donor-advisor 

has, or reasonably expects to have, 

advisory privileges with respect to the 

distribution or investment of amounts 

held in the fund or account by reason 

of the donor’s status as a donor, Fund 

R is not a donor advised fund. 

§ 53.4966–4 Exceptions to the definition of 

donor advised fund. 

(a) Funds or accounts that make 

distributions only to a single identified 

organization—(1) In general. The term 

donor advised fund does not include 

any fund or account that is established 

by written agreement to make (and that 

actually does make) distributions only 

to a single identified organization as 

defined in paragraph (a)(2) of this 

section, and that meets the other 

requirements of this paragraph (a). 

(2) Single identified organization. For 

purposes of this paragraph (a), the term 

single identified organization means an 

organization that is described in 

sections 170(c)(2) and 509(a)(1), (2), or 

(3) of the Internal Revenue Code (Code) 

(other than a disqualified supporting 

organization), or that is a governmental 

entity described in section 170(c)(1) if 

the distribution is exclusively for public 

purposes. 

(3) Distributions to a single identified 

organization. The sponsoring 

organization must make distributions 

from the fund or account only to the 

single identified organization for use in 

the single identified organization’s 

activities (other than the activities of 

administering donor advised funds or 

grant-making), and not to third parties 

on behalf of the single identified 

organization. 

(4) Special rules—(i) In general. A 

fund or account will not be treated as 

making distributions only to a single 

identified organization if— 

(A) A donor, donor-advisor, or related 

person has or reasonably expects to 

have the ability to advise regarding 

some or all of the distributions from the 

single identified organization to other 

individuals or entities; or 

(B) A distribution from the fund or 

account provides, directly or indirectly, 

a more than incidental benefit (within 

the meaning of section 4967 of the 

Code), to a donor, donor-advisor, or 

related person with respect to the fund. 

(ii) Certifications. A sponsoring 

organization may rely on a certification 

from the donor that no distribution will 

be described in paragraph (a)(4)(i) of 

this section as long as the sponsoring 

organization lacks knowledge to the 

contrary. 

(5) Substitution for specified 

organization. A sponsoring organization 

may substitute another single identified 

organization if the substitution is 

conditioned upon the occurrence of a 

loss of exemption, substantial failure or 

abandonment of operations, or a 

dissolution or reorganization that results 

in the named single identified 

organization ceasing to exist, and the 

event is beyond the direct or indirect 

control of donor(s), donor-advisor(s), or 

related persons. 

(6) Examples. The following examples 

illustrate the principles of this section: 

(i) Example 1. A and B, a married 

couple, establish Fund V at X, a 

sponsoring organization. Fund V is 

established by written agreement to 

make distributions only to Y, a 

university recognized as exempt under 

section 501(c)(3) of the Code and 

described in section 170(b)(1)(A)(ii). In 

the gift instrument, A and B reserve the 

right to recommend which university 

projects should be supported by Fund V 

and which investments to make with 

fund assets. A and B certify that A, B, 

and persons related to A and B do not 

benefit from any distributions from 

Fund V and do not have, or reasonably 

expect to have, the ability to advise 

regarding some or all of the 

distributions from Y to other entities. 

Fund V is not a donor advised fund 

because all distributions are made to a 

single identified organization, Y. 

(ii) Example 2. Assume the same facts 

as paragraph (a)(6)(i) of this section 

(Example 1), except that the sponsoring 

organization uses funds from Fund V to 

purchase goods to distribute to the 

community on behalf of Y. Fund V does 

not meet the exception for a fund or 

account that makes distributions only to 

a single identified organization because 

not all distributions from Fund V are 

made to the single identified 

organization, Y. 

(iii) Example 3. Assume the same 

facts as paragraph (a)(6)(i) of this section 

(Example 1), except that A is on the 

Board of Y. Because A has the ability to 

advise some or all of the distributions 

from Y to other entities, Fund V does 

not meet the exception for a fund or 

account that makes distributions only to 

a single identified organization. 

(b) Certain funds or accounts that 

grant scholarships—(1) In general. The 

term donor advised fund does not 

include any fund or account with 

respect to which a donor or donoradvisor advises as to which individuals 

receive grants for travel, study, or other 

similar purposes, if— 

(i) The exclusive purpose of the fund 

or account is to make grants to 

individuals for travel, study, or other 

similar purposes; 

(ii) The donor or donor-advisor 

provides advice exclusively in the 

person’s capacity as a member of the 

selection committee selecting the 

individuals who receive grants; 

(iii) All the members of the selection 

committee are appointed by the 

sponsoring organization; 

(iv) No combination of donor(s), 

donor-advisor(s), or related persons 

controls, directly or indirectly, the 

selection committee; 

(v) All grants from the fund or 

account are awarded on an objective 

and nondiscriminatory basis pursuant to 

a written procedure approved in 

advance by the board of directors of the 

sponsoring organization, and the 

procedure is designed to ensure that all 

the grants adhere to the principles set 

forth by section 4945(g)(1), (2) or (3) of 

the Code and the regulations under 

section 4945 (other than the 

requirement to get advance approval by 

the IRS); and 

(vi) The fund or account maintains 

adequate records as described in 

§ 53.4945–4(c)(6) that demonstrate the 

recipients were selected on an objective 

and nondiscriminatory basis. 

(2) Control of committee—(i) In 

general. For purposes of paragraph 

(b)(1)(iv) of this section, whether control 

of the committee exists is determined by 

looking to the substance, rather than the 

form, of any arrangement. 

(ii) Direct control. A committee will 

be considered controlled if donor(s), 

donor-advisor(s), or related persons, 

either alone or together— 

(A) Can require the committee to take 

or refrain from taking any action; 

(B) Control 50 percent or more of the 

total voting power of the committee; or 

(C) Have the right to exercise veto 

power over the committee’s decisions. 

(iii) Indirect control. Whether a 

committee is indirectly controlled by a 

combination of donor(s), donoradvisor(s), or related persons is 

determined by the facts and 

circumstances, including the nature of 


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77940 Federal Register / Vol. 88, No. 218 / Tuesday, November 14, 2023 / Proposed Rules 

any relationships among the members of 

the selection committee and with any 

donor, donor-advisor, or related person. 

For example, a committee is indirectly 

controlled by a combination of donor(s), 

donor-advisor(s), or related persons if a 

majority of the selection committee is 

currently engaged by the donor, donoradvisor, or any related person in any 

employment or fiduciary capacity, 

whether as an employee or independent 

contractor, or recommended by a donor 

or donor-advisor and appointed to the 

selection committee based on other than 

objective criteria regarding the person’s 

expertise, or a combination thereof. 

(3) Appointing members of the 

selection committee. In appointing the 

members of the selection committee, a 

sponsoring organization may act 

through its board of directors, trustees, 

or other governing body; a committee 

appointed by the governing body; or an 

appropriate officer of the sponsoring 

organization. 

(4) Examples. The following examples 

illustrate the principles of this section: 

(i) Example 1. Fund O was 

established at sponsoring organization Y 

to grant scholarships. Fund O receives 

contributions from many unrelated 

donors, including D, E, and F. Y 

appointed D, E, and F to serve on Fund 

O’s 5-person selection committee by 

reason of their status as donors. Because 

donors control its selection committee, 

Fund O does not meet the exception for 

certain funds or accounts that grant 

scholarships under paragraph (b) of this 

section. 

(ii) Example 2. Assume the same facts 

as in paragraph (b)(4)(i) of this section 

(Example 1), except that Y appoints G, 

a donor; H, G’s donor-advisor; and I, an 

attorney currently employed by G to 

serve on Fund O’s 5-person selection 

committee. Y appoints G, H, and I by 

reason of G’s status as a donor. The 

committee is indirectly controlled by G, 

and thus the fund does not meet the 

exception for certain funds or accounts 

that grant scholarships under paragraph 

(b) of this section. 

(iii) Example 3. Assume the same 

facts as in paragraph (b)(4)(i) of this 

section (Example 1), except that Y 

appoints D and four officers of Y who 

have not contributed to Fund O to serve 

on the 5-person selection committee. 

Assuming that the other requirements of 

paragraph (b)(1) of this section are met 

and that the facts do not indicate that D 

indirectly controls the committee, Fund 

O meets the exception for certain funds 

or accounts that grant scholarships 

under paragraph (b) of this section. 

(c) Certain scholarship funds 

established by certain section 501(c)(4) 

organizations. The term donor advised 

fund does not include a fund or account 

established by a broad-based 

membership organization described in 

section 501(c)(4) that establishes a 

committee to advise as to which 

individuals receive grants, if— 

(1) The fund or account’s single 

identified charitable purpose is to make 

grants to individuals for scholarships 

described in section 4945(g)(1); 

(2) The selection of recipients of 

scholarships from the fund or account is 

made using a selection committee the 

members of which are nominated by the 

section 501(c)(4) organization and 

approved in writing by the sponsoring 

organization; 

(3) The fund or account serves a 

charitable class; 

(4) Recipients of grants from the fund 

or account are selected on an objective 

and nondiscriminatory basis pursuant to 

a procedure, approved in advance by 

the sponsoring organization’s board of 

directors, that is designed to ensure that 

all the grants meet the requirements of 

section 4945(g)(1) and the regulations 

under section 4945 (other than the 

requirement to get advance approval by 

the IRS); 

(5) No distribution is made from the 

fund or account to, or for the benefit of: 

(i) Any director, officer, or trustee of 

the sponsoring organization of the fund 

or account; 

(ii) Any member of the fund or 

account’s selection committee; 

(iii) Any member, honorary member, 

or employee of the section 501(c)(4) 

organization; or 

(iv) Any related person with respect 

to anyone described in paragraph 

(c)(5)(i), (ii), or (iii) of this section; and 

(6) The fund or account maintains 

adequate records as described in 

§ 53.4945–4(c)(6) that demonstrate the 

recipients were selected on an objective 

and nondiscriminatory basis. 

(d) Certain disaster relief funds. The 

term donor advised fund does not 

include a fund or account if— 

(1) The fund or account’s single 

identified charitable purpose is to 

provide relief from one or more 

qualified disasters within the meaning 

of section 139(c)(1), (2), or (3) of the 

Code; 

(2) The fund or account serves a 

charitable class; 

(3) The selection of recipients of 

grants from the fund or account is made 

using a selection committee— 

(i) That is not directly or indirectly 

controlled (as defined in paragraph 

(b)(2) of this section) by donor(s), donoradvisor(s), or related persons and to 

which all the members are appointed by 

the sponsoring organization; or 

(ii) The majority of which, if the fund 

or account gives preference or priority 

to employees (or their family members) 

of an employer to receive grants, 

consists of persons who are not in a 

position to exercise substantial 

influence over the affairs of the 

employer (or adequate substitute 

procedures exist to ensure that any 

benefit to the employer is incidental and 

tenuous); 

(4) The selection committee selects 

recipients of grants from the fund or 

account (and determines the amounts of 

such grants) based on objective and 

nondiscriminatory determinations of 

need pursuant to a procedure approved 

in advance by the board of directors of 

the sponsoring organization; 

(5) No distribution is made from the 

fund or account that would result in 

more than incidental benefit (within the 

meaning of section 4967 of the Code) 

to— 

(i) Any director, officer, or trustee of 

the sponsoring organization of the fund 

or account; 

(ii) Any member of the fund’s 

selection committee; or 

(iii) Any related person with respect 

to a director, officer, or trustee of the 

sponsoring organization or to a member 

of the selection committee; and 

(6) Records are maintained that 

demonstrate the need of the recipients 

for the disaster relief assistance 

provided and that satisfy section 

6033(b)(14) of the Code. 

§ 53.4966–5 Taxable distributions. 

(a) Taxable distributions—(1) In 

general. Except as provided in 

paragraphs (a)(2) and (3) of this section, 

the term taxable distribution means any 

distribution from a donor advised 

fund— 

(i) To any natural person; or 

(ii) To any other person if— 

(A) The distribution is for any 

purpose other than one specified in 

section 170(c)(2)(B) of the Internal 

Revenue Code (Code), as defined in 

paragraph (b) of this section; or 

(B) The sponsoring organization does 

not exercise expenditure responsibility 

with respect to the distribution in 

accordance with paragraph (d) of this 

section. 

(2) Non-taxable distributions. The 

term taxable distribution does not 

include any distribution from a donor 

advised fund to— 

(i) Any organization described in 

section 170(b)(1)(A) (other than a 

disqualified supporting organization), as 

defined in paragraph (c) of this section; 

(ii) The sponsoring organization of the 

donor advised fund; or 

(iii) Any other donor advised fund. 

(3) Special rule. If a series of 

distributions is undertaken pursuant to 


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Federal Register / Vol. 88, No. 218 / Tuesday, November 14, 2023 / Proposed Rules 77941 

a plan that achieves a result inconsistent 

with the purposes of section 4966 of the 

Code, the distributions are treated as a 

single distribution for purposes of 

section 4966. For example, if a donor 

advises a distribution, that the 

sponsoring organization subsequently 

makes, from a donor advised fund to 

Charity X and the donor or the 

sponsoring organization arranges for 

Charity X to use the funds to make 

distributions to individuals 

recommended by the donor, the 

distribution will be a taxable 

distribution from the sponsoring 

organization to individuals. 

(b) Distribution for purpose not 

specified in section 170(c)(2)(B)—(1) In 

general. For purposes of paragraph 

(a)(1)(ii)(A) of this section, a distribution 

to be used for an activity that is 

prohibited under section 501(c)(3) of the 

Code or for an activity that, if it were a 

substantial part of a section 501(c)(3) 

organization’s total activities, would 

cause loss of tax exemption, is not for 

a purpose specified in section 

170(c)(2)(B). For example, a distribution 

used for political campaign intervention 

activity or for attempting to influence 

legislation is considered to be for a 

purpose not specified in section 

170(c)(2)(B). Purposes described in 

section 170(c)(2)(B) are treated as such 

whether or not carried out by an 

organization described in section 170(c). 

(2) Grants to noncharitable 

organizations. If the distribution is a 

grant (as defined in § 53.4945–4(a)(2)) to 

any organization (other than an 

organization described in section 

501(c)(3) and not in section 509(a)(4) of 

the Code), it will not be considered for 

a purpose specified in section 

170(c)(2)(B) unless the grantee agrees 

either to separately account for the grant 

funds on its books or to segregate the 

grant funds. 

(c) Organizations described in section 

170(b)(1)(A)—(1) In general. For 

purposes of paragraph (a)(2)(i) of this 

section, an organization will be treated 

as described in section 170(b)(1)(A) if— 

(i) It is described in both sections 

170(b)(1)(A) and 170(c)(2), other than a 

disqualified supporting organization, 

and without regard to section 

170(c)(2)(A); 

(ii) It is a governmental unit described 

in section 170(b)(1)(A)(v) and 170(c)(1) 

(or an agency or instrumentality thereof, 

including an organization described in 

section 511(a)(2)(B) of the Code), as long 

as the distribution to it is made for 

exclusively public purposes; or 

(iii) It is a foreign government (or an 

agency or instrumentality thereof), or an 

international organization designated as 

such by Executive Order under 22 

U.S.C. 288, as long as the distribution to 

it is made exclusively for charitable 

purposes as described in section 

170(c)(2)(B). 

(2) Certain foreign organizations. For 

purposes of this section, a foreign 

organization distributee that does not 

have a ruling or determination letter 

that it is an organization described in 

sections 501(c)(3) and 170(b)(1)(A) 

(other than a disqualified supporting 

organization) will be treated as 

described in sections 501(c)(3) and 

170(b)(1)(A) (other than a disqualified 

supporting organization) if, prior to the 

distribution, the sponsoring 

organization makes a good faith 

determination, using procedures similar 

to those set forth in § 53.4945–5(a)(5), 

that the distributee is described in 

sections 501(c)(3) and 170(b)(1)(A) 

(other than a disqualified supporting 

organization). 

(d) Expenditure responsibility—(1) In 

general. For purposes of paragraph 

(a)(1)(ii)(B) of this section, a sponsoring 

organization will be treated as 

exercising expenditure responsibility if 

it follows the procedures set forth in 

§ 53.4945–5(b) through (e) as modified 

by paragraph (d)(2) of this section. 

(2) Special rules—(i) Nonapplicability of certain Code provisions. 

References to sections 507, 4945(d), and 

4948 of the Code do not apply. 

(ii) Substituted terms. In applying 

§ 53.4945–5(b) through (e), substitute 

sponsoring organization for private 

foundation, granting private foundation, 

granting foundation, grantor 

foundation, foundation, or grantor (but 

not for private foundation grantees in 

§ 53.4945–5(c)); substitute distribution 

for grant or amount granted; substitute 

distributee for grantee; and substitute 

taxable distribution for taxable 

expenditure each place they appear. 

(iii) Additional modifications. In lieu 

of § 53.4945–5(b)(3)(iv)(c) and 

(b)(4)(iv)(c), the distributee must agree 

not to use any of the funds to make any 

grant to an organization that does not 

comply with the expenditure 

responsibility requirements of this 

paragraph (d), to make any grant to a 

natural person, or to make any grant, 

loan, compensation, or other similar 

payment (as described in section 

4958(c)(2) of the Code) to a donor, 

donor-advisor, or related person with 

respect to the donor advised fund from 

which the distribution that is the subject 

of the agreement is made. 

§ 53.4966–6 Applicability date. 

Applicability date. The rules of 

§§ 53.4966–1 through 53.4966–5 apply 

to taxable years ending on or after [the 

date of publication of the Treasury 

decision adopting these rules as final 

regulations in the Federal Register]. 

Douglas W. O’Donnell, 

Deputy Commissioner for Services and 

Enforcement. 

[FR Doc. 2023–24982 Filed 11–13–23; 8:45 am] 

BILLING CODE 4830–01–P 

ENVIRONMENTAL PROTECTION 

AGENCY 

40 CFR Part 257 

[EPA–HQ–OLEM–2020–0107; FRL–7814– 

05–OLEM] 

RIN 2050–AH14 

Hazardous and Solid Waste 

Management System: Disposal of Coal 

Combustion Residuals From Electric 

Utilities; Legacy CCR Surface 

Impoundments 

AGENCY: Environmental Protection 

Agency (EPA). 

ACTION: Notice of data availability 

(NODA). 

SUMMARY: The Environmental Protection 

Agency (EPA or the Agency) is 

announcing the availability of new 

information and data pertaining to the 

Agency’s May 18, 2023 proposed 

rulemaking on the Disposal of Coal 

Combustion Residuals (CCR) from 

Electric Utilities; Legacy CCR Surface 

Impoundments. EPA is seeking public 

comment on this additional 

information, which may affect the 

Agency’s decisions as it develops a final 

rule. EPA is not reopening any other 

aspect of the proposal, the CCR 

regulations, or the underlying support 

documents that were previously 

available for comment. 

DATES: Comments must be received on 

or before December 11, 2023. 

ADDRESSES: You may send comments, 

identified by Docket ID No. EPA–HQ– 

OLEM–2020–0107, by any of the 

following methods: 

• Federal eRulemaking Portal: 

https://www.regulations.gov/ (our 

preferred method). Follow the online 

instructions for submitting comments. 

• Mail: U.S. Environmental 

Protection Agency, EPA Docket Center, 

OLEM Docket, Mail Code 28221T, 1200 

Pennsylvania Avenue NW, Washington, 

DC 20460. 

• Hand Delivery or Courier (by 

scheduled appointment only): EPA 

Docket Center, WJC West Building, 

Room 3334, 1301 Constitution Avenue 

NW, Washington, DC 20004. The Docket 

Center’s hours of operations are 8:30 

a.m. to 4:30 p.m., Monday through 

Friday (except Federal Holidays). 


khammond on DSKJM1Z7X2PROD with PROPOSALS