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55746 Federal Register/Vol. 76, No. 174/Thursday, September 8, 2011/Rules and Regulations

DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Parts 1 and 602

[TD 9549]

RIN 1545-BH28

Implementation of Form 990

AGENCY: Internal Revenue Service (IRS),

Treasury.

ACTION: Final regulations and removal of

temporary regulations.

SUMMARY: This document contains final

regulations necessary to implement the

redesigned Form 990, "Return of

Organization Exempt From Income

Tax." These final regulations make

revisions to the regulations to allow for

new threshold amounts for reporting

compensation, to require that

compensation be reported on a calendar

year basis, and to modify the scope of

organizations subject to information

reporting requirements upon a

substantial contraction. The final

regulations also eliminate the advance

ruling process for new organizations,

change the public support computation

period for publicly supported

organizations to five years, consistent

with the revised Form 990, and clarify

that support must be reported using the

organization's overall method of

accounting. All tax-exempt

organizations required to file annual

information returns are affected by these

regulations.

DATES: Effective Date: These regulations

are effective on September 8, 2011.

Applicability Date: For dates of

applicability, see §§ 1.170A-9(k), 1.507-

2(f), 1.509(a)-3(o), 1.6033-2(k), and

1.6043-3(e).

FOR FURTHER INFORMATION CONTACT:

Terri Harris at (202) 622-6070 (not a

toll-free number).

SUPPLEMENTARY INFORMATION:

Paperwork Reduction Act

The collection of information

contained in these final regulations has

been reviewed and approved by the

Office of Management and Budget in

accordance with the Paperwork

Reduction Act of 1995 (44 U.S.C.

3507(d)) under control number 1545-

2117. The estimated annual burden per

recordkeeper will vary, depending on

individual circumstances. The

collection of information in this final

regulation is in § 1.6033-2. The

information collected under § 1.6033-2

relates to compensation reporting by

tax-exempt organizations. The

information that is required to be

collected for purposes of § 1.6033-2 is

required to be submitted on Form 990,

"Return of Organization Exempt From

Income Tax." For further information

concerning this collection of

information and the burden associated

with the Form 990, or where to submit

comments on this collection of

information and the accuracy of the

estimated burden, please refer to the

instructions of the Form 990. The total

annual reporting burden associated with

this document is one hour.

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.

Background

Form 990

Under section 6033 of the Internal

Revenue Code (Code), organizations that

are exempt from Federal income tax

under section 501(a) are generally

required to file an annual information

return reporting gross income, receipts,

disbursements, and such other

information as the IRS requires. Certain

exceptions to this filing requirement

apply. For example, churches are not

required to file annual information

returns. The Treasury regulations direct

that the annual information return shall

be filed on Form 990, "Return of

Organization Exempt From Income Tax"

or Form 990-PF, "Return of Private

Foundation or Section 4947(a)(1)

Nonexempt Charitable Trust Treated as

a Private Foundation." The regulations

further specify certain information to be

reported on the return.

The IRS revises forms and

instructions on an annual basis to reflect

changes in the law and evolving tax

administration needs. On December 20,

2007, the IRS released a redesigned

Form 990. The Form 990 had not been

significantly revised since 1979, and

both the IRS and stakeholders regarded

the form as needing major revision to

keep pace with changes in the law and

with the increasing size, diversity, and

complexity of the exempt sector. With

the exception of certain smaller

organizations for which there is a

graduated transition period,

organizations began using the new form

for the 2008 tax year (returns filed in

2009).

On September 9, 2008, the IRS and

the Treasury Department issued final

and temporary regulations under

sections 170(b), 507, 509(a), 6033, and

6043 necessary to implement the

redesigned Form 990, "Return of

Organization Exempt from Income Tax,"

(TD 9423) in the Federal Register (73 FR

52528). Also on September 9, 2008, the

IRS and the Treasury Department issued

a notice of proposed rulemaking crossreferencing those Temporary

Regulations and inviting public

comment and requests for a public

hearing (REG-142333-07) in the

Federal Register (73 FR 52218).

The IRS did not receive any requests

for a public hearing. The IRS received

one written comment responding to this

notice. After consideration of the

comment, the proposed regulations are

revised and published in final form

substantially as proposed. The major

areas of comment and revision are

discussed in the following Explanation

of Provisions.

Summary of Comments and

Explanation of Provisions

Private Foundation Status and Advance

Rulings

In its application for recognition of

tax-exempt status (Form 1023,

"Application for Recognition of

Exemption Under Section 501(c)(3) of

the Internal Revenue Code"), a section

501(c)(3) organization also requests a

determination of its private foundation

status or public charity status, that is,

whether it is a private foundation and,

if not, the Code provision excepting it

from private foundation classification.

Under the current statute and prior

regulations, an organization could

request either an advance ruling or a

definitive ruling addressing the

organization's exemption under section

501(c)(3) and its private foundation

status under section 509(a). The

proposed regulations eliminated the

advance ruling process and provided

instead that an organization would be a

publicly supported organization (thus

qualifying for public charity status) in

its first five years if it could show, in its

application for exemption, that it could

reasonably be expected to receive the

requisite public support during such

period.

The comment suggested that the final

regulations clarify the process for

requesting an updated ruling or

determination letter as to public charity

status under §§ 1.170A-9(f)(5) and

1.509(a)-3(e). This process is now

explained in Rev. Proc. 2011-10, 2011-
Federal Register/Vol. 76, No. 174/Thursday, September 8, 2011/Rules and Regulations

2 IRB 294 and its successors. Thus, the

final regulations do not incorporate this

suggestion.

Computation Period for Public Support

The proposed regulations changed the

computation period for public support

from a four-year period comprised of the

four years prior to the taxable year being

tested to a five-year period ending with

the taxable year being tested. An

organization that meets a public support

test for a taxable year is treated as

publicly supported for that taxable year

and the immediately succeeding taxable

year. An organization that does not meet

a public support test for a taxable year

may be at risk of being classified as a

private foundation as of the first day of

the succeeding taxable year if the

organization also fails to meet a public

support test for that succeeding taxable

year. Because the IRS and the Treasury

Department recognized that an

organization will not be able to compute

its public support for a taxable year

under the changed computation period

until the subsequent taxable year, the

notice of proposed rulemaking

requested comments on specific

situations that might warrant relief from

the imposition of Chapter 42 excise

taxes. In addition, organizations that

believed that it would be unfair or

inequitable to impose the private

foundation excise taxes or penalties

against them for all or part of the first

year in which they were reclassified as

private foundations were invited to

contact the IRS, Exempt Organizations,

Rulings and Agreements, Washington,

DC. No organizations contacted the IRS.

The comment suggested that the final

regulations should treat organizations

that fail a public support test for two

consecutive years as private foundations

as of the beginning of the second test

year only for purposes of section 507

(termination of private foundation

status) and section 4940 (excise tax on

investment income), and that such an

organization should not be treated as a

private foundation for all other purposes

until the beginning of the third

consecutive taxable year. The

commenter suggested that such a rule

was necessary because organizations

cannot always predict the amount of

support they receive from year-to-year.

The comment analogized this suggestion

to the rule that previously applied when

a new organization reached the end of

its five-year advance ruling period.

Under the prior regulations, an

organization generally was treated as

publicly supported until 90 days after

the end of the advance ruling period, or,

if Form 8734, "Support Schedule for

Advance Ruling Period," was timely

submitted, until the IRS made a final

determination of its status. If an

organization failed to qualify as a

publicly supported organization, only

the section 4940 investment income tax

and section 507 termination tax applied

for the five-year advance ruling period

that had already ended. The reclassified

organization and its disqualified

persons would be subject to all the

Chapter 42 excise taxes applicable to

private foundations and disqualified

persons only after the end of the 90-day

period or when the IRS made a final

determination.

In response to the comment, the final

regulations provide that an organization

that fails a public support test for two

consecutive taxable years will be treated

as a private foundation as of the

beginning of the second year of failure

only for purposes of sections 507, 4940,

and 6033. An organization will be

treated as a private foundation for all

purposes beginning the first day of the

third consecutive taxable year.

The comment also suggested adding

examples applying the "facts and

circumstances test" under § 1.170(A)-

9T(f)(3) or issuing other guidance

providing examples of the application of

this test. The proposed regulations

contained numerous examples reflecting

the five-year computation period in

§§ 1.170A-9T(f)(9), 1.509(a)-3T(c)(6),

and 1.509(a)-3T(e)(3), including several

examples illustrating the application of

the facts and circumstances test in

§ 1.170A-9(f)(9). The final regulations

retain the examples in the proposed

regulations but do not include

additional examples, as it was not clear

what additional clarification was

needed.

Method of Accounting

Previously, when a section 501(c)(3)

organization computed its public

support, it was required to use the cash

method of accounting to report the

amount of public support it received on

Schedule A, "Public Charity Status and

Public Support," even if the

organization used the accrual method of

accounting to keep its books under

section 446, and otherwise report on

Form 990. Under the proposed

regulations, when a section 501(c)(3)

organization computed its public

support and reported the information on

Schedule A, it was required to use the

same accounting method that it uses to

keep its books under section 446 and

that it otherwise uses to report on its

Form 990.

The comment observed that an

organization using the accrual method

of accounting to keep its books and to

calculate its public support will need to

include the present value of a multi-year

grant as support in the year in which the

grant commitment is received. The

commenter suggested that this could

deter private foundations from making

substantial multi-year grants to an

organization due to a concern that the

grant could cause the organization to

fail the public support test and be

reclassified as a private foundation. The

comment suggested that the unusual

grant rules in the final regulations be

expanded to add a new factor giving

favorable consideration to certain types

of multi-year private foundation grants.

Alternatively, the comment suggested

that the regulations should permit

organizations to elect, for purposes of

the public support test, to accrue multiyear grants ratably over the period to

which they relate.

The final regulations do not

incorporate these suggestions. While the

requirement to compute public support

in accordance with an organization's

normal method of accounting generally

is advantageous and less cumbersome

for most organizations, the IRS and the

Treasury Department recognize that

some accrual-method organizations

receiving substantial multi-year grants

from private foundations and

individuals may be concerned that the

requirement to account for those multiyear grants on an accrual-method may

adversely affect their public charity

status. However, the longer, five-year

testing period in the proposed and final

regulations should mitigate the impact

of recognizing a larger amount of

support from one source in a single

year.

In addition, one of the goals of the

redesign of the Form 990 was to

implement consistent reporting

throughout each organization's Form

990 and financial records in order to

reduce an organization's recordkeeping

burden and to increase transparency of

an organization's activities to the

general public. In general, use of an

organization's normal method of

accounting for calculation of its public

support reduces the recordkeeping and

reporting burden on accrual-method

taxpayers, as they no longer must

maintain separate cash method records

solely for reporting public support on

Schedule A. The revised Form 990,

Schedule A, sets forth easier-to-follow

rules for calculating public support and

captures the information necessary for

the organization and the general public

to monitor an organization's compliance

with the public support tests. Consistent

financial reporting on the basis of an

organization's normal accounting

method throughout the organization's

Form 990, including the support test in

55747
55748 Federal Register/Vol. 76, No. 174/Thursday, September 8, 2011/Rules and Regulations

Schedule A, facilitates reconciliation of

the Form 990 reporting with an

organization's audited financial

statements, increasing the ability of the

general public to rely on an

organization's Form 990 as an accurate

reflection of the organization's financial

circumstances. Consistent reporting

thus assists in the oversight of the

charitable community by the general

public, as well as by the IRS. Given

these considerations, the IRS and the

Treasury Department have determined

not to adopt the suggested elective

change to the accounting method for

multi-year grants.

The IRS and the Treasury Department

also decline to adopt the suggestion that

the unusual grant rules be expanded to

include multi-year grants. The public

support test is designed to ensure that

an organization is not funded by a small

number of large donors, and IRS and the

Treasury Department do not believe it

should exclude a large contribution

from a single donor simply because it is

paid out over a number of years. The

fact that a grant is a multi-year grant has

historically been taken into

consideration in determining whether a

particular grant constitutes an unusual

grant, at times to the benefit and at

times to the detriment of the recipient

organization. The unusual grant

exclusion generally applies to

substantial contributions or bequests

that (1) Are attracted by the publicly

supported nature of the organization, (2)

are unusual or unexpected in their

amount, and (3) would adversely affect

the organization's public charity status

because of their amount. The final

regulations in §§ 1.170A-9(f)(6)(ii)(B)

and 1.509(a)-3(c)(3)(iii) provide that all

pertinent facts and circumstances

continue to be taken into consideration

when determining whether a particular

contribution will be excluded from the

support calculation under the unusual

grant exclusion, with no single factor

being determinative.

If an accrual basis organization

receives a substantial multi-year grant

from a private foundation or individual

that, taken along with all other facts and

circumstances, would satisfy the

standards in §§ 1.170A-9(f)(6) and

1.509(a)-3(c)(3) for treatment as an

unusual grant, such a grant generally

would be excluded from the

computation of public support. An

organization may request a private letter

ruling pursuant to §§ 1.170A-9(f)(6)(iv)

and 1.509(a)-3(c)(5) that a multi-year

grant constitutes an unusual grant under

§§ 1.170A-9(f)(6)(ii) and 1.509(a)-

3(c)(3), based on all the facts and

circumstances. See also Rev. Proc 2011-

4 (2011-1 IRB 123) and its successors.

Additionally, Rev. Proc. 81-7 (1981-1

CB 621), provides guidelines regarding

grants and contributions, including

multi-year grants to finance capital

items, that will be considered unusual

grants under §§ 1.170A-9(f)(6)(ii) and

1.509(a)-3(c)(3) and related provisions

without a private letter ruling from the

IRS.

Reliance

The proposed regulations provided

that donors may rely on an

organization's ruling that the

organization is described in sections

170(b)(1)(A)(vi) and 509(a)(1) or in

section 509(a)(2) until notice of a change

in status is provided to the public (such

as by publication in the Internal

Revenue Bulletin), unless the donor was

responsible for, or aware of, the act or

failure to act that results in the

organization's loss of public charity

status. The proposed regulations further

provided that donors may rely on

advance rulings that expire on or after

June 9, 2008, until notice of a change in

status is provided to the public (such as

by publication in the Internal Revenue

Bulletin).

The comment suggested that the final

regulations should incorporate a safe

harbor under which a grantor or

contributor will not be considered

responsible for, or aware of, an act or

failure to act that will result in loss of

public charity status, such as those set

forth in Rev. Proc. 89-23 (1989-1 CB

844) and Rev. Proc. 81-6 (1981-1 CB

620). The IRS and the Treasury

Department agree that grantor reliance

safe harbors, such as those noted, are

still appropriate, but believe that this

guidance is more appropriately

provided in non-regulatory form, such

as revenue procedures. Therefore, the

final regulations do not incorporate this

suggestion.

However, the final regulations do

restore, in §§ 1.170A-9(f)(5)(iii) and

1.509-3(e)(2)(ii), language that was

inadvertently deleted from the proposed

regulations giving limited grantor and

donor reliance based on a written

statement from the grantee organization.

Section 4966 imposes an excise tax on

a sponsoring organization of a donor

advised fund (DAF) for each taxable

distribution it makes from a DAF. Under

section 4966(c), a taxable distribution

generally is any distribution from a DAF

to any natural person, or to any other

person if (i) The distribution is for any

purpose other than one specified in

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

sponsoring organization maintaining the

DAF does not exercise expenditure

responsibility with respect to such

distribution in accordance with section

4945(h). Among other things, a taxable

distribution does not include a

distribution from a DAF to any

organization described in section

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

supporting organization).

Notice 2006-109 (2006-2 C.B. 1121)

requested comments on the application

of the Pension Protection Act of 2006,

Public Law 109-280 (120 Stat. 780

(2006)) (PPA) to DAFs and supporting

organizations. Several comments were

received requesting that sponsoring

organizations of DAFs be allowed to rely

on an IRS ruling or determination of an

organization's public charity status for

various purposes, including for

purposes of determining whether a

distribution to an organization would be

a taxable distribution under section

4966. The IRS and the Treasury

Department agree that reliance relief for

sponsoring organizations of DAFs is

appropriate. Accordingly, the final

regulations provide that, for purposes of

section 4966, sponsoring organizations

of DAFs may rely on an IRS

determination letter or ruling that the

organization is described in sections

170(b)(1)(A)(vi) and 509(a)(1) or in

section 509(a)(2) to the same extent as

other grantors and contributors. The

final regulations also allow sponsoring

organizations of DAFs to rely on a

favorable determination issued to a

grantee that a grant is an unusual grant.

Private Foundation Termination

Section 1.507-2 addresses private

foundation terminations under section

507(b). The proposed regulations

revised § 1.507-2 to delete references to

the four-year computation period and

the transition rules related to 12-month

terminations that are obsolete. Section

507(b)(1)(B) allows an organization to

terminate its private foundation status

by meeting the requirements of section

509(a)(1), (a)(2), or (a)(3) (and thus

operating as a public charity) for a

continuous period of 60 months,

provided the organization (1) Prior to

commencement of the 60-month period,

notifies the Secretary in the manner

prescribed by regulations that it is

terminating private foundation status,

and (2) later establishes to the

satisfaction of the Secretary in a manner

prescribed by regulations that it

operated as a public charity during the

60-month period. The proposed

regulations continued to provide that a

terminating private foundation could

request an advance ruling regarding its

public charity status under § 1.507-

2T(d). The proposed regulations also

retained the provision requiring

terminating private foundations to

provide sufficient information to the IRS
Federal Register/Vol. 76, No. 174/Thursday, September 8, 2011/Rules and Regulations

within 90 days of the end of the 60-

month period to allow the IRS to make

a determination on public charity status.

The comment suggested that the final

regulations should simplify the process

of terminating private foundation status

under § 1.507-2 by eliminating the

requirement that an organization file

certain information with the IRS within

90 days after completing the 60-month

termination period. The comment

observed that the IRS eliminated the

Form 8734 filing requirement for newlyformed organizations with advance

rulings, choosing instead to rely on the

information reported on Schedule A to

monitor public support.

The final regulations do not

incorporate this suggestion. In

eliminating the advance ruling period

and liberalizing the procedures for new

organizations, the IRS took into

consideration the experiential data

indicating the high incidence of

qualification for public charity status at

the end of the advance ruling period. As

stated in the notice of proposed

rulemaking, approximately 95 percent

of the organizations that received

advance rulings later received definitive

rulings that they were public charities.

The IRS does not have analogous

experiential data relating to

organizations attempting to terminate

private foundation status under section

507(b)(1)(B) to support a similar change

in these procedures.

In addition, if the organization fails to

qualify as a public charity for the entire

60-month period, it will continue to be

treated as a private foundation for the

entire 60-month period. Thus, unlike a

new organization that had an advance

ruling as a public charity, an

organization terminating its private

foundation status continues to be

classified as a terminating private

foundation during the 60-month period

and continues as such until the IRS

receives and makes a determination on

the organization's 90-day submission of

information following the end of its

advance ruling period.

Substantial Contributor

The term "substantial contributor,"

for purposes of Chapter 42, is defined

under section 507(d)(2) and § 1.507-6.

The comment suggested that, given that

a new organization that fails to qualify

as publicly supported after its first five

years of existence will not be treated as

a private foundation for any purpose

during its first five years, the final

regulations should clarify whether, for

purposes of Chapter 42, the identity of

substantial contributors to the

organization will be determined by

taking into account contributions

received while the organization was a

public charity, or only contributions

received after the date the organization

is reclassified as a private foundation.

Because section 1.507-6 is not within

the scope of these final regulations, the

final regulations do not incorporate this

suggestion.

Miscellaneous

In § 1.170A-9(f), changes were made

in the proposed regulation to clarify that

the facts and circumstances test

described in paragraph (f)(3) takes into

account all pertinent facts and

circumstances, and not just those listed

in paragraph (f)(3)(iii); additional

conforming changes were made in the

final regulations. In § 1.507-2, language

inadvertently added to the proposed

regulation when clarifying the factors

for determining whether a grantee

organization has an independent

governing body was deleted. In

addition, the final regulations include

language conforming § 1.6033-2(g) to

the changes made to section

6033(a)(3)(B) of the Code under the

PPA. Since the date of enactment of the

PPA, August 17, 2006, the

Commissioner's discretionary authority

to relieve organizations from the annual

filing requirement under section 6033(a)

has not applied to supporting

organizations described in section

509(a)(3) of the Code. Section 1.6033-

2(g)(6), which provides the general

statement of the Commissioner's

discretionary authority to relieve

organizations from the annual filing

requirement under section 6033(a), has

been corrected to include the modifying

language provided by the PPA in section

6033(a)(3)(B). Sections 1.6033-

2(g)(1)(iii) and 1.6033-2(g)(1)(iv) have

been amended to include conforming

changes. Several other incidental

changes were made throughout the final

regulations in order to increase clarity

and consistency, none of which modify

the substance of the proposed

regulations.

Additionally, the final regulations

include a correction in § 1.6033-2(i) to

the place to which an organization's

change of operation notifications is sent.

Effective/Applicability Date and

Transition Rules

These final regulations generally are

effective on September 8, 2011, and

generally apply to taxable years

beginning on or after January 1, 2008.

All organizations, including

organizations that received a definitive

ruling prior to the effective date of these

regulations, must use the new five-year

computation period to calculate public

support for their first taxable year

beginning on or after January 1, 2008,

and for all subsequent taxable years.

Special Analyses

It has been determined that this

Treasury decision is not a significant

regulatory action as defined in

Executive Order 12866, as

supplemented by Executive Order

13565. Therefore, a regulatory

assessment is not required. It has also

been determined that section 553(b) of

the Administrative Procedure Act (5

U.S.C. chapter 5) does not apply. It is

hereby certified that the collection of

information in this regulation will not

have a significant economic impact on

a substantial number of small entities.

This certification is based on the fact

that burden on tax-exempt entities will

be reduced by (1) Eliminating the

separate advance ruling process and the

additional process for subsequently

seeking a definitive ruling, (2) clarifying

rules regarding the method of

accounting and period for reporting

certain items, and (3) providing

discretion for the IRS to narrow or

clarify circumstances under which

reporting is required. Accordingly, a

Regulatory Flexibility Analysis under

the Regulatory Flexibility Act (5 U.S.C.

chapter 6) is not required. Pursuant to

section 7805(f) of the Code, these

regulations have been submitted to the

Chief Counsel for Advocacy of the Small

Business Administration for comment

on its impact on small business.

Statement of Availability for

Documents Published in the Internal

Revenue Bulletin

For copies of recently issued revenue

procedures, revenue rulings, notices and

other guidance published in the Internal

Revenue Bulletin or Cumulative

Bulletin please visit the IRS Web site at

http://www.irs.gov.

Drafting Information

The principal author of this regulation

is Terri Harris, Office of Associate Chief

Counsel (Tax Exempt and Government

Entities). However, other personnel

from the IRS and the Treasury

Department participated in their

development.

List of Subjects

26 CFR Part 1

Income taxes, Reporting and

recordkeeping requirements.

26 CFR Part 602

Reporting and recordkeeping

requirements.

55749
55750 Federal Register/Vol. 76, No. 174/Thursday, September 8, 2011/Rules and Regulations

Amendments to the Regulations

Accordingly, 26 CFR parts 1 and 602

are amended as follows:

PART 1-INCOME TAXES

* Paragraph 1. The authority citation

for part 1 continues to read in part as

follows:

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

* Par. 2. Section1.170A-9 is amended

by revising paragraphs (f) and (k) to read

as follows:

§ 1.170A-9 Definition of section

170(b)(1)(A) organization.

(f) Definition of section

170(b)(1)(A)(vi) organization-(1) In

general. An organization is described in

section 170(b)(1)(A)(vi) if it-

(i) Is referred to in section 170(c)(2)

(other than an organization specifically

described in paragraphs (b) through (e)

of this section); and

(ii) Normally receives a substantial

part of its support from a governmental

unit referred to in section 170(c)(1) or

from direct or indirect contributions

from the general public ("publicly

supported"). For purposes of this

paragraph (f), an organization is

publicly supported if it meets the

requirements of either paragraph (f)(2)

of this section (331/3 percent support

test) or paragraph (f)(3) of this section

(facts and circumstances test). Paragraph

(f)(4) of this section defines "normally"

for purposes of the 331/3 percent support

test and the facts and circumstances

test, and for new organizations in the

first five years of the organization's

existence as a section 501(c)(3)

organization. Paragraph (f)(5) of this

section provides for determinations of

foundation classification and rules for

reliance by donors and contributors.

Paragraphs (f)(6), (f)(7), and (f)(8) of this

section list the items that are included

and excluded from the term support.

Paragraph (f)(9) of this section provides

examples of the application of this

paragraph. Types of organizations that,

subject to the provisions of this

paragraph (f), generally qualify under

section 170(b)(1)(A)(vi) as "publicly

supported" are publicly or

governmentally supported museums of

history, art, or science, libraries,

community centers to promote the arts,

organizations providing facilities for the

support of an opera, symphony

orchestra, ballet, or repertory drama or

for some other direct service to the

general public.

(2) Determination whether an

organization is "publicly supported";

33113 percent support test. An

organization is publicly supported if the

total amount of support (see paragraphs

(f)(6), (f)(7), and (f)(8) of this section)

that the organization normally (see

paragraph (f)(4)(i) of this section)

receives from governmental units

referred to in section 170(c)(1), from

contributions made directly or

indirectly by the general public, or from

a combination of these sources, equals

at least 331/3 percent of the total support

normally received by the organization.

See paragraph (f)(9), Example 1 of this

section.

(3) Determination whether an

organization is "publicly supported";

facts and circumstances test. Even if an

organization fails to meet the 331/3

percent support test described in

paragraph (f)(2) of this section, it is

publicly supported if it normally (see

paragraph (f)(4)(i) of this section)

receives a substantial part of its support

from governmental units, from

contributions made directly or

indirectly by the general public, or from

a combination of these sources, and

meets the other requirements of this

paragraph (f)(3). In order to satisfy the

facts and circumstances test, an

organization must meet the

requirements of paragraphs (f)(3)(i) and

(f)(3)(ii) of this section. In addition, the

organization must be in the nature of an

organization that is publicly supported,

taking into account all pertinent facts

and circumstances, including the factors

listed in paragraphs (f)(3)(iii)(A) through

(f)(3)(iii)(E) of this section.

(i) Ten-percent support limitation.

The percentage of support (see

paragraphs (f)(6), (f)(7) and (f)(8) of this

section) normally received by an

organization from governmental units,

from contributions made directly or

indirectly by the general public, or from

a combination of these sources, must be

substantial. For purposes of this

paragraph (f)(3), an organization will not

be treated as normally receiving a

substantial amount of governmental or

public support unless the total amount

of governmental and public support

normally received equals at least 10

percent of the total support normally

received by such organization.

(ii) Attraction of public support. An

organization must be so organized and

operated as to attract new and

additional public or governmental

support on a continuous basis. An

organization will be considered to meet

this requirement if it maintains a

continuous and bona fide program for

solicitation of funds from the general

public, community, or membership

group involved, or if it carries on

activities designed to attract support

from governmental units or other

organizations described in section

170(b)(1)(A)(i) through (b)(1)(A)(vi). In

determining whether an organization

maintains a continuous and bona fide

program for solicitation of funds from

the general public or community,

consideration will be given to whether

the scope of its fundraising activities is

reasonable in light of its charitable

activities. Consideration will also be

given to the fact that an organization, in

its early years of existence, may limit

the scope of its solicitation to persons

deemed most likely to provide seed

money in an amount sufficient to enable

it to commence its charitable activities

and expand its solicitation program.

(iii) In addition to the requirements

set forth in paragraphs (f)(3)(i) and

(f)(3)(ii) of this section that must be

satisfied, all pertinent facts and

circumstances, including the following

factors, will be taken into consideration

in determining whether an organization

is "publicly supported" within the

meaning of paragraph (f)(1) of this

section. However, an organization is not

generally required to satisfy all of the

factors in paragraphs (f)(3)(iii)(A)

through (f)(3)(iii)(E) of this section. The

factors relevant to each case and the

weight accorded to any one of them may

differ depending upon the nature and

purpose of the organization and the

length of time it has been in existence.

(A) Percentage of financial support.

The percentage of support received by

an organization from public or

governmental sources will be taken into

consideration in determining whether

an organization is "publicly supported."

The higher the percentage of support

above the 10 percent requirement of

paragraph (f)(3)(i) of this section from

public or governmental sources, the

lesser will be the burden of establishing

the publicly supported nature of the

organization through other factors,

including those described in this

paragraph (f)(3), while the lower the

percentage, the greater will be the

burden. If the percentage of the

organization's support from public or

governmental sources is low because it

receives a high percentage of its total

support from investment income on its

endowment funds, such fact will be

treated as evidence of an organization

being "publicly supported" if such

endowment funds were originally

contributed by a governmental unit or

by the general public. However, if such

endowment funds were originally

contributed by a few individuals or

members of their families, such fact will

increase the burden on the organization

of establishing that it is "publicly

supported" taking into account all

pertinent facts and circumstances,
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including the other factors described in

paragraph (f)(3)(iii) of this section.

(B) Sources of support. The fact that

an organization meets the requirement

of paragraph (f)(3)(i) of this section

through support from governmental

units or directly or indirectly from a

representative number of persons, rather

than receiving almost all of its support

from the members of a single family,

will be considered evidence of an

organization being "publicly

supported." In determining what is a "representative number of persons,"

consideration will be given to the type

of organization involved, the length of

time it has been in existence, and

whether it limits its activities to a

particular community or region or to a

special field which can be expected to

appeal to a limited number of persons.

(C) Representative governing body.

The fact that an organization has a

governing body which represents the

broad interests of the public, rather than

the personal or private interests of a

limited number of donors (or persons

standing in a relationship to such

donors which is described in section

4946(a)(1)(C) through (a)(1)(G)), will be

considered evidence of an organization

being "publicly supported." An

organization will be treated as having a

representative governing body if it has

a governing body (whether designated

in the organization's governing

instrument or bylaws as a Board of

Directors, Board of Trustees, or similar

governing body) which is comprised of

public officials acting in their capacities

as such; of individuals selected by

public officials acting in their capacities

as such; of persons having special

knowledge or expertise in the particular

field or discipline in which the

organization is operating; of community

leaders, such as elected or appointed

officials, clergymen, educators, civic

leaders, or other such persons

representing a broad cross-section of the

views and interests of the community;

or, in the case of a membership

organization, of individuals elected

pursuant to the organization's governing

instrument or bylaws by a broadly based

membership.

(D) Availability of public facilities or

services; public participation in

programs or policies. (1) The fact that an

organization generally provides

facilities or services directly for the

benefit of the general public on a

continuing basis (such as a museum or

library which holds open its building or

facilities to the public, a symphony

orchestra which gives public

performances, a conservation

organization which provides

educational services to the public

through the distribution of educational

materials, or an old age home which

provides domiciliary or nursing services

for members of the general public) will

be considered evidence that such

organization is "publicly supported."

(2) The fact that an organization is an

educational or research institution

which regularly publishes scholarly

studies that are widely used by colleges

and universities or by members of the

general public will also be considered

evidence that such organization is

"publicly supported."

(3) The following factors will also be

considered evidence that an

organization is "publicly supported":

(i) The participation in, or

sponsorship of, the programs of the

organization by members of the public

having special knowledge or expertise,

public officials, or civic or community

leaders.

(ii) The maintenance of a definitive

program by an organization to

accomplish its charitable work in the

community, such as combating

community deterioration in an

economically depressed area that has

suffered a major loss of population and

jobs.

(iii) The receipt of a significant part of

its funds from a public charity or

governmental agency to which it is in

some way held accountable as a

condition of the grant, contract, or

contribution.

(E) Additional factors pertinent to

membership organizations. The

following are additional factors to be

considered in determining whether a

membership organization is "publicly

supported":

(1) Whether the solicitation for duespaying members is designed to enroll a

substantial number of persons in the

community or area, or in a particular

profession or field of special interest

(taking into account the size of the area

and the nature of the organization's

activities).

(2) Whether membership dues for

individual (rather than institutional)

members have been fixed at rates

designed to make membership available

to a broad cross section of the interested

public, rather than to restrict

membership to a limited number of

persons.

(3) Whether the activities of the

organization will be likely to appeal to

persons having some broad common

interest or purpose, such as educational

activities in the case of alumni

associations, musical activities in the

case of symphony societies, or civic

affairs in the case of parent-teacher

associations. See Example 2 through

Example 5 contained in paragraph (f)(9)

of this section for illustrations of this

paragraph (f)(3).

(4) Definition of normally; general

rule-(i) Normally; 33113 percent support

test. An organization "normally"

receives the requisite amount of public

support and meets the 331/3 percent

support test for a taxable year and the

taxable year immediately succeeding

that year, if, for the taxable year being

tested and the four taxable years

immediately preceding that taxable

year, the organization meets the 331/3

percent support test on an aggregate

basis.

(ii) Normally; facts and circumstances

test. An organization "normally"

receives the requisite amount of public

support and meets the facts and

circumstances test of paragraph (f)(3) for

a taxable year and the taxable year

immediately succeeding that year, if, for

the taxable year being tested and the

four taxable years immediately

preceding that taxable year, the

organization meets the facts and

circumstances test on an aggregate basis.

In the case of paragraphs (f)(3)(iii)(A)

and (f)(3)(iii)(B) of this section, facts

pertinent to years preceding the fiveyear period may also be taken into

consideration. The combination of

factors set forth in paragraphs

(f)(3)(iii)(A) through (f)(3)(iii)(E) of this

section that an organization normally

must meet does not have to be the same

for each five-year period so long as there

exists a sufficient combination of factors

to show compliance with the facts and

circumstances test.

(iii) Special rule. The fact that an

organization has normally met the

requirements of the 331/3 percent

support test for a current taxable year,

but is unable normally to meet such

requirements for a succeeding taxable

year, will not in itself prevent such

organization from meeting the facts and

circumstances test for such succeeding

taxable year.

(iv) Example. The application of

paragraphs (f)(4)(i), (f)(4)(ii), and

(f)(4)(iii) of this section may be

illustrated by the following example:

Example. (i) X is recognized as an

organization described in section 501(c)(3).

On the basis of support received during

taxable years 2008, 2009, 2010, 2011, and

2012, in the aggregate, X receives at least

331/3 percent of its support from

governmental units referred to in section

170(c)(1), from contributions made directly

or indirectly by the general public, or from

a combination of these sources. Consequently, X meets the 3 3 1/3 percent

support test for taxable year 2012 (the current

taxable year). X also meets the 331/3 support

test for 2013, as the immediately succeeding

taxable year.

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(ii) In taxable years 2009, 2010, 2011, 2012,

and 2013, in the aggregate, X does not receive

at least 3 31/3 percent of its support from

governmental units referred to in section

170(c)(1), from contributions made directly

or indirectly by the general public, or from

a combination of these sources. However, X

still meets the 331/3 percent support test for

taxable year 2013 based on the aggregate

support received for taxable years 2008

through 2012.

(iii) In taxable years 2010, 2011, 2012,

2013, and 2014, in the aggregate, X does not

receive at least 33 1/3 percent of its support

from governmental units referred to in

section 170(c)(1), from contributions made

directly or indirectly by the general public,

or from a combination of these sources. X

does not meet the 331/3 percent support test

for taxable year 2014.

(iv) X meets the facts and circumstances

test for taxable year 2013 and for taxable year

2014 (the immediately succeeding taxable

year) based on the aggregate support X

receives, X's fundraising program, and

consideration of other factors, including

those listed in paragraphs (f)(3)(iii)(A)

through (f)(3)(iii)(E) of this section, during

taxable years 2009, 2010, 2011, 2012, and

2013. Therefore, even though X does not

meet the 331/3 percent support test for taxable

year 2014, X is still an organization described

in section 170(b)(1)(A)(vi) for that year.

(v) Normally; first five years of an

organization's existence. (A) An

organization "normally" receives the

requisite amount of public support and

meets the 331/3 percent public support

test or the facts and circumstances test

during its first five taxable years as a

section 501(c)(3) organization if the

organization can reasonably be expected

to meet the requirements of the 331/3

percent support test or the facts and

circumstances test during that period.

With respect to such organization's

sixth taxable year, the general definition

of normally set forth in paragraphs

(f)(4)(i), (f)(4)(ii), and (f)(4)(iii) of this

section apply. Alternatively, the

organization shall be treated as "normally" meeting the 331/3 percent

support test or the facts and

circumstances test for its sixth taxable

year (but not its seventh taxable year) if

it meets the 331/3 percent support test or

the facts and circumstances test under

the definition of normally set forth in

paragraphs (f)(4)(i), (f)(4)(ii), and

(f)(4)(iii) of this section for its fifth

taxable year (based on support received

in its first through fifth taxable years).

(B) Basic consideration. In

determining whether an organization

can reasonably be expected (within the

meaning of paragraph (f)(4)(v)(A) of this

section) to meet the requirements of the

331/3 percent support test or the facts

and circumstances test during its first

five taxable years, the basic

consideration is whether its

organizational structure, current or

proposed programs or activities, and

actual or intended method of operation

are such as can reasonably be expected

to attract the type of broadly based

support from the general public, public

charities, and governmental units that is

necessary to meet such tests. The factors

that are relevant to this determination,

and the weight accorded to each of

them, may differ from case to case,

depending on the nature and functions

of the organization. The information to

be considered for this purpose shall

consist of all pertinent facts and

circumstances, including the factors set

forth in paragraph (f)(3) of this section.

(vi) Example. The application of

paragraph (f)(4)(v) of this section may be

illustrated by the following example:

Example. (i) Organization Y was formed in

January 2008, and uses a taxable year ending

December 31. After September 9, 2008, and

before December 31, 2008, Organization Y

filed Form 1023 requesting recognition of

exemption as an organization described in

section 501(c)(3) and in sections

170(b)(1)(A)(vi) and 509(a)(1). In its

application, Organization Y established that

it can reasonably be expected to operate as a publicly supported organization under

paragraph (f)(2) or (f)(3) and paragraph

(f)(4)(v) of this section. Subsequently,

Organization Y received a ruling or determination letter that it is an organization

described in section 501(c)(3) and sections

170(b)(1)(A)(vi) and 509(a)(1) effective as of

the date of its formation.

(ii) Organization Y is described in sections

170(b)(1)(A)(vi) and 509(a)(1) for its first five

taxable years (the taxable years ending

December 31, 2008, through December 31,

2012).

(iii) Organization Y can qualify as a

publicly supported organization for the

taxable year ending December 31, 2013, if

Organization Y can meet the requirements of

either paragraph (f)(2) or paragraph (f)(3) of

this section or § 1.509(a)-3(a) and § 1.509(a)-

(3)(b) for the taxable years ending December

31, 2009, through December 31, 2013, or for

the taxable years ending December 31, 2008,

through December 31, 2012.

(vii) Organizations reclassified as

private foundations. (A) New publicly

supported organizations. If a new

publicly supported organization

described under section 170(b)(1)(A)(vi)

cannot meet the requirements of the

331/3 percent test of paragraph (f)(2) or

the facts and circumstances test of

paragraph (f)(3) for its sixth taxable year

under the general definition of normally

set forth in paragraphs (f)(4)(i), (f)(4)(ii),

and (f)(4)(iii) of this section or under the

alternate rule set forth in paragraph

(f)(4)(v) of this section (effectively

failing to meet a public support test for

both its fifth and sixth taxable years), it

will be treated as a private foundation

as of the first day of its sixth taxable

year only for purposes of sections 507,

4940, and 6033. Such an organization

must file a Form 990-PF, "Return of

Private Foundation or Section 4947(a)(1)

Nonexempt Charitable Trust Treated as

a Private Foundation," and will be

liable for the net investment tax

imposed by section 4940 and, if

applicable, the private foundation

termination tax imposed by section

507(c), for its sixth taxable year. For

succeeding taxable years, the

organization will be treated as a private

foundation for all purposes.

(B) Other publicly supported

organizations. A publicly supported

organization described in section

170(b)(1)(A)(vi) (other than a new

publicly supported organization

described in paragraph (f)(4)(vii)(A) of

this section) that has failed to meet both

the 331/3 percent support test and the

facts and circumstances test for any two

consecutive taxable years will be treated

as a private foundation as of the first

day of the second consecutive taxable

year only for purposes of sections 507,

4940, and 6033. Such an organization

must file a Form 990-PF, "Return of

Private Foundation or Section 4947(a)(1)

Nonexempt Charitable Trust Treated as

a Private Foundation," and will be

liable for the net investment tax

imposed by section 4940 and, if

applicable, the private foundation

termination tax imposed by section

507(c), for the second consecutive failed

taxable year. For succeeding taxable

years, the organization will be treated as

a private foundation for all purposes.

(5) Determinations of foundation

classification and reliance. (i) A ruling

or determination letter that an

organization is described in section

170(b)(1)(A)(vi) may be issued to an

organization. Such determination may

be made in conjunction with the

recognition of the organization's taxexempt status or at such other time as

the organization believes it is described

in section 170(b)(1)(A)(vi). The ruling or

determination letter that the

organization is described in section

170(b)(1)(A)(vi) may be revoked if, upon

examination, the organization has not

met the requirements of paragraph (f) of

this section. The ruling or determination

letter that the organization is described

in section 170(b)(1)(A)(vi) also may be

revoked if the organization's application

for a ruling or determination contained

one or more material misstatements or

omissions of fact or if such application

was part of a scheme or plan to avoid

or evade any provision of the Internal

Revenue Code. The revocation of the

determination that an organization is

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

does not preclude revocation of the
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determination that the organization is

described in section 501(c)(3).

(ii) Status of grantors or contributors.

For purposes of sections 170, 507,

545(b)(2), 642(c), 4942, 4945, 4966,

2055, 2106(a)(2), and 2522, grantors or

contributors may rely upon a

determination letter or ruling that an

organization is described in section

170(b)(1)(A)(vi) until the IRS publishes

notice of a change of status (for

example, in the Internal Revenue

Bulletin or Publication 78, "Cumulative

List of Organizations described in

Section 170(c) of the Internal Revenue

Code of 1986," which can be searched

at http://www.irs.gov.) For this purpose,

grantors or contributors also may rely on

an advance ruling that expires on or

after June 9, 2008. However, a grantor or

contributor may not rely on such an

advance ruling or any determination

letter or ruling if the grantor or

contributor was responsible for, or

aware of, the act or failure to act that

resulted in the organization's loss of

classification under section

170(b)(1)(A)(vi) or acquired knowledge

that the IRS had given notice to such

organization that it would be deleted

from such classification.

(iii) Reliance by grantors or

contributors. A grantor or contributor,

other than one of the organization's

founders, creators, or foundation

managers (within the meaning of section

4946(b)), will not be considered to be

responsible for, or aware of, the act or

failure to act that resulted in the loss of

the organization's "publicly supported"

classification under section

170(b)(1)(A)(vi), if such grantor or

contributor has made such grant or

contribution in reliance upon a written

statement by the grantee organization

that such grant or contribution will not

result in the loss of such organization's

classification as a publicly supported

organization as described in section

170(b)(1)(A)(vi). Such statement must be

signed by a responsible officer of the

grantee organization and must set forth

sufficient information, including a

summary of the pertinent financial data

for the five taxable years immediately

preceding the current taxable year, to

assure a reasonably prudent person that

his grant or contribution will not result

in the loss of the grantee organization's

classification as a publicly supported

organization as described in section

170(b)(1)(A)(vi). If a reasonable doubt

exists as to the effect of such grant or

contribution, or if the grantor or

contributor is one of the organization's

founders, creators, or foundation

managers, the procedure set forth in

paragraph (f)(6)(iv) of this section for

requesting a determination from the IRS

may be followed by the grantee

organization for the protection of the

grantor or contributor.

(6) Definition of support; meaning of

general public-(i) In general. In

determining whether the 331/2 percent

support test or the 10 percent support

limitation described in paragraph

(f)(3)(i) of this section is met,

contributions by an individual, trust, or

corporation shall be taken into account

as support from direct or indirect

contributions from the general public

only to the extent that the total amount

of the contributions by any such

individual, trust, or corporation during

the period described in paragraph

(f)(4)(i) or paragraph (f)(4)(ii) of this

section does not exceed two percent of

the organization's total support for such

period, except as provided in paragraph

(f)(6)(ii) of this section. Therefore, for

example, any contribution by one

individual will be included in full in

the denominator of the fraction

determining the 331/2 percent support or

the 10 percent support limitation, but

will be includible in the numerator of

such fraction only to the extent that

such amount does not exceed two

percent of the denominator. In applying

the two percent limitation, all

contributions made by a donor and by

any person or persons standing in a

relationship to the donor that is

described in section 4946(a)(1)(C)

through (a)(1)(G) and the related

regulations shall be treated as made by

one person. The two percent limitation

shall not apply to support received from

governmental units referred to in

section 170(c)(1) or to contributions

from organizations described in section

170(b)(1)(A)(vi), except as provided in

paragraph (f)(6)(v) of this section. For

purposes of paragraphs (f)(2), (f)(3)(i),

and (f)(7)(iii)(A)(2) of this section, the

term indirect contributions from the

general public includes contributions

received by the organization from

organizations (such as section

170(b)(1)(A)(vi) organizations) that

normally receive a substantial part of

their support from direct contributions

from the general public, except as

provided in paragraph (f)(6)(v) of this

section. See the examples in paragraph

(f)(9) of this section for the application

of this paragraph (f)(6)(i). For purposes

of this paragraph (f), the term

contributions includes qualified

sponsorship payments (as defined in

§ 1.513-4) in the form of money or

property (but not services).

(ii) Exclusion of unusual grants. (A)

For purposes of applying the two

percent limitation described in

paragraph (f)(6)(i) of this section to

determine whether the 331/3 percent

support test or the 10 percent support

limitation in paragraph (f)(3)(i) of this

section is satisfied, one or more

contributions may be excluded from

both the numerator and the

denominator of the applicable support

fraction if such contributions meet the

requirements of paragraph (f)(6)(iii) of

this section. The exclusion provided by

this paragraph (f)(6)(ii) is generally

intended to apply to substantial

contributions or bequests from

disinterested parties, which

contributions or bequests-

(1) Are attracted by reason of the

publicly supported nature of the

organization;

(2) Are unusual or unexpected with

respect to the amount thereof; and

(3) Would, by reason of their size,

adversely affect the status of the

organization as normally being publicly

supported for the applicable period

described in paragraph (f)(4) of this

section.

(B) In the case of a grant (as defined

in § 1.509(a)-3(g)) that meets the

requirements of this paragraph (f)(6)(ii),

if the terms of the granting instrument

require that the funds be paid to the

recipient organization over a period of

years, the grant amounts received by the

organization may be excluded for such

year or years in which they would

otherwise be includible in computing

support under the method of accounting

on the basis of which the organization

regularly computes its income in

keeping its books under section 446.

However, no item of gross investment

income may be excluded under this

paragraph (f)(6). The provisions of this

paragraph (f)(6) shall apply to exclude

unusual grants made during any of the

applicable periods described in

paragraph (f)(4) or paragraph (f)(6) of

this section. See paragraph (f)(6)(iv) of

this section as to reliance by a grantee

organization upon an unusual grant

ruling under this paragraph (f)(6).

(iii) Determining factors. In

determining whether a particular

contribution may be excluded under

paragraph (f)(6)(ii) of this section, all

pertinent facts and circumstances will

be taken into consideration. No single

factor will necessarily be determinative.

For some of the factors similar to the

factors to be considered, see § 1.509(a)-

3(c)(4).

(iv) Grantors and contributors. Prior

to the making of any grant or

contribution that will allegedly meet the

requirements for exclusion under

paragraph (f)(6)(ii) of this section, a

potential grantee organization may

request a determination whether such

grant or contribution may be so

excluded. Requests for such

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determination may be filed by the

grantee organization in the time and

manner specified by revenue procedure

or other guidance published in the

Internal Revenue Bulletin. The issuance

of such determination will be at the sole

discretion of the Commissioner. The

organization must submit all

information necessary to make a

determination on the factors referred to

in paragraph (f)(6)(iii) of this section. If

a favorable determination is issued,

such determination may be relied upon

by the grantor or contributor of the

particular contribution in question for

purposes of sections 170, 507, 545(b)(2),

642(c), 4942, 4945, 4966, 2055,

2106(a)(2), and 2522 and by the grantee

organization for purposes of paragraph

(f)(6)(ii) of this section.

(v) Grants from public charities.

Pursuant to paragraph (f)(6)(i) of this

section, contributions received from a

governmental unit or from a section

170(b)(1)(A)(vi) organization are not

subject to the two percent limitation

described in paragraph (f)(6)(i) of this

section unless such contributions

represent amounts which have been

expressly or impliedly earmarked by a

donor to such governmental unit or

section 170(b)(1)(A)(vi) organization as

being for, or for the benefit of, the

particular organization claiming section

170(b)(1)(A)(vi) status. See § 1.509(a)-

3(j)(3) for examples illustrating the rules

of this paragraph (f)(6)(v).

(7) Definition of support; special rules

and meaning of terms-(i) Definition of

support. For purposes of this paragraph

(f), the term "support" shall be as

defined in section 509(d) (without

regard to section 509(d)(2)). The term

"support" does not include-

(A) Any amounts received from the

exercise or performance by an

organization of its charitable,

educational, or other purpose or

function constituting the basis for its

exemption under section 501(a). In

general, such amounts include amounts

received from any activity the conduct

of which is substantially related to the

furtherance of such purpose or function

(other than through the production of

income); or

(B) Contributions of services for

which a deduction is not allowable.

(ii) For purposes of the 331/3 percent

support test and the 10 percent support

limitation in paragraph (f)(3)(i) of this

section, all amounts received that are

described in paragraph (f)(7)(i)(A) or

paragraph (f)(7)(i)(B) of this section are

to be excluded from both the numerator

and the denominator of the fractions

determining compliance with such tests,

except as provided in paragraph

(f)(7)(iii) of this section.

(iii) Organizations dependent

primarily on gross receipts from related

activities. (A) Notwithstanding the

provisions of paragraph (f)(7)(i) of this

section, an organization will not be

treated as satisfying the 331/3 percent

support test or the 10 percent support

limitation in paragraph (f)(3)(i) of this

section if it receives-

(1) Almost all of its support (as

defined in section 509(d)) from gross

receipts from related activities; and

(2) An insignificant amount of its

support from governmental units

(without regard to amounts referred to

in paragraph (f)(7)(i)(A) of this section)

and contributions made directly or

indirectly by the general public.

(B) Example. The application of this

paragraph (f)(7)(iii) may be illustrated

by the following example:

Example. Z, an organization described in

section 501(c)(3), is controlled by A, its

president. Z received $500,000 during the

period consisting of the current taxable year

and the four immediately preceding taxable

years under a contract with the Department

of Transportation, pursuant to which Z has

engaged in research to improve a particular

vehicle used primarily by the Federal

government. During this same period, the

only other support received by Z consisted of

$5,000 in small contributions primarily from

Z's employees and business associates. The

$500,000 amount constitutes support under

sections 509(d)(2) and 509(a)(2)(A). Under

these circumstances, Z meets the conditions

of paragraphs (f)(7)(iii)(A)(1) and

(f)(7)(iii)(A)(2) of this section and will not be

treated as meeting the requirements of either

the 331/3 percent support test or the facts and

circumstances test. As to the rules applicable

to organizations that fail to qualify under

section 170(b)(1)(A)(vi) because of the

provisions of this paragraph (f)(7)(iii), see

section 509(a)(2) and the related regulations.

For the distinction between gross receipts (as

referred to in section 509(d)(2)) and gross

investment income (as referred to in section

509(d)(4)), see § 1.509(a)-3(m).

(iv) Membership fees. For purposes of

this paragraph (f)(7), the term support

shall include "membership fees" within

the meaning of § 1.509(a)-3(h) (that is,

if the basic purpose for making a

payment is to provide support for the

organization rather than to purchase

admissions, merchandise, services, or

the use of facilities).

(8) Support from a governmental unit.

(i) For purposes of the 331/3 percent

support test and the 10 percent support

limitation described in paragraph

(f)(3)(i) of this section, the term support

from a governmental unit includes any

amounts received from a governmental

unit, including donations or

contributions and amounts received in

connection with a contract entered into

with a governmental unit for the

performance of services or in

connection with a government research

grant. However, such amounts will not

constitute support from a governmental

unit for such purposes if they constitute

amounts received from the exercise or

performance of the organization's

exempt functions as provided in

paragraph (f)(7)(i)(A) of this section.

(ii) For purposes of paragraph (f)(8)(i)

of this section, any amount paid by a

governmental unit to an organization is

not to be treated as received from the

exercise or performance of its charitable,

educational, or other purpose or

function constituting the basis for its

exemption under section 501(a) (within

the meaning of paragraph (f)(7)(i)(A) of

this section) if the purpose of the

payment is primarily to enable the

organization to provide a service to, or

maintain a facility for, the direct benefit

of the public (regardless of whether part

of the expense of providing such service

or facility is paid for by the public),

rather than to serve the direct and

immediate needs of the payor. For

example-

(A) Amounts paid for the

maintenance of library facilities which

are open to the public;

(B) Amounts paid under government

programs to nursing homes or homes for

the aged in order to provide health care

or domiciliary services to residents of

such facilities; and

(C) Amounts paid to child placement

or child guidance organizations under

government programs for services

rendered to children in the community,

are considered payments the purpose of

which is primarily to enable the

recipient organization to provide a

service or maintain a facility for the

direct benefit of the public, rather than

to serve the direct and immediate needs

of the payor. Furthermore, any amount

received from a governmental unit

under circumstances such that the

amount would be treated as a "grant"

within the meaning of § 1.509(a)-3(g)

will generally constitute "support from

a governmental unit" described in this

paragraph (f)(8), rather than an amount

described in paragraph (f)(7)(i)(A) of this

section.

(9) Examples. The application of

paragraphs (f)(1) through (f)(8) of this

section may be illustrated by the

following examples:

Example 1. (i) M is recognized as an

organization described in section 501(c)(3).

For the years 2008 through 2012 (the

applicable period with respect to the taxable

year 2012 under paragraph (f)(4) of this

section), M received support (as defined in

paragraphs (f)(6) through (8) of this section)

of $600,000 from the following sources:
Federal Register/Vol. 76, No. 174/Thursday, September 8, 2011/Rules and Regulations

Investm ent incom e .....................................................................................................................................................................................

City R (a governm ental unit described in section 170(c)(1)) ...................................................................................................................

United Fund (an organization described in section 170(b)(1)(A)(vi)) .....................................................................................................

Contributions (including six contributions in excess of the tw o-percent lim it, totaling $170,000) .....................................................

$300,000

40,000

40,000

220,000

T otal su p p ort ....................................................................................................................................................................................... 6 0 0 ,0 0 0

(ii) With respect to the taxable year

2012, M's public support is computed as

follows:

Support from a governm ental unit described in section 170(c)(1) .........................................................................................................

Indirect contributions from the general public (United Fund) ...............................................................................................................

Contributions by various donors that w ere not in excess of $12,000, or tw o percent of total support ...............................................

Six contributions that were each in excess of $12,000, or two percent of total support, up to the two-percent limitation, 6 x

$ 1 2 ,0 0 0 .............................................................................................................................

T o ta l su p p o rt .......................................................................................................................................................................................

$40,000

40,000

50,000

72,000

202,000

(iii) M's support from governmental

units referred to in section 170(c)(1) and

from direct and indirect contributions

from the general public (as defined in

paragraph (f)(6) of this section) with

respect to the taxable year 2012

normally exceeds 331/3 percent of M's

total support ($202,000/$600,000 =

33.67 percent) for the applicable period

(2008 through 2012). M meets the 331/3

percent support test with respect to

2012 and is therefore publicly

supported for the taxable years 2012 and

2013.

Example 2. (i) N is recognized as an

organization described in section 501(c)(3). It

was created to maintain public gardens

containing botanical specimens and

displaying statuary and other art objects. The

facilities, works of art, and a large

endowment were all contributed by a single

contributor. The members of the governing

body of the organization are unrelated to its

creator. The gardens are open to the public

without charge and attract a substantial

number of visitors each year. For the current

taxable year and the four taxable years

immediately preceding the current taxable

year, 95 percent of the organization's total

support was received from investment

income from its original endowment. N also

maintains a membership society that is

supported by members of the general public

who wish to contribute to the upkeep of the

gardens by paying a small annual

membership fee. Over the five-year period in

question, these fees from the general public

constituted the remaining five percent of the

organization's total support for such period.

(ii) Under these circumstances, N does not

meet the 331/3 percent support test for its

current taxable year. Furthermore, because

only five percent of its total support is, with

respect to the current taxable year, normally

received from the general public, N does not

satisfy the 10 percent support limitation

described in paragraph (f)(3)(i) of this section

and therefore does not qualify as publicly

supported under the facts and circumstances

test. Because N has failed to satisfy the 10

percent support limitation under paragraph

(f)(3)(i) of this section, none of the other

requirements or factors set forth in

paragraphs (f)(3)(iii)(A) through (f)(3)(iii)(E)

of this section can be considered in

determining whether N qualifies as a

publicly supported organization. For its

current taxable year, therefore, N is not an

organization described in section

170(b)(1)(A)(vi).

Example 3. (i) 0, an art museum, is

recognized as an organization described in

section 501(c)(3). In 1930, 0 was founded in

S City by the members of a single family to

collect, preserve, interpret, and display to the

public important works of art. 0 is governed

by a Board of Trustees that originally

consisted almost entirely of members of the

founding family. However, since 1945,

members of the founding family or persons

standing in a relationship to the members of

such family described in section

4946(a)(1)(C) through (G) have annually

constituted less than one-fifth of the Board of

Trustees. The remaining board members are

citizens of S City from a variety of

professions and occupations who represent

the interests and views of the people of S

City in the activities carried on by the

organization rather than the personal or

private interests of the founding family. 0

solicits contributions from the general public

and, for the current taxable year and each of

the four taxable years immediately preceding

the current taxable year, 0 has received total

contributions (in small sums of less than

$100, none of which exceeds two percent of

O's total support for such period) in excess

of $10,000. These contributions from the

general public (as defined in paragraph (f)(6)

of this section) represent 25 percent of the

organization's total support for such five-year

period. For this same period, investment

income from several large endowment funds

has constituted 75 percent of O's total

support. 0 expends substantially all of its

annual income for its exempt purposes and

thus depends upon the funds it annually

solicits from the public as well as its

investment income in order to carry out its

activities on a normal and continuing basis

and to acquire new works of art. 0 has, for

the entire period of its existence, been open

to the public and more than 300,000 people

(from S City and elsewhere) have visited the

museum in each of the current taxable year

and the four immediately preceding taxable

years.

(ii) Under these circumstances, 0 does not

meet the 331/3 percent support test for its

current year because it has received only 25

percent of its total support for the applicable

five-year period from the general public.

However, under the facts set forth above, 0

meets the 10 percent support limitation

under paragraph (f)(3)(i) of this section, as

well as the requirements of paragraph

(f)(3)(ii) of this section. Under all of the facts

set forth in this example, 0 is considered as

meeting the requirements of the facts and

circumstances test on the basis of satisfying

paragraphs (f)(3)(i) and (f)(3)(ii) of this

section and the factors set forth in paragraphs

(f)(3)(iii)(A) through (f)(3)(iii)(D) of this

section. 0 is therefore publicly supported for

its current taxable year and the immediately

succeeding taxable year.

Example 4. (i) In 1960, the P Philharmonic

Orchestra was organized in T City through

the combined efforts of a local music society

and a local women's club to present to the

public a wide variety of musical programs

intended to foster music appreciation in the

community. P is recognized as an

organization described in section 501(c)(3).

The orchestra is composed of professional

musicians who are paid by the association.

Twelve performances open to the public are

scheduled each year. A small admission fee

is charged for each of these performances. In

addition, several performances are staged

annually without charge. During the current

taxable year and the four taxable years

immediately preceding the current taxable

year, P has received separate contributions of

$200,000 each from A and B (not members

of a single family) and support of $120,000

from the T Community Chest, a public

federated fundraising organization operating

in T City. P depends on these funds in order

to carry out its activities and will continue

to depend on contributions of this type to be

made in the future. P has also begun a

fundraising campaign in an attempt to

expand its activities for the coming years. P

is governed by a Board of Directors

comprised of five individuals. A faculty

member of a local college, the president of a

local music society, the head of a local

banking institution, a prominent doctor, and

a member of the governing body of the local

chamber of commerce currently serve on P's

Board and represent the interests and views

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55756 Federal Register/Vol. 76, No. 174/Thursday, September 8, 2011/Rules and Regulations

of the community in the activities carried on

by P.

(ii) With respect to P's current taxable year, taxable years immediately preceding the

P's sources of support are computed on the current taxable year, as follows:

basis of the current taxable year and the four

C on trib u tio n s .............................................................................................................................................................................................. $ 5 2 0 ,0 0 0

Receipts from perform ances ...................................................................................................................................................................... 100,000

Total support ................................................................................................................................................................... 620,000

Less:

Receipts from perform ances (excluded under paragraph (f)(7)(i)(A) of this section) ............................................................................ 100,000

Total support for purposes of paragraphs (f)(2) and (f)(3)(i) of this section ................................................................................... 520,000

(iii) For purposes of paragraphs (f)(2)

and (f)(3)(i) of this section, P's public

support is computed as follows:

T Community Chest (indirect support from the general public) .............................................................................................................

Two contributions from A & B (each in excess of $10,400-2 percent of total support) 2 x $10,400 .................................................

120,000

20,800

T o ta l ..................................................................................................................................................................................................... 1 4 0 ,8 0 0

(iv) Under these circumstances, P

does not meet the 331/3 percent support

test for its current year because it has

received only 27 percent of its total

support ($140,800/$520,000) for the

applicable five-year period from the

general public. However, under the facts

set forth above, P meets the 10 percent

support limitation under paragraph

(f)(3)(i) of this section, as well as the

requirements of paragraph (f)(3)(ii) of

this section. Under all of the facts set

forth in this example, P is considered as

meeting the requirements of the facts

and circumstances test on the basis of

satisfying paragraphs (f)(3)(i) and

(f)(3)(ii) of this section and the factors

set forth in paragraphs (f)(3)(iii)(A)

through (f)(3)(iii)(D) of this section. P is

therefore publicly supported for its

current taxable year and the

immediately succeeding taxable year.

Example 5. (i) Q is recognized as an

organization described in section 501(c)(3). It

is a philanthropic organization founded in

1965 by C for the purpose of making annual

contributions to worthy charities. C created

Q as a charitable trust by the transfer of

appreciated securities worth $500,000 to Q.

Pursuant to the trust agreement, C and two

other members of his family are the sole

trustees of Q and are vested with the right to

appoint successor trustees. In each of the

current taxable year and the four taxable

years immediately preceding the current

taxable year, Q received $12,000 in

investment income from its original

endowment. Each year Q makes a solicitation

for funds by operating a charity ball at C's

residence. Guests are invited and requested

to make contributions of $100 per couple.

During the five-year period at issue, $15,000

was received from the proceeds of these

events. C and his family have also made

contributions to Q of $25,000 over the fiveyear period at issue. Q makes disbursements

each year of substantially all of its net

income to the public charities chosen by the

trustees.

(ii) Q's sources of support for the

current taxable year and the four taxable

years immediately preceding the current

taxable year as follows:

Investm ent incom e ..................................................................................................................................................................... $60,000

Contributions .......................................................................................................................................................................... 40,000

Total support ................................................................................................................................................................... 100,000

(iii) For purposes of paragraphs (f)(2)

and (f)(3)(i) of this section, Q's public

support is computed as follows:

Contributions from the general public ......................................................................................................................................................

C's contribution (in excess of $ 2,000- 2 percent of total support) 1 x $2,000 .....................................................................................

T o ta l ..............................................................................................................................

$ 15,000

2,000

17,000

(iv) Under these circumstances, Q

does not meet the 331/3 percent support

test for its current year because it has

received only 17 percent of its total

support ($17,000/$100,000) for the

applicable five-year period from the

general public. Thus, Q's classification

as a "publicly supported" organization

depends on whether it meets the

requirements of the facts and

circumstances test. Even though it

satisfies the 10 percent support

limitation under paragraph (f)(3)(i) of

this section, its method of solicitation

makes it questionable whether Q

satisfies the requirements of paragraph

(f)(3)(ii) of this section. Because of its

method of operating, Q also has a

greater burden of establishing its

publicly supported nature under

paragraph (f)(3)(iii)(A) of this section.

Based upon the foregoing facts and

circumstances, including Q's failure to

receive favorable consideration under

the factors set forth in paragraphs

(f)(3)(iii)(B), (f)(3)(iii)(C), and

(f)(3)(iii)(D) of this section, Q does not

satisfy the facts and circumstances test.

(10) Community trust; introduction.

Community trusts have often been

established to attract large contributions

of a capital or endowment nature for the

benefit of a particular community or

area, and often such contributions have

come initially from a small number of

donors. While the community trust

generally has a governing body

comprised of representatives of the

particular community or area, its

contributions are often received and

maintained in the form of separate trusts

or funds, which are subject to varying
Federal Register/Vol. 76, No. 174/Thursday, September 8, 2011/Rules and Regulations

degrees of control by the governing

body. To qualify as a "publicly

supported" organization, a community

trust must meet the 331/3 percent

support test, or, if it cannot meet that

test, be organized and operated so as to

attract new and additional public or

governmental support on a continuous

basis sufficient to meet the facts and

circumstances test. Such facts and

circumstances test includes a

requirement of attraction of public

support in paragraph (f)(3)(ii) of this

section which, as applied to community

trusts, generally will be satisfied if they

seek gifts and bequests from a wide

range of potential donors in the

community or area served, through

banks or trust companies, through

attorneys or other professional persons,

or in other appropriate ways that call

attention to the community trust as a

potential recipient of gifts and bequests

made for the benefit of the community

or area served. A community trust is not

required to engage in periodic,

community-wide, fundraising

campaigns directed toward attracting a

large number of small contributions in

a manner similar to campaigns

conducted by a community chest or

united fund. Paragraph (f)(11) of this

section provides rules for determining

the extent to which separate trusts or

funds may be treated as component

parts of a community trust, fund, or

foundation (herein collectively referred

to as a "community trust," and

sometimes referred to as an "organization") for purposes of meeting

the requirements of this paragraph for

classification as a publicly supported

organization. Paragraph (f)(12) of this

section contains rules for trusts or funds

that are prevented from qualifying as

component parts of a community trust

by paragraph (f)(11) of this section.

(11) Community trusts; requirements

for treatment as a single entity-(i)

General rule. For purposes of sections

170, 501, 507, 508, 509, and Chapter 42,

any organization that meets the

requirements contained in paragraphs

(f)(11)(iii) through (f)(11)(vi) of this

section will be treated as a single entity,

rather than as an aggregation of separate

funds, and except as otherwise

provided, all funds associated with such

organization (whether a trust, not-forprofit corporation, unincorporated

association, or a combination thereof)

which meet the requirements of

paragraph (f)(11)(ii) of this section will

be treated as component parts of such

organization.

(ii) Component part of a community

trust. In order to be treated as a

component part of a community trust

referred to in this paragraph (f)(11)

(rather than as a separate trust or notfor-profit corporation or association), a

trust or fund:

(A) Must be created by a gift, bequest,

legacy, devise, or other transfer to a

community trust which is treated as a

single entity under this paragraph

(f)(11); and

(B) May not be directly or indirectly

subjected by the transferor to any

material restriction or condition (within

the meaning of § 1.507-2(a)(7)) with

respect to the transferred assets. For

purposes of this paragraph (f)(11)(ii)(B),

if the transferor is not a private

foundation, the provisions of § 1.507-

2(a)(7) shall be applied to the trust or

fund as if the transferor were a private

foundation established and funded by

the person establishing the trust or fund

and such foundation transferred all its

assets to the trust or fund. Any transfer

made to a fund or trust which is treated

as a component part of a community

trust under this paragraph (f)(11)(ii) will

be treated as a transfer made "to" a "publicly supported" community trust

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

and 507(b)(1)(A) if such community

trust meets the requirements of section

170(b)(1)(A)(vi) as a "publicly

supported" organization at the time of

the transfer, except as provided in

paragraph (f)(5)(ii) of this section or

§§ 1.508-1(b)(4) and 1.508-1(b)(6)

(relating, generally, to reliance by

grantors and contributors). See also

paragraphs (f)(12)(ii) and (f)(12)(iii) of

this section for special provisions

relating to split-interest trusts and

certain private foundations described in

section 170(b)(1)(F)(iii).

(iii) Name. The organization must be

commonly known as a community trust,

fund, foundation, or other similar name

conveying the concept of a capital or

endowment fund to support charitable

activities (within the meaning of section

170(c)(1) or section 170(c)(2)(B)) in the

community or area it serves.

(iv) Common instrument. All funds of

the organization must be subject to a

common governing instrument or a

master trust or agency agreement (herein

referred to as the "governing

instrument"), which may be embodied

in a single document or several

documents containing common

language. Language in an instrument of

transfer to the community trust making

a fund subject to the community trust's

governing instrument or master trust or

agency agreement will satisfy the

requirements of this paragraph

(f)(11)(iv). In addition, if a community

trust adopts a new governing instrument

(or creates a corporation) to put into

effect new provisions (applying to

future transfers to the community trust),

the adoption of such new governing

instrument (or creation of a corporation

with a governing instrument) which

contains common language with the

existing governing instrument shall not

preclude the community trust from

meeting the requirements of this

paragraph (f)(11)(iv).

(v) Common governing body. (A) The

organization must have a common

governing body or distribution

committee (herein referred to as the "governing body") which either directs

or, in the case of a fund designated for

specified beneficiaries, monitors the

distribution of all of the funds

exclusively for charitable purposes

(within the meaning of section 170(c)(1)

or section 170(c)(2)(B)). For purposes of

this paragraph (f)(11)(v), a fund is

designated for specified beneficiaries

only if no person is left with the

discretion to direct the distribution of

the fund.

(B) Powers of modification and

removal. The fact that the exercise of

any power described in this paragraph

(f)(11)(v)(B) is reviewable by an

appropriate State authority will not

preclude the community trust from

meeting the requirements of this

paragraph (f)(11)(v)(B). Except as

provided in paragraph (f)(11)(v)(C) of

this section, the governing body must

have the power in the governing

instrument, the instrument of transfer,

the resolutions or by-laws of the

governing body, a written agreement, or

otherwise-

(1) To modify any restriction or

condition on the distribution of funds

for any specified charitable purposes or

to specified organizations if in the sole

judgment of the governing body

(without the necessity of the approval of

any participating trustee, custodian, or

agent), such restriction or condition

becomes, in effect, unnecessary,

incapable of fulfillment, or inconsistent

with the charitable needs of the

community or area served;

(2) To replace any participating

trustee, custodian, or agent for breach of

fiduciary duty under State law; and

(3) To replace any participating

trustee, custodian, or agent for failure to

produce a reasonable (as determined by

the governing body) return of net

income (within the meaning of

paragraph (f)(11)(v)(F) of this section)

over a reasonable period of time (as

determined by the governing body).

(C) Transitional rule-(1)

Notwithstanding paragraph (f)(11)(v)(B)

of this section, if a community trust

meets the requirements of paragraph

(f)(11)(v)(C)(3) of this section, then in

the case of any instrument of transfer

which is executed before July 19, 1977,

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and is not revoked or amended

thereafter (with respect to any

dispositive provision affecting the

transfer to the community trust), and in

the case of any instrument of transfer

which is irrevocable on January 19,

1982, the governing body must have the

power to cause proceedings to be

instituted (by request to the appropriate

State authority)-

(i) To modify any restriction or

condition on the distribution of funds

for any specified charitable purposes or

to specified organizations if in the

judgment of the governing body such

restriction or condition becomes, in

effect, unnecessary, incapable of

fulfillment, or inconsistent with the

charitable needs of the community or

area served; and

(ii) To remove any participating

trustee, custodian, or agent for breach of

fiduciary duty under State law.

(2) The necessity for the governing

body to obtain the approval of a

participating trustee to exercise the

powers described in paragraph

(f)(11)(v)(C)(1) of this section shall be

treated as not preventing the governing

body from having such power, unless

(and until) such approval has been (or

is) requested by the governing body and

has been (or is) denied.

(3) Paragraph (f)(11)(v)(C)(1) of this

section shall not apply unless the

community trust meets the requirements

of paragraph (f)(11)(v)(B) of this section,

with respect to funds other than those

under instruments of transfer described

in the first sentence of such paragraph

(f)(11)(v)(C)(1) of this section, by

January 19, 1978, or such later date as

the Commissioner may provide for such

community trust, and unless the

community trust does not, once it so

complies, thereafter solicit for funds

that will not qualify under the

requirements of paragraph (f)(11)(v)(B)

of this section.

(D) Inconsistent State law-(1) For

purposes of paragraphs (f)(11)(v)(B)(1), (f) (11) (v) (B) (2), (f) (11) (v) (B) (3),

(f)(11)(v)(C)(1)(i), (f)(11)(v)(C)(1)(ii), and

(f)(11)(v)(E) of this section, if a power

described in such a provision is

inconsistent with State law even if such

power were expressly granted to the

governing body by the governing

instrument and were accepted without

limitation under an instrument of

transfer, then the community trust will

be treated as meeting the requirements

of such a provision if it meets such

requirements to the fullest extent

possible consistent with State law (if

such power is or had been so expressly

granted).

(2) For example, if, under the

conditions of paragraph (f)(11)(v)(D)(1)

of this section, the power to modify is

inconsistent with State law, but the

power to institute proceedings to

modify, if so expressly granted, would

be consistent with State law, the

community trust will be treated as

meeting such requirements to the fullest

extent possible if the governing body

has the power (in the governing

instrument or otherwise) to institute

proceedings to modify a condition or

restriction. On the other hand, if in such

a case the community trust has only the

power to cause proceedings to be

instituted to modify a condition or

restriction, it will not be treated as

meeting such requirements to the fullest

extent possible.

(3) In addition, if, for example, under

the conditions of paragraph

(f)(11)(v)(D)(1) of this section, the power

to modify and the power to institute

proceedings to modify a condition or

restriction is inconsistent with State

law, but the power to cause such

proceedings to be instituted would be

consistent with State law, if it were

expressly granted in the governing

instrument and if the approval of the

State Attorney General were obtained,

then the community trust will be treated

as meeting such requirements to the

fullest extent possible if it has the power

(in the governing instrument or

otherwise) to cause such proceedings to

be instituted, even if such proceedings

can be instituted only with the approval

of the State Attorney General.

(E) Exercise of powers. The governing

body shall (by resolution or otherwise)

commit itself to exercise the powers

described in paragraphs (f)(11)(v)(B),

(f)(11)(v)(C), and (f)(11)(v)(D) of this

section in the best interests of the

community trust. The governing body

will be considered not to be so

committed where it has grounds to

exercise such a power and fails to

exercise it by taking appropriate action.

Such appropriate action may include,

for example, consulting with the

appropriate State authority prior to

taking action to replace a participating

trustee.

(F) Reasonable return. In addition to

the requirements of paragraphs

(f)(11)(v)(B), (f)(11)(v)(C), (f)(11)(v)(D), or

(f)(11)(v)(E) of this section, the

governing body shall (by resolution or

otherwise) commit itself to obtain

information and take other appropriate

steps with the view to seeing that each

participating trustee, custodian, or

agent, with respect to each restricted

trust or fund that is, and with respect to

the aggregate of the unrestricted trusts

or funds that are, a component part of

the community trust, administers such

trust or fund in accordance with the

terms of its governing instrument and

accepted standards of fiduciary conduct

to produce a reasonable return of net

income (or appreciation where not

inconsistent with the community trust's

need for current income), with due

regard to safety of principal, in

furtherance of the exempt purposes of

the community trust (except for assets

held for the active conduct of the

community trust's exempt activities). In

the case of a low return of net income

(and, where appropriate, appreciation),

the IRS will examine carefully whether

the governing body has, in fact,

committed itself to take the appropriate

steps. For purposes of this paragraph

(f)(11)(v)(F), any income that has been

designated by the donor of the gift or

bequest to which such income is

attributable as being available only for

the use or benefit of a broad charitable

purpose, such as the encouragement of

higher education or the promotion of

better health care in the community,

will be treated as unrestricted. However,

any income that has been designated for

the use or benefit of a named charitable

organization or agency or for the use or

benefit of a particular class of charitable

organizations or agencies, the members

of which are readily ascertainable and

are less than five in number, will be

treated as restricted.

(vi) Common reports. The

organization must prepare periodic

financial reports treating all of the funds

which are held by the community trust,

either directly or in component parts, as

funds of the organization.

(12) Community trusts; treatment of

trusts and not-for-profit corporations

and associations not included as

components. (i) For purposes of sections

170, 501, 507, 508, 509, and Chapter 42,

any trust or not-for-profit corporation or

association that is alleged to be a

component part of a community trust,

but that fails to meet the requirements

of paragraph (f)(11)(ii) of this section,

shall not be treated as a component part

of a community trust and, if a trust,

shall be treated as a separate trust and

be subject to the provisions of section

501, section 4947(a)(1), or section

4947(a)(2), as the case may be. If such

organization is a not-for-profit

corporation or association, it will be

treated as a separate entity, and, if it is

described in section 501(c)(3), it will be

treated as a private foundation unless it

is described in section 509(a)(1), section

509(a)(2), section 509(a)(3), or section

509(a)(4). In the case of a fund that is

ultimately treated as not being a

component part of a community trust

pursuant to this paragraph (f)(12), if the

Forms 990 filed annually by the

community trust included financial
Federal Register/Vol. 76, No. 174/Thursday, September 8, 2011/Rules and Regulations

information with respect to such fund

and treated such fund in the same

manner as other component parts

thereof, such returns filed by the

community trust prior to the taxable

year in which the Commissioner notifies

such fund that it will not be treated as

a component part will be treated as its

separate return for purpose of

Subchapter A of Chapter 61 of Subtitle

F, and the first such return filed by the

community trust will be treated as the

notification required of the separate

entity for purposes of section 508(a).

(ii) If a transfer is made in trust to a

community trust to make income or

other payments for a period of a life or

lives in being or a term of years to any

individual or for any noncharitable

purpose, followed by payments to or for

the use of the community trust (such as

in the case of a charitable remainder

annuity trust or a charitable remainder

unitrust described in section 664 or a

pooled income fund described in

section 642(c)(5)), such trust will be

treated as a component part of the

community trust upon the termination

of all intervening noncharitable interests

and rights to the actual possession or

enjoyment of the property if such trust

satisfies the requirements of paragraph

(f)(11) of this section at such time. Until

such time, the trust will be treated as a

separate trust. If a transfer is made in

trust to a community trust to make

income or other payments to or for the

use of the community trust, followed by

payments to any individual or for any

noncharitable purpose, such trust will

be treated as a separate trust rather than

as a component part of the community

trust. See section 4947(a)(2) and the

related regulations for the treatment of

such split-interest trusts. The provisions

of this paragraph (f)(12)(ii) provide rules

only for determining when a charitable

remainder trust or pooled income fund

may be treated as a component part of

a community trust and are not intended

to preclude a community trust from

maintaining a charitable remainder trust

or pooled income fund. For purposes of

grantors and contributors, a pooled

income fund of a publicly supported

community trust shall be treated no

differently than a pooled income fund of

any other publicly supported

organization.

(iii) An organization described in

section 170(b)(1)(F)(iii) will not

ordinarily satisfy the requirements of

paragraph (f)(11)(ii) of this section

because of the unqualified right of the

donor to designate the recipients of the

income and principal of the trust. Such

organization will therefore ordinarily be

treated as other than a component part

of a community trust under paragraph

(f)(12)(i) of this section. However, see

section 170(b)(1)(F)(iii) and the related

regulations with respect to the treatment

of contributions to such organizations.

(13) Method of accounting. For

purposes of section 170(b)(1)(A)(vi), an

organization's support will be

determined under the method of

accounting on the basis of which the

organization regularly computes its

income in keeping its books under

section 446. For example, if a grantor

makes a grant to an organization payable

over a term of years, such grant will be

includible in the support fraction of the

grantee organization under the method

of accounting on the basis of which the

grantee organization regularly computes

its income in keeping its books under

section 446.

(14) Transition rules. (i) An

organization that received an advance

ruling, that expires on or after June 9,

2008, that it will be treated as an

organization described in sections

170(b)(1)(A)(vi) and 509(a)(1) will be

treated as meeting the requirements of

paragraph (f)(2) or paragraph (f)(3) of

this section for the first five taxable

years of its existence as a section

501(c)(3) organization unless the IRS

issued to the organization a proposed

determination prior to September 9,

2008, that the organization is not

described in sections 170(b)(1)(A)(vi)

and 509(a)(1) or in section 509(a)(2).

(ii) Paragraph (f)(4)(v) of this section

shall not apply with respect to an

organization that received an advance

ruling that expired prior to June 9, 2008,

and that did not timely file with the

Internal Revenue Service the required

information to establish that it is an

organization described in sections

170(b)(1)(A)(vi) and 509(a)(1) or in

section 509(a)(2).

(iii) An organization that fails to meet

a public support test for its first taxable

year beginning on or after January 1,

2008, under the regulations in this

section may use the prior tests set forth

in § 1.170A-9(e)(2) or § 1.170A-9(e)(3),

or in §§ 1.509(a)-3(a)(2) and 1.509(a)-

3(a)(3), as in effect before September 9,

2008 (as contained in 26 CFR part 1

revised April 1, 2008), to determine

whether the organization was publicly

supported for its 2008 taxable year

based on its satisfaction of a public

support test for taxable year 2007,

computed over the period 2003 through

2006.

(iv) Examples. The application of this

paragraph (f)(14) may be illustrated by

the following examples:

Example 1. (i) Organization X was formed

in January 2004 and uses a taxable year

ending June 30. Organization X received an advance ruling letter that it is recognized as

an organization described in section 501(c)(3)

effective as of the date of its formation and

that it is treated as a publicly supported

organization under sections 170(b)(1)(A)(vi)

and 509(a)(1) during the five-year advance

ruling period that will end on June 30, 2008.

This date is on or after June 9, 2008.

(ii) Under the transition rule, Organization

X is a publicly supported organization

described in sections 170(b)(1)(A)(vi) and

509(a)(1) for the taxable years ending June 30,

2004, through June 30, 2008. Organization X

does not need to establish within 90 days

after June 30, 2008, that it met a public

support test under § 1.170A-9(e) or

§ 1.509(a)-3, as in effect prior to September

9, 2008, (as contained in 26 CFR part 1

revised April 1, 2008), for its advance ruling

period.

(iii) Organization X can qualify as a

publicly supported organization for the

taxable year ending June 30, 2009, if

Organization X can meet the requirements of

paragraph (f)(2) or (f)(3) of this section or

§§ 1.509(a)-3(a)(2) and 1.509(a)-3(a)(3) for

the taxable years ending June 30, 2005,

through June 30, 2009, or for the taxable

years ending June 30, 2004, through June 30,

2008. In addition, for its taxable year ending

June 30, 2009, Organization X may qualify as

a publicly supported organization by availing

itself of the transition rule contained in

paragraph (f)(14)(iii) of this section, which

looks to support received by X in the taxable

years ending June 30, 2004, through June 30,

2007.

Example 2. (i) Organization Y was formed

in January 2000, and uses a taxable year

ending December 31. Organization Y

received a final determination that it was

recognized as tax-exempt under section

501(c)(3) and as a publicly supported

organization prior to September 9, 2008.

(ii) For taxable year 2008, Organization Y

will qualify as publicly supported if it meets

the requirements under either paragraph

(f)(2) or (f)(3) of this section or §§ 1.509(a)-

3(a)(2) or 1.509(a)-3(a)(3) for the five-year

period January 1, 2004, through December

31, 2008. Organization Y will also qualify as

publicly supported for taxable year 2008 if it

meets the requirements under § 1.170A9(e)(2) or § 1.170A-9(e)(3), or under

§§ 1.509(a)-3(a)(2) and 1.509(a)-3(a)(3), as in

effect prior to September 9, 2008, (as

contained in 26 CFR part 1 revised April 1,

2008) for taxable year 2007, using the fouryear period from January 1, 2003, through

December 31, 2006.

(k) Effective/applicability date-(1) In

general. These regulations shall apply to

taxable years beginning after December

31, 1969.

(2) Applicability date. The regulations

in paragraph (f) of this section shall

apply to taxable years beginning on or

after January 1, 2008. For tax years

beginning after December 31, 1969, and

beginning before January 1, 2008, see

§ 1.170A-9(e) (as contained in 26 CFR

part 1 revised April 1, 2008).

§ 1.170A-9T [Removed]

m Par. 3. Section 1.170A-9T is removed.

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55760 Federal Register/Vol. 76, No. 174/Thursday, September 8, 2011/Rules and Regulations

* Par. 4. Section 1.507-2 is revised to

read as follows:

§ 1.507-2 Special rules; transfer to, or

operation as, public charity.

(a) Transfer to public charities-(1)

General rule. Under section 507(b)(1)(A)

a private foundation, with respect to

which there have not been either willful

repeated acts (or failures to act) or a

willful and flagrant act (or failure to act)

giving rise to liability for tax under

Chapter 42, may terminate its private

foundation status by distributing all of

its net assets to one or more

organizations described in section

170(b)(1)(A) (other than in clauses (vii)

and (viii)) each of which has been in

existence and so described for a

continuous period of at least 60

calendar months immediately preceding

such distribution. Because section

507(a) does not apply to such a

termination, a private foundation which

makes such a termination is not

required to give the notification

described in section 507(a)(1). A private

foundation that terminates its private

foundation status under section

507(b)(1)(A) does not incur tax under

section 507(c) and, therefore, no

abatement of such tax under section

507(g) is required.

(2) Effect of current ruling. A private

foundation seeking to terminate its

private foundation status pursuant to

section 507(b)(1)(A) may rely on a ruling

or determination letter issued to a

potential distributee organization that

such distributee organization is an

organization described in section

170(b)(1)(A)(i), 170(b)(1)(A)(ii), 170(b)(1)(A)(iii), 170(b)(1)(A)(iv),

170(b)(1)(A)(v), or 170(b)(1)(A)(vi) in

accordance with the provisions of

§ 1.509(a)-7.

(3) Organizations described in more

than one clause of section 170(b)(1)(A).

For purposes of this paragraph and

section 507(b)(1)(A), the parenthetical

term "other than in clauses (vii) and

(viii)" shall refer only to an organization

that is described only in section

170(b)(1)(A)(vii) or section 170(b)(1)(A)

(viii). Thus, an organization described

in section 170(b)(1)(A)(i),

170(b)(1)(A)(ii), 170(b)(1)(A)(iii), 170(b)(1)(A)(iv), 170(b)(1)(A)(v), or

170(b)(1)(A)(vi) will not be precluded

from being a distributee described in

section 507(b)(1)(A) merely because it

also appears to meet the description of

an organization described in section

170(b)(1)(A)(vii) or section

170(b)(1)(A)(viii).

(4) Applicability of Chapter 42 to

foundations terminating under section

507(b)(1)(A). An organization that

terminates its private foundation status

pursuant to section 507(b)(1)(A) will

remain subject to the provisions of

Chapter 42 until the distribution of all

of its net assets to distributee

organizations described in section

507(b)(1)(A) has been completed.

(5) Return required from

organizations terminating private

foundation status under section

507(b)(1)(A)-(i) An organization that

terminates its private foundation status

under section 507(b)(1)(A) is required to

file a return under the provisions of

section 6043(b).

(ii) An organization that terminates its

private foundation status under section

507(b)(1)(A) is not required to comply

with section 6104(d) for the taxable year

in which such termination occurs.

(6) Distribution of net assets. A

private foundation will meet the

requirement to "distribute all of its net

assets" within the meaning of section

507(b)(1)(A) only if it transfers all of its

right, title, and interest in and to all of

its net assets to one or more

organizations referred to in section

50 7(b)(1)(A).

(7) Effect of restrictions and

conditions upon distributions of net

assets-(i) In general. In order to

effectuate a transfer of "all of its right,

title, and interest in and to all of its net

assets" within the meaning of paragraph

(a)(6) of this section, a transferor private

foundation may not impose any material

restriction or condition that prevents the

transferee organization referred to in

section 507(b)(1)(A) (herein sometimes

referred to as the "public charity") from

freely and effectively employing the

transferred assets, or the income derived

therefrom, in furtherance of its exempt

purposes. Whether or not a particular

condition or restriction imposed upon a

transfer of assets is material (within the

meaning of this paragraph (a)(7)) must

be determined from all of the facts and

circumstances of the transfer. Some of

the more significant facts and

circumstances to be considered in

making such a determination are-

(A) Whether the public charity

(including a participating trustee,

custodian, or agent in the case of a

community trust) is the owner in fee of

the assets it receives from the private

foundation;

(B) Whether such assets are to be held

and administered by the public charity

in a manner consistent with one or more

of its exempt purposes;

(C) Whether the governing body of the

public charity has the ultimate authority

and control over such assets, and the

income derived therefrom; and

(D) Whether, and to what extent, the

governing body of the public charity is

organized and operated so as to be

independent from the transferor.

(ii) Independent governing body. As

provided in paragraph (a)(7)(i)(D) of this

section, one of the more significant facts

and circumstances to be considered in

making the determination whether a

particular condition or restriction

imposed upon a transfer of assets is

material within the meaning of this

paragraph (a)(7) is whether, and the

extent to which, the governing body is

organized and operated so as to be

independent from the transferor. In

turn, the determination as to such factor

must be determined from all of the facts

and circumstances. Some of the more

significant facts and circumstances to be

considered in making such a

determination are-

(A) Whether, and to what extent,

members of the governing body are

comprised of persons selected by the

transferor private foundation or

disqualified persons with respect

thereto or are themselves such

disqualified persons;

(B) Whether, and to what extent,

members of the governing body are

selected by public officials acting in

their capacities as such; and

(C) How long a period of time each

member of the governing body may

serve in such capacity. In the case of a

transfer that is to a community trust, the

community trust shall meet this

paragraph (a)(7)(ii)(C) if-

(1) Its governing body is comprised of

members who may serve a period of not

more than ten consecutive years; and

(2) Upon completion of a period of

service (beginning before or after the

date of transfer), no member may serve

again within a period consisting of the

lesser of five years or the number of

consecutive years the member has

immediately completed serving.

(iii) Factors not adversely affecting

determination. The presence of some or

all of the following factors will not be

considered as preventing the transferee

"from freely and effectively employing

the transferred assets, or the income

derived therefrom, in furtherance of its

exempt purposes" (within the meaning

of paragraph (a)(7)(i) of this section):

(A) Name. The fund is given a name

or other designation which is the same

as or similar to that of the transferor

private foundation or otherwise

memorializes the creator of the

foundation or his family.

(B) Purpose. The income and assets of

the fund are to be used for a designated

purpose or for one or more particular

section 509(a)(1), section 509(a)(2), or

section 509(a)(3) organization, and such

use is consistent with the charitable,

educational, or other basis for the
Federal Register/Vol. 76, No. 174/Thursday, September 8, 2011/Rules and Regulations

exempt status of the public charity

under section 501(c)(3).

(C) Administration. The transferred

assets are administered in an

identifiable or separate fund, some or all

of the principal of which is not to be

distributed for a specified period, if the

public charity (including a participating

trustee, custodian, or agent in the case

of a community trust) is the legal and

equitable owner of the fund and the

governing body exercises ultimate and

direct authority and control over such

fund, as, for example, a fund to endow

a chair at a university or a medical

research fund at a hospital. In the case

of a community trust, the transferred

assets must be administered in or as a

component part of the community trust

within the meaning of § 1.170A-9 (f) (11).

(D) Restrictions on disposition. The

transferor private foundation transfers

property the continued retention of

which by the transferee is required by

the transferor if such retention is

important to the achievement of

charitable or other similar purposes in

the community because of the peculiar

features of such property, as, for

example, where a private foundation

transfers a woodland preserve which is

to be maintained by the public charity

as an arboretum for the benefit of the

community. Such a restriction does not

include a restriction on the disposition

of an investment asset or the

distribution of income.

(iv) Adverse factors. The presence of

any of the following factors will be

considered as preventing the transferee

"from freely and effectively employing

the transferred assets, or the income

derived therefrom, in furtherance of its

exempt purposes" (within the meaning

of paragraph (a)(7)(i) of this section):

(A) Distributions. (1) With respect to

distributions made after April 19, 1977,

the transferor private foundation, a

disqualified person with respect thereto,

or any person or committee designated

by, or pursuant to the terms of an

agreement with, such a person

(hereinafter referred to as donor),

reserves the right, directly or indirectly,

to name (other than by designation in

the instrument of transfer of particular

section 509(a)(1), section 509(a)(2), or

section 509(a)(3) organizations) the

persons to which the transferee public

charity must distribute, or to direct the

timing of such distributions (other than

by direction in the instrument of

transfer that some or all of the principal,

as opposed to specific assets, not be

distributed for a specified period) as, for

example, by a power of appointment.

The IRS will examine carefully whether

the seeking of advice by the transferee

from, or the giving of advice by, any

donor after the assets have been

transferred to the transferee constitutes

an indirect reservation of a right to

direct such distributions. In any such

case, the reservation of such a right will

be considered to exist where the only

criterion considered by the public

charity in making a distribution of

income or principal from a donor's fund

is advice offered by the donor. Whether

there is a reservation of such a right will

be determined from all of the facts and

circumstances, including, but not

limited to, the factors contained in

paragraphs (a)(7)(iv)(A)(2) and

(a)(7)(iv)(A)(3) of this section.

(2) The presence of some or all of the

following factors will indicate that the

reservation of a right to direct

distributions does not exist:

(i) There has been an independent

investigation by the staff of the public

charity evaluating whether the donor's

advice is consistent with specific

charitable needs most deserving of

support by the public charity (as

determined by the public charity).

(ii) The public charity has

promulgated guidelines enumerating

specific charitable needs consistent with

the charitable purposes of the public

charity and the donor's advice is

consistent with such guidelines.

(iii) The public charity has instituted

an educational program publicizing to

donors and other persons the guidelines

enumerating specific charitable needs

consistent with the charitable purposes

of the public charity.

(iv) The public charity distributes

funds in excess of amounts distributed

from the donor's fund to the same or

similar types of organizations or

charitable needs as those recommended

by the donor.

(v) The public charity's solicitations

(written or oral) for funds specifically

state that such public charity will not be

bound by advice offered by the donor.

(3) The presence of some or all of the

following factors will indicate the

reservation of a right to direct

distributions does exist:

(i) The solicitations (written or oral) of

funds by the public charity state or

imply, or a pattern of conduct on the

part of the public charity creates an

expectation, that the donor's advice will

be followed.

(ii) The advice of a donor (whether or

not restricted to a distribution of income

or principal from the donor's trust or

fund) is limited to distributions of

amounts from the donor's fund, and the

factors described in paragraph

(a)(7)(iv)(A)(2)(i) or paragraph

(a)(7)(iv)(A)(2)(ii) of this section are not

present.

(iii) Only the advice of the donor as

to distributions of such donor's fund is

solicited by the public charity and no

procedure is provided for considering

advice from persons other than the

donor with respect to such fund.

(iv) For the taxable year and all prior

taxable years the public charity follows

the advice of all donors with respect to

their funds substantially all of the time.

(B) Other action or withholding of

action. The terms of the transfer

agreement, or any expressed or implied

understanding, required the public

charity to take or withhold action with

respect to the transferred assets which is

not designed to further one or more of

the exempt purposes of the public

charity, and such action or withholding

of action would, if performed by the

transferor private foundation with

respect to such assets, have subjected

the transferor to tax under Chapter 42

(other than with respect to the

minimum investment return

requirement of section 4942(e)).

(C) Assumption of leases, contractual

obligations, or liabilities. The public

charity assumes leases, contractual

obligations, or liabilities of the

transferor private foundation, or takes

the assets thereof subject to such

liabilities (including obligations under

commitments or pledges to donees of

the transferor private foundation), for

purposes inconsistent with the purposes

or best interests of the public charity,

other than the payment of the

transferor's Chapter 42 taxes incurred

prior to the transfer to the public charity

to the extent of the value of the assets

transferred.

(D) Retention of investment assets.

The transferee public charity is required

by any restriction or agreement (other

than a restriction or agreement imposed

or required by law or regulatory

authority), express or implied, to retain

any securities or other investment assets

transferred to it by the private

foundation. In a case where such

transferred assets consistently produce a

low annual return of income, the IRS

will examine carefully whether the

transferee is required by any such

restriction or agreement to retain such

assets.

(E) Right of first refusal. An agreement

is entered into in connection with the

transfer of securities or other property

which grants directly or indirectly to the

transferor private foundation or any

disqualified person with respect thereto

a right of first refusal with respect to the

transferred securities or other property

when and if disposed of by the public

charity, unless such securities or other

property was acquired by the transferor

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55762 Federal Register/Vol. 76, No. 174/Thursday, September 8, 2011/Rules and Regulations

private foundation subject to such right

of first refusal prior to October 9, 1969.

(F) Relationships. An agreement is

entered into between the transferor

private foundation and the transferee

public charity which establishes

irrevocable relationships with respect to

the maintenance or management of

assets transferred to the public charity,

such as continuing relationships with

banks, brokerage firms, investment

counselors, or other advisors with

regard to the investments or other

property transferred to the public

charity (other than a relationship with a

trustee, custodian, or agent for a

community trust acting as such). The

transfer of property to a public charity

subject to contractual obligations which

were established prior to November 11,

1976, between the transferor private

foundation and persons other than

disqualified persons with respect to

such foundation will not be treated as

prohibited under the preceding

sentence, but only if such contractual

obligations were not entered into

pursuant to a plan to terminate the

private foundation status of the

transferor under section 507(b)(1)(A)

and if the continuation of such

contractual obligations is in the best

interests of the public charity.

(G) Other conditions. Any other

condition is imposed on action by the

public charity which prevents it from

exercising ultimate control over the

assets received from the transferor

private foundation for purposes

consistent with its exempt purposes.

(v) Examples. The provisions of this

paragraph (a)(7) may be illustrated by

the following examples:

Example 1. The M Private Foundation

transferred all of its net assets to the V Cancer

Institute, a public charity described in

section 170(b)(1)(A)(iii). Prior to the transfer,

M's activities consisted of making grants to

hospitals and universities to further research

into the causes of cancer. Under the terms of

the transfer, V is required to keep M's assets

in a separate fund and use the income and

principal to further cancer research.

Although the assets may be used only for a

limited purpose, this purpose is consistent

with and in furtherance of V's exempt

purposes, and does not prevent the transfer

from being a distribution for purposes of

section 507(b)(1)(A).

Example 2. The N Private Foundation

transferred all of its net assets to W

University, a public charity described in

section 170(b)(1)(A)(ii). Under the terms of

the transfer, W is required to use the income

and principal to endow a chair at the

university to be known as the "John J. Doe

Memorial Professorship," named after N's

creator. Although the transferred assets are to

be used for a specified purpose by W, this

purpose is in furtherance of W's exempt

educational purposes, and there are no

conditions on investment or reinvestment of

the principal or income. The use of the name

of the foundation's creator for the chair is not

a restriction which would prevent the

transfer from being a distribution for

purposes of section 507(b)(1)(A).

Example 3. The 0 Private Foundation

transferred all of its net assets to X Bank as

trustee for the Q Community Trust, a

community trust that is a public charity

described in section 170(b)(1)(A)(vi). Under

the terms of the transfer, X is to hold the

assets in trust for Q and is directed to

distribute the income annually to the Y

Church, a public charity described in section

170(b)(1)(A)(i). The distribution of income to

Y Church is consistent with Q's exempt

purposes. If the trust created by this transfer

otherwise meets the requirements of

§ 1.170A-9(f)(11) as a component part of the

Q Community Trust, the assets transferred by

O to X will be treated as distributed to one

or more public charities within the meaning

of section 507(b)(1)(A). The direction to

distribute the income to Y Church meets the

conditions of paragraph (a)(7)(iii)(B) of this

section and will therefore not disqualify the

transfer under section 507(b)(1)(A).

Example 4. (i) The P Private Foundation

transferred all of its net assets to Z Bank as

trustee for the R Community Trust, a

community trust that is a public charity

described in section 170(b)(1)(A)(vi). Under

the terms of the transfer, Z is to hold the

assets in trust for R and distribute the income

to those public charities described in section

170(b)(1)(A)(i) through (b)(1)(A)(vi) that are

designated by B, the creator of P. R's

governing body has no authority during B's

lifetime to vary B's direction. Under the

terms of the transfer, it is intended that Z

retain the transferred assets in their present

form for a period of 20 years, or until the date

of B's death if it occurs before the expiration

of such period. Upon the death of B, R will

have the power to distribute the income to

such public charities as it selects and may

dispose of the corpus as it sees fit.

(ii) Under paragraph (a)(7)(iv)(A) or

paragraph (a)(7)(iv)(D) of this section, as a

result of the restrictions imposed with

respect to the transferred assets, there has

been no distribution of all P's net assets

within the meaning of section 507(b)(1)(A) at

the time of the transfer. In addition, P has not

transferred its net assets to a component part

of R Community Trust, but rather to a

separate trust described in § 1.170A-9(f)(12).

(b) Operation as a public charity-(1)

In general. Under section 507(b)(1)(B),

an organization can terminate its private

foundation status if the organization-

(i) Meets the requirements of section

509(a)(1), section 509(a)(2) or section

509(a)(3) for a continuous period of 60

calendar months beginning with the

first day of any taxable year that begins

after December 31, 1969;

(ii) In compliance with section

507(b)(1)(B)(ii) and paragraph (b)(3) of

this section, properly notifies the IRS, in

such manner as may be provided by

published guidance, publication, form

or instructions, before the

commencement of such 60-month

period, that it is terminating its private

foundation status; and

(iii) Properly establishes immediately

after the expiration of such 60-month

period that such organization has

complied with the requirements of

section 509(a)(1), section 509(a)(2) or

section 509(a)(3) during the 60-month

period, in the manner described in

paragraph (b)(4) of this section.

(2) Relationship of section

507(b)(1)(B) to sections 507(a), 507(c),

and 507(g). Because section 507(a) does

not apply to a termination described in

section 507(b)(1)(B), a private

foundation's notification that it is

commencing a termination pursuant to

section 507(b)(1)(B) will not be treated

as a notification described in section

507(a) even if the private foundation

does not successfully terminate its

private foundation status pursuant to

section 507(b)(1)(B). A private

foundation that terminates its private

foundation status under section

507(b)(1)(B) does not incur tax under

section 507(c) and, therefore, no

abatement of such tax under section

507(g) is required.

(3) Notification of termination. In

order to comply with the requirements

under section 507(b)(1)(B)(ii), an

organization shall before the

commencement of the 60-month period

under section 507(b)(1)(B)(i) notify the

IRS, in such manner as may be provided

by published guidance, publication,

form or instructions, of its intention to

terminate its private foundation status.

Such notification shall contain the

following information-

(i) The name and address of the

private foundation;

(ii) Its intention to terminate its

private foundation status;

(iii) The Code section under which it

seeks classification (section 509(a)(1),

section 509(a)(2) or section 509(a)(3));

(iv) If section 509(a)(1) is applicable,

the clause of section 170(b)(1)(A)

involved;

(v) The date its regular taxable year

begins; and

(vi) The date of commencement of the

60-month period.

(4) Establishment of termination. In

order to comply with the requirements

under section 507(b)(1)(B)(iii), an

organization shall within 90 days after

the expiration of the 60-month period

file such information with the IRS, in

such manner as may be provided by

published guidance, publication, form

or instructions, as is necessary to make

a determination as to the organization's

status as an organization described

under section 509(a)(1), section

509(a)(2) or section 509(a)(3) and the
Federal Register/Vol. 76, No. 174/Thursday, September 8, 2011/Rules and Regulations

related regulations. See paragraph (c) of

this section as to the information

required to be submitted under this

paragraph (b)(4).

(5) Incomplete information. The

failure to supply, within the required

time, all of the information required by

paragraph (b)(3) or paragraph (b)(4) of

this section is not alone sufficient to

constitute a failure to satisfy the

requirements of section 507(b)(1)(B). If

the information that is submitted within

the required time is incomplete and the

organization supplies the necessary

additional information at the request of

the Commissioner within the additional

time period allowed by him, the original

submission will be considered timely.

(6) Application of special rules and

filing requirements. An organization

that has terminated its private

foundation status under section

507(b)(1)(B) is not required to comply

with the special rules set forth in

sections 508(a) and 508(b). Such

organization is also not required to file

a return under the provisions of section

6043(b) by reason of termination of its

private foundation status under the

provisions of section 507(b)(1)(B).

(7) Extension of time to assess

deficiencies. If a private foundation files

a notification (described in paragraph

(b)(3) of this section) that it intends to

begin a 60-month termination pursuant

to section 507(b)(1)(B) and does not file

a request for an advance ruling pursuant

to paragraph (d) of this section, such

private foundation may file with the

notification described in paragraph

(b)(3) of this section a consent under

section 6501(c)(4) to the effect that the

period of limitation upon assessment

under section 4940 for any taxable year

within the 60-month termination period

shall not expire prior to one year after

the date of expiration of the time

prescribed by law for the assessment of

a deficiency for the last taxable year

within the 60-month period. Such

consents, if filed, will ordinarily be

accepted by the Commissioner. See

paragraph (e)(3) of this section for an

illustration of the procedure required to

obtain a refund of the tax imposed by

section 4940 in a case where such a

consent is not in effect.

(c) Sixty-month terminations-(i)

Method of determining normal sources

of support. (i) In order to meet the

requirements of section 507(b)(1)(B) for

the 60-month termination period as a

section 509(a)(1) or section 509(a)(2)

organization, an organization must meet

the requirements of section 509(a)(1) or

section 509(a)(2), as the case may be, for

a continuous period of at least 60

calendar months. In determining

whether an organization seeking status

under section 509(a)(1) as an

organization described in section

170(b)(1)(A)(iv) or section

170(b)(1)(A)(vi) or under section

509(a)(2) normally meets the

requirements set forth under such

sections, support received in taxable

years prior to the commencement of the

60-month period shall not be taken into

consideration, except as otherwise

provided in this section.

(ii) For purposes of section

507(b)(1)(B), an organization will be

considered to be a section 509(a)(1)

organization described in section

170(b)(1)(A)(vi) for a continuous period

of 60 calendar months only if the

organization satisfies the provisions of

§ 1.170A-9(f), other than § 1.170A9(f)(4)(v), based upon aggregate data for

such entire period. The calculation of

public support shall be made over the

period beginning with the date of the

commencement of the 60-month period,

and ending with the last day of the 60-

month period.

(iii) For purposes of section

507(b)(1)(B), an organization will be

considered to be a section 509(a)(2)

organization only if such organization

meets the support requirements set forth

in sections 509(a)(2)(A) and 509(a)(2)(B)

and the related regulations, other than

§ 1.509(a)-3(d), for the continuous

period of 60 calendar months prescribed

under section 507(b)(1)(B). The

calculation of public support shall be

made over the period beginning with

the date of the commencement of the

60-month period, and ending with the

last day of the 60-month period.

(2) Organizational and operational

tests. In order to meet the requirements

of section 507(b)(1)(B) for the 60-month

termination period as an organization

described in section 170(b)(1)(A)(i),

170(b)(1)(A)(ii), 170(b)(1)(A)(iii), 170(b)(1)(A)(iv), or 170(b)(1)(A)(v) or

section 509(a)(3), as the case may be, an

organization must meet the

requirements of the applicable

provisions for a continuous period of at

least 60 calendar months. For purposes

of section 507(b)(1)(B), an organization

will be considered to be such an

organization only if it satisfies the

requirements of the applicable provision

(including with respect to section

509(a)(3), the organizational and

operational test set forth in section

509(a)(3)(A)) at the commencement of

such 60-month period and continuously

thereafter during such period.

(d) Advance rulings for 60-month

terminations-(i) In general. An

organization that files the notification

required by section 507(b)(1)(B)(ii) that

it is commencing a 60-month

termination may obtain an advance

ruling from the Commissioner that it

can be expected to satisfy the

requirements of section 507(b)(1)(B)(i)

during the 60-month period. Such an

advance ruling may be issued if the

organization can reasonably be expected

to meet the requirements of section

507(b)(1)(B)(i) during the 60-month

period. The issuance of a ruling will be

discretionary with the Commissioner.

(2) Basic consideration. In

determining whether an organization

can reasonably be expected (within the

meaning of paragraph (d)(1) of this

section) to meet the requirements of

section 507(b)(1)(B)(i) for the 60-month

period, the basic consideration is

whether its organizational structure

(taking into account any revisions made

prior to the beginning of the 60-month

period), current or proposed programs

or activities, actual or intended method

of operation, and current or projected

sources of support are such as to

indicate that the organization is likely to

satisfy the requirements of section

509(a)(1), section 509(a)(2), or section

509(a)(3) and paragraph (c) of this

section during the 60-month period. In

making such a determination, all

pertinent facts and circumstances shall

be considered.

(3) Reliance by grantors and

contributors. For purposes of sections

170, 545(b)(2), 642(c), 4942, 4945, 4966,

2055, 2106(a)(2), and 2522, grants or

contributions to an organization which

has obtained a ruling referred to in this

paragraph will be treated as made to an

organization described in section

509(a)(1), section 509(a)(2), or section

509(a)(3), as the case may be, until the

IRS publishes notice that such advance

ruling is being revoked (such as by

publication in the Internal Revenue

Bulletin). However, a grantor or

contributor may not rely on such an

advance ruling if the grantor or

contributor was responsible for, or

aware of, the act or failure to act that

resulted in the organization's failure to

meet the requirements of section

509(a)(1), section 509(a)(2), or section

509(a)(3), or acquired knowledge that

the IRS had given notice to such

organization that its advance ruling

would be revoked. Prior to the making

of any grant or contribution which

allegedly will not result in the grantee's

failure to meet the requirements of

section 509(a)(1), section 509(a)(2), or

section 509(a)(3), a potential grantee

organization may request a ruling

whether such grant or contribution may

be made without such failure. A request

for such ruling may be filed by the

grantee organization with the IRS. The

issuance of such ruling will be at the

sole discretion of the Commissioner.

55763
55764 Federal Register/Vol. 76, No. 174/Thursday, September 8, 2011/Rules and Regulations

The organization must submit all

information necessary to make a

determination on the factors referred to

in paragraph (d)(2) of this section. If a

favorable ruling is issued, such ruling

may be relied upon by the grantor or

contributor of the particular

contribution in question for purposes of

sections 170, 507, 545(b)(2), 642(c),

4942, 4945, 4966, 2055, 2106(a)(2), and

2522.

(4) Reliance by organization. An

organization obtaining an advance

ruling pursuant to this paragraph cannot

rely on such a ruling. Consequently, if

the organization does not pay the tax

imposed by section 4940 for any taxable

year or years during the 60-month

period, and it is subsequently

determined that such tax is due for such

year or years (because the organization

did not in fact complete a successful

termination pursuant to section

507(b)(1)(B) and was not treated as an

organization described in section

509(a)(1), section 509(a)(2), or section

509(a)(3) for such year or years), the

organization is liable for interest in

accordance with section 6601 if any

amount of tax under section 4940 has

not been paid on or before the last date

prescribed for payment. However,

because any failure to pay such tax

during the 60-month period (or prior to

the revocation of such ruling) is due to

reasonable cause, the penalty under

section 6651 with respect to the tax

imposed by section 4940 shall not

apply.

(5) Extension of time to assess

deficiencies. The advance ruling

described in paragraph (d)(1) of this

section shall be issued only if such

organization's request for an advance

ruling is filed with a consent under

section 6501(c)(4) to the effect that the

period of limitations upon assessment

under section 4940 for any taxable year

within the advance ruling period shall

not expire prior to one year after the

date of the expiration of the time

prescribed by law for the assessment of

a deficiency for the last taxable year

within the 60-month period.

(e) Effect on grantors or contributors

and on the organization itself (1) Effect

of satisfaction of requirements for

termination; treatment during the

termination period. In the event that an

organization satisfies the requirements

of section 507(b)(1)(B) for termination of

its private foundation status during the

continuous 60-month period, such

organization shall be treated for such

entire 60-month period in the same

manner as an organization described in

section 509(a)(1), section 509(a)(2), or

section 509(a)(3), as the case may be.

(2) Failure to meet termination

requirements-(i) In general. Except as

otherwise provided in paragraphs (d)

and (e)(2)(ii) of this section, any

organization that fails to satisfy the

requirements of section 507(b)(1)(B) for

termination of its private foundation

status during the continuous 60-month

period shall be treated as a private

foundation for the entire 60-month

period, for purposes of sections 507

through 509 and Chapter 42, and grants

or contributions to such an organization

shall be treated as made to a private

foundation for purposes of sections 170,

507(b)(1)(A), 4942, and 4945.

(ii) Certain 60-month terminations.

Notwithstanding paragraph (e)(2)(i) of

this section, if an organization fails to

satisfy the requirements of section

509(a)(1), section 509(a)(2), or section

509(a)(3) for the continuous 60-month

period but does satisfy the requirements

of section 509(a)(1), section 509(a)(2), or

section 509(a)(3), as the case may be, for

any taxable year or years during such

60-month period, the organization shall

be treated as a section 509(a)(1), section

509(a)(2), or section 509(a)(3)

organization for such taxable year or

years, and grants or contributions made

during such taxable year or years shall

be treated as made to an organization

described in section 509(a)(1), section

509(a)(2), or section 509(a)(3). In

addition, sections 507 through 509 and

Chapter 42 shall not apply to such

organization for any taxable year within

such 60-month period for which it does

meet such requirements. For purposes

of determining whether an organization

satisfies the requirements of section

509(a)(1), section 509(a)(2), or section

509(a)(3) for any taxable year in the 60-

month period, the calculation of public

support shall be made over the period

beginning with the date of the

commencement of the 60-month period,

and ending with the last day of the

taxable year being tested. The

organization shall not be treated as a

section 509(a)(1) or section 509(a)(2)

organization for any taxable year during

the 60-month period solely by reason of

having met a public support test for the

preceding year. In addition, the

transition rules in §§ 1.170-9(f)(14)(iii)

and 1.509(a)-3(n)(iii) shall not apply.

(iii) Aggregate tax benefit. For

purposes of section 507(d), the

organization's aggregate tax benefit

resulting from the organization's section

501(c)(3) status shall continue to be

computed from the date from which

such computation would have been

made, but for the notice filed under

section 507(b)(1)(B)(ii), except that any

taxable year within such 60-month

period for which such organization

meets the requirements of section

509(a)(1), section 509(a)(2), or section

509(a)(3) shall be excluded from such

computations.

(iv) Excess business holdings. See

section 4943 and the related regulations

for rules relating to decreases in a

private foundation's holdings in a

business enterprise which are caused by

the foundation's failure to terminate its

private foundation status after giving the

notification for termination under

section 507(b)(1)(B)(ii).

(3) Example. The provisions of this

paragraph (e) may be illustrated by the

following example:

Example 1. Y, a calendar year private

foundation, notifies the IRS that it intends to

terminate its private foundation status by

converting into a publicly supported

organization described in section

170(b)(1)(A)(vi) and that its 60-month

termination period will commence on

January 1, 2010. Y does not obtain a ruling

described in paragraph (d) of this section.

Based upon its support for 2010, Y does not

qualify as a publicly supported organization

within the meaning of § 1.170A-9(f) and this

paragraph for 2010. Consequently, in order to

avoid the risks of penalties and interest if Y

fails to terminate within the 60-month

period, Y files its 2010 return as a private

foundation and pays the tax imposed by

section 4940. Because a consent (described in

paragraph (b)(7) of this section), which

would prevent the period of limitations for

all years in the 60-month period from

expiring, is not in effect, in order to be able

to file a claim for refund, Y and the IRS must

agree to extend the period of limitation for

all taxes imposed under Chapter 42 for 2010.

Based on the aggregate data for the entire

60-month period (2010 through 2014), Y does

qualify as a publicly-supported organization

for the entire 60-month period.

Consequently, Y is treated as a publiclysupported organization for the entire 60-

month period. Y files a claim for refund for

the taxes paid under section 4940 for 2010,

and such taxes are refunded.

(f) Effective/applicability date-(1)

Effective date. These regulations are

effective on September 8, 2011.

(2) Applicability date. The regulations

in this section shall apply to tax years

beginning on or after January 1, 2008.

For taxable years beginning after

December 31, 1969, and beginning

before January 1, 2008, see § 1.507-2 (as

contained in 26 CFR part 1 revised April

1, 2008).

§ 1.507-2T [Removed]

* Par. 5. Section 1.507-2T is removed.

* Par. 6. Section 1.509(a)-3 is amended

as follows:

1. Revising paragraphs (a)(2), (a)(3)(i),

(c), (d), (e), (k) and (n).

2. Adding new paragraph (o).

The revisions and addition read as

follows:
Federal Register/Vol. 76, No. 174/Thursday, September 8, 2011/Rules and Regulations

§1.509(a)-3 Broadly, publicly supported

organizations.

(a) * * *

(2) One-third support test. An

organization will meet the one-third

support test if it normally (within the

meaning of paragraph (c) or paragraph

(d) of this section) receives from

permitted sources more than one-third

of its support in each taxable year from

any combination of-

(i) Gifts, grants, contributions, or

membership fees; and

(ii) Gross receipts from admissions,

sales of merchandise, performance of

services, or furnishing of facilities, in an

activity that is not an unrelated trade or

business (within the meaning of section

513), subject to certain limitations

described in paragraph (b) of this

section. For purposes of this section,

governmental units, organizations

described in section 509(a)(1), and

persons other than disqualified persons

with respect to the organization shall be

referred to as permitted sources. For

purposes of this section, the amount of

support received from the sources

described in paragraph (a)(2)(i) of this

section and this paragraph (a)(2)(ii)

(subject to the limitations referred to in

this paragraph (a)(2)) will be referred to

as the numerator of the one-third

support fraction, and the total amount of

support received (as defined in section

509(d)) will be referred to as the

denominator of the one-third support

fraction. Section 1.509(a)-3(f)

distinguishes gifts and contributions

from gross receipts; § 1.509(a)-3(g)

distinguishes grants from gross receipts;

§ 1.509(a)-3(h) defines membership

fees; § 1.509(a)-3(i) defines "any bureau

or similar agency of a governmental

unit"; § 1.509(a)-3(j) describes the

treatment of certain indirect forms of

support; paragraph (k) of this section

describes the method of accounting for

support; § 1.509(a)-3(1) describes the

treatment of gross receipts from section

513(a)(1), section 513(a)(2), or section

513(a)(3) activities; § 1.509(a)-3(m)

distinguishes gross receipts from gross

investment income; and § 1.509(a)-3(n)

describes transition rules for

organizations that received advance

rulings that expire on or after June 9,

2008.

(3) * * *

(i) In general. An organization will

meet the not-more-than-one-third

support test under section 509(a)(2)(B) if

it normally (within the meaning of

paragraph (c) or (d) of this section)

receives not more than one-third of its

support in each taxable year from the

sum of its gross investment income (as

defined in section 509(e)) and the excess

(if any) of the amount of its unrelated

business taxable income (as defined in

section 512) derived from trades or

businesses that were acquired by the

organization after June 30, 1975, over

the amount of tax imposed on such

income by section 511. For purposes of

this section the amount of support

received from items described in section

509(a)(2)(B) will be referred to as the

numerator of the not-more-than-onethird support fraction, and the total

amount of support (as defined in section

509(d)) will be referred to as the

denominator of the not-more-than-onethird support fraction. For purposes of

section 509(a)(2), paragraph (m) of this

section distinguishes gross receipts from

gross investment income. For purposes

of section 509(e), gross investment

income includes the items of investment

income described in § 1.512(b)-1(a). * * * * *

(c) Normally-(1) In general-(i)

Definition. The support tests set forth in

section 509(a)(2) are to be computed on

the basis of the nature of the

organization's normal sources of

support. An organization will be

considered as "normally" receiving one

third of its support from any

combination of gifts, grants,

contributions, membership fees, and

gross receipts from permitted sources

(subject to the limitations described in

§ 1.509(a)-3(b)) and not more than one

third of its support from items described

in section 509(a)(2)(B) for a taxable year

and the taxable year immediately

succeeding such year, if, for such

taxable year and the four taxable years

immediately preceding such taxable

year, the aggregate amount of the

support received during the applicable

period from gifts, grants, contributions,

membership fees, and gross receipts

from permitted sources (subject to the

limitations described in § 1.509(a)-3(b))

is more than one third, and the

aggregate amount of the support

received from items described in section

509(a)(2)(B) is not more than one third,

of the total support of the organization

for such five-year period. A publicly

supported organization described under

section 509(a)(2) that has failed to meet

either the one-third support test of

paragraph (a)(2) of this section or the

not-more-than-one-third support test of

paragraph (a)(3) of this section for two

consecutive years will be treated as a

private foundation as of the first day of

the second consecutive taxable year

only for purposes of sections 507, 4940,

and 6033. Such an organization must

file a Form 990-PF, "Return of Private

Foundation or Section 4947(a)(1)

Nonexempt Charitable Trust Treated as

a Private Foundation," and will be

liable for the net investment tax

imposed by section 4940 and, if

applicable, the private foundation

termination tax imposed by section

507(c), for that second consecutive

failed year. For the succeeding years,

the organization will be treated as a

private foundation for all purposes.

(ii) First five years of an

organization's existence. See paragraph

(d)(1) of this section for the definition of

"normally" for organizations in the first

five years of their existence.

(2) Terminations under section

507(b)(1)(B). For the special rules

applicable to the term normally as

applied to private foundations that elect

to terminate their private foundation

status pursuant to the 60-month

procedure provided in section

507(b)(1)(B), see the regulations under

such section.

(3) Exclusion of unusual grants. For

purposes of applying the tests for

support set forth in paragraphs (a)(2)

and (a)(3) of this section, one or more

contributions may be excluded from the

numerator of the one-third support

fraction and from the denominator of

both the one-third support and notmore-than-one-third support fractions

only if such a contribution meets the

requirements of this paragraph (c)(3).

The exclusion provided by this

paragraph (c)(3) is generally intended to

apply to substantial contributions and

bequests from disinterested parties,

which contributions or bequests-

(i) Are attracted by reason of the

publicly supported nature of the

organization;

(ii) Are unusual or unexpected with

respect to the amount thereof; and

(iii) Would by reason of their size,

adversely affect the status of the

organization as normally meeting the

one-third support test for any of the

applicable periods described in this

paragraph (c) or paragraph (d) of this

section. In the case of a grant (as defined

in § 1.509(a)-3(g)) that meets the

requirements of this paragraph (c)(3), if

the terms of the granting instrument

require that the funds be paid to the

recipient organization over a period of

years, the grant amounts may be

excluded for such year or years in

which they would otherwise be

includible in computing support under

the method of accounting on the basis

of which the organization regularly

computes its income in keeping its

books under section 446. However, no

item described in section 509(a)(2)(B)

may be excluded under this paragraph

(c)(3). The provisions of this paragraph

(c)(3) shall apply to exclude unusual

grants made during any of the

applicable periods described in this

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55766 Federal Register/Vol. 76, No. 174/Thursday, September 8, 2011/Rules and Regulations

paragraph (c) or paragraph (d) of this

section. See paragraph (c)(5) of this

section as to reliance by a grantee

organization upon an unusual grant

ruling under this paragraph (c)(3).

(4) Determining factors. In

determining whether a particular

contribution may be excluded under

paragraph (c)(3) of this section, all

pertinent facts and circumstances will

be taken into consideration. No single

factor will necessarily be determinative.

Among the factors to be considered

are-

(i) Whether the contribution was

made by any person (or persons

standing in a relationship to such

person which is described in section

4946(a)(1)(C) through 4946(a)(1)(G))

who created the organization,

previously contributed a substantial part

of its support or endowment, or stood in

a position of authority, such as a

foundation manager (within the

meaning of section 4946(b)), with

respect to the organization. A

contribution made by a person other

than those persons described in this

paragraph (c)(4)(i) will ordinarily be

given more favorable consideration than

a contribution made by a person

described in this paragraph (c)(4)(i);

(ii) Whether the contribution was a

bequest or an inter vivos transfer. A

bequest will ordinarily be given more

favorable consideration than an inter

vivos transfer;

(iii) Whether the contribution was in

the form of cash, readily marketable

securities, or assets which further the

exempt purposes of the organization,

such as a gift of a painting to a museum;

(iv) Except in the case of a new

organization, whether, prior to the

receipt of the particular contribution,

the organization has carried on an actual

program of public solicitation and

exempt activities and has been able to

attract a significant amount of public

support;

(v) Whether the organization may

reasonably be expected to attract a

significant amount of public support

subsequent to the particular

contribution. In this connection,

continued reliance on unusual grants to

fund an organization's current operating

expenses (as opposed to providing new

endowment funds) may be evidence that

the organization cannot reasonably be

expected to attract future support from

the general public;

(vi) Whether, prior to the year in

which the particular contribution was

received, the organization met the onethird support test described in

paragraph (a)(2) of this section without

the benefit of any exclusions of unusual

grants pursuant to paragraph (c)(3) of

this section;

(vii) Whether neither the contributor

nor any person standing in a

relationship to such contributor which

is described in section 4946(a)(1)(C)

through 4946(a)(1)(G) continues directly

or indirectly to exercise control over the

organization;

(viii) Whether the organization has a

representative governing body as

described in § 1.509(a)-3(d)(3)(i); and

(ix) Whether material restrictions or

conditions (within the meaning of

§ 1.507-2(a)(7)) have been imposed by

the transferor upon the transferee in

connection with such transfer.

(5) Grantors and contributors. Prior to

the making of any grant or contribution

expected to meet the requirements for

exclusion under paragraph (c)(3) of this

section, a potential grantee organization

may request a determination whether

such grant or contribution may be so

excluded. Requests for such

determination may be filed by the

grantee organization in the time and

manner specified by revenue procedure

or other guidance published in the

Internal Revenue Bulletin. The issuance

of such determination will be at the sole

discretion of the Commissioner. The

organization must submit all

information necessary to make a

determination of the applicability of

paragraph (c)(3) of this section,

including all information relating to the

factors described in paragraph (c)(4) of

this section. If a favorable determination

is issued, such determination may be

relied upon by the grantor or contributor

of the particular contribution in

question for purposes of sections 170,

507, 545(b)(2), 642(c), 4942, 4945, 4966,

2055, 2106(a)(2), and 2522 and by the

grantee organization for purposes of

paragraph (c)(3) of this section.

(6) Examples. The application of the

principles set forth in this paragraph is

illustrated by the examples as follows.

For purposes of these examples, the

term general public is defined as

persons other than disqualified persons

and other than persons from whom the

foundation received gross receipts in

excess of the greater of $5,000 or 1

percent of its support in any taxable

year, the term gross investment income

is as defined in section 509(e), and the

term gross receipts is limited to receipts

from activities which are not unrelated

trades or businesses (within the

meaning of section 513).

Example 1. (i) For the years 2008 through

2012, X, an organization exempt under

section 501(c)(3) that makes scholarship

grants to needy students of a particular city,

received support from the following sources:

2008:

Gross receipts (general public) ...........................................................................................................................................................

Contributions (substantial contributors) ............................................................................................................................................

Gross investm ent incom e ....................................................................................................................................................................

Total support ............................................................................................................................................................. ............. 100,000

2009:

Gross receipts (general public) ...........................................................................................................................................................

Contributions (substantial contributors) ............................................................................................................................................

Gross investm ent incom e ....................................................................................................................................................................

Total support ............................................................................................................................................................. ............. 100,000

2010:

Gross receipts (general public) ...........................................................................................................................................................

Contributions (substantial contributors) ............................................................................................................................................

Gross investm ent incom e ....................................................................................................................................................................

Total support ............................................................................................................................................................. ............. 100,000

2011:

Gross receipts (general public) ...........................................................................................................................................................

Contributions (substantial contributors) ............................................................................................................................................

Gross investm ent incom e ....................................................................................................................................................................

Total support ............................................................................................................................................................. ............. 100,000

$35,000

36,000

29,000

34,000

35,000

31,000

35,000

30,000

35,000

33,000

32,000

35,000
Federal Register/Vol. 76, No. 174/Thursday, September 8, 2011/Rules and Regulations

2012:

Gross receipts (general public) ...........................................................................................................................................................

Contributions (substantial contributors) ............................................................................................................................................

Gross investm ent incom e ....................................................................................................................................................................

T o ta l su p p ort ................................................................................................................................................................................

(ii) In applying section 509(a)(2) to the

taxable year 2012, on the basis of paragraph

(c)(1)(i) of this section, the total amount of

support from gross receipts from the general

public ($168,000) for the period 2008 through

2012, was more than one third, and the total

amount of support from gross investment

income ($160,000) was less than one third, of

X's total support for the same period

($500,000). For the taxable years 2012 and

2013, X is therefore considered normally to

receive more than one third of its support

from the public sources described in section

509(a)(2)(A) and less than one third of its

support from items described in section

509(a)(2)(B). The fact that X received less

than one third of its support from section

509(a)(2)(A) sources in 2012 and more than

one third of its support from items described

in section 509(a)(2)(B) in 2011 does not affect

its status because it normally met the

applicable tests over a five-year period.

Example 2. Assume the same facts as in

Example 1 except that in 2012, X also

received an unexpected bequest of $50,000

from A, an elderly widow who was interested

in encouraging the work of X, but had no

other relationship to it. Solely by reason of

the bequest, A became a disqualified person.

X used the bequest to create five new

scholarships. Its operations otherwise

remained the same. Under these

circumstances, if A's bequest is included in

X's support calculation, X could not meet the

five-year support test because the total

amount received from gross receipts from the

general public ($168,000) would not be more

than one-third of its total support for the fiveyear period ($550,000). Because A is a

disqualified person, her bequest cannot be

included in the numerator of the one-third

support test under section 509(a)(2)(A).

However, based on the factors set forth in

paragraph (c)(4) of this section, A's bequest

may be excluded as an unusual grant under

paragraph (c)(3) of this section. Therefore, X

will be considered to have met the support

test for the taxable years 2012 and 2013.

Example 3. Y, an organization described in

section 501(c)(3), was created by A, the

holder of all the common stock in M

corporation; B, A's wife; and C, A's business

associate. The purpose of Y was to sponsor

and equip athletic teams for underprivileged

children in the community. Each of the three

creators makes small cash contributions to Y.

A, B, and C have been active participants in

the affairs of Y since its creation. Y regularly

raises small amounts of contributions

through fundraising drives and selling

admission to some of the sponsored sporting

events. The operations of Y are carried out

on a small scale, usually being restricted to

the sponsorship of two to four baseball teams

of underprivileged children. In 2009, M

recapitalizes and creates a first and second

class of 6 percent nonvoting preferred stock,

most of which is held by A and B. In 2010,

A contributes 49 percent of his common

stock in M to Y. A's contribution of M's

common stock was substantial and

constitutes 90 percent of Y's total support for

2010. A combination of the facts and

circumstances described in paragraph (c)(4)

of this section preclude A's contribution of

M's common stock in 2010 from being

excluded as an unusual grant under

paragraph (c)(3) of this section for purposes

of determining whether Y meets the onethird support test under section 509(a)(2).

Example 4. (i) M is organized in 2009 to

promote the appreciation of ballet in a

particular region of the United States. Its

principal activities consist of erecting a

theater for the performance of ballet and the

organization and operation of a ballet

company. M receives a determination letter

that it is an organization described in section

501(c)(3) and that it is a public charity

described in section 509(a)(2). The governing

body of M consists of nine prominent

unrelated citizens residing in the region who

have either an expertise in ballet or a strong

interest in encouraging appreciation of the art

form.

(ii) In 2010, Z, a private foundation,

proposes to makes a grant of $500,000 in cash

to M to provide sufficient capital for M to

commence its activities. Although A, the

creator of Z, is one of the nine members of

M's governing body, was one of M's original

founders, and continues to lend his prestige

to M's activities and fund raising efforts, A

does not, directly or indirectly, exercise any

control over M. M also receives a significant

amount of support from a number of smaller

contributions and pledges from other

members of the general public. M charges

admission to the ballet performances to the

general public.

(iii) Although the support received in 2010

will not impact M's status as a public charity

for its first five taxable years, it will be

relevant to the determination of whether M

meets the one-third support test under

section 509(a)(2) for the 2014 taxable year,

using the computation period 2010 through

2014. Within the appropriate timeframe, M

may submit a request for a private letter

ruling that the $500,000 contribution from Z

qualifies as an unusual grant.

(iv) Under the above circumstances, even

though A was a founder and member of the

governing body of M, M may exclude Z's

contribution of $500,000 in 2010 as an

unusual grant under paragraph (c)(3) of this

section for purposes of determining whether

M meets the one-third support test under

section 509(a)(2) for 2014.

Example 5. (i) Assume the same facts as

Example 4(i) except that, in addition, in

2013, B, a widow, passes away and bequeaths

$4 million to M. During 2009 through 2013,

B made small contributions to M, none

exceeding $10,000 in any year. During 2009

through 2013, M received approximately

$450,000 from receipts for admissions and

contributions from the general public. At the

time of B's death, no person standing in a

relationship to B described in section

4946(a)(1)(C) through 4946(a)(1)(G) was a

member of M's governing body. B's bequest

was in the form of cash and readily

marketable securities. The only condition

placed upon the bequest was that it be used

by M to advance the art of ballet.

(ii) Although the support received in 2013

will not impact M's status as a public charity

for its first five taxable years, it will be

relevant to the determination of whether M

meets the one-third support test under

section 509(a)(2) for future years. Within the

appropriate timeframe, M may submit a

request for a private letter ruling that the $4

million bequest from B qualifies as an

unusual grant.

(iii) Under the above circumstances, M

may exclude B's bequest of $4 million in

2013 as an unusual grant under paragraph

(c)(3) of this section for purposes of

determining whether M meets the one-third

support test under section 509(a)(2) for 2014

and subsequent years.

Example 6. (i) N is a research organization

that was created by A in 2009 for the purpose

of carrying on economic studies primarily

through persons receiving grants from N and

engaging in the sale of economic

publications. N received a determination

letter that it is described in section 501(c)(3)

and that it is a public charity described in

509(a)(2). N's five-member governing body

consists of A; A's sons, B and C; and two

unrelated economists. In 2009, A made a

contribution to N of $100,000 to help

establish the organization. During 2009

through 2013, A made annual contributions

to N averaging $20,000 a year. During the

same period, N received annual contributions

from members of the general public averaging

$15,000 per year and receipts from the sale

of its publications averaging $50,000 per

year. In 2013, B made an inter vivos

contribution to N of $600,000 in cash and

readily marketable securities.

(ii) Although the support received in 2013

will not impact N's status as a public charity

for its first five taxable years, it will be

relevant to the determination of whether N

meets the one-third support test under

section 509(a)(2) for future years. In

determining whether B's contribution of

$600,000 in 2013 may be excluded as an

unusual grant, the support N received in

2009 through 2013 is relevant in considering

the factor described in paragraph (c)(4)(vi) of

this section, notwithstanding that N received

a determination letter that it is described in

section 509(a)(2).

(iii) Under the above circumstances, in

particular the facts that B is a disqualified

person described in section 4946(a)(1)(D) and

N does not have a representative governing

body as described in paragraphs (c)(4)(viii)

31,000

39,000

30,000

100,000

55767
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and (d)(3)(i) of this section, N cannot exclude

B's contribution of $600,000 in 2013 as an

unusual grant under paragraph (c)(3) of this

section for purposes of determining whether

N meets the one-third support test under

section 509(a)(2) for 2014 and future years.

Example 7. (i) 0 is an educational

organization created in 2009. 0 received a

determination letter that it is described in

section 501(c)(3) and that it is a public

charity described in section 509(a)(2). The

governing body of 0 has 9 members,

consisting of A, a prominent civic leader, and

8 other unrelated civic leaders and educators

in the community, all of whom participated

in the creation of 0. During 2009 through

2013, the principal source of income for 0

has been receipts from the sale of its

educational periodicals. These sales have

amounted to $200,000 for this period. Small

contributions amounting to $50,000 have also

been received during the same period from

members of the governing body, including A,

as well as other members of the general

public.

(ii) In 2013, A contributed $750,000 of the

nonvoting stock of S, a closely held

corporation, to 0. A retained a substantial

portion of the voting stock of S. By a majority

vote, the governing body of 0 decided to

retain the S stock for a period of at least five

years.

(iii) Although the support received in 2013

will not impact O's status as a public charity

for its first five taxable years, it will be

relevant to the determination of whether 0

meets the one-third support test under

section 509(a)(2) for future years. In

determining whether A's contribution of the

S stock in 2013 may be excluded as an

unusual grant, the support 0 received in

2009 through 2013 is relevant in considering

the factor described in paragraph (c)(4)(vi) of

this section, notwithstanding that 0 received

a determination letter that it is described in

section 509(a)(2).

(iv) Under the above circumstances, in

particular the facts that A is a foundation

manager within the meaning of section

4946(b) and A's contribution is in the form

of closely held stock, 0 cannot exclude A's

contribution of the S stock in 2013 as an

unusual grant under paragraph (c)(3) of this

section for purposes of determining whether

0 meets the one-third support test under

section 509(a)(2) for 2014 and future years.

(d) Definition of normally; first five

years of an organization's existence-(1)

In general. An organization will

"normally" meet the one-third support

test and the not-more-than-one-third

support test during its first five taxable

years as a section 501(c)(3) organization

if the organization can reasonably be

expected to meet the requirements of

the one-third support test and the notmore-than-one-third support test during

that period. With respect to an

organization's sixth taxable year, the

general definition of normally in

paragraph (c)(1) of this section applies.

Alternatively, the organization shall be

treated as normally meeting the onethird support test and the not-morethan-one-third support test for its sixth

taxable year (but not its seventh taxable

year) if it meets the one-third support

test and the not-more-than-one-third

support test under the definition of

normally set forth in paragraph (c)(1)(i)

of this section for its fifth taxable year

(based on support received in its first

through fifth taxable years). If a new

publicly supported organization

described under section 509(a)(2)

cannot meet the requirements of the

one-third support test or the not-morethan-one-third support test for its sixth

taxable year using either the general

definition of normally in paragraph

(c)(1) of this section or the alternate rule

above (effectively failing to meet a

public support test for both its fifth and

sixth years), it will be reclassified as a

private foundation as of the first day of

its sixth taxable year only for purposes

of sections 507, 4940, and 6033. Such an

organization must file a Form 990-PF,

"Return of Private Foundation or

Section 4947(a)(1) Nonexempt

Charitable Trust Treated as a Private

Foundation," and is liable for the net

investment tax imposed by section 4940

and, if applicable, the private

foundation termination tax imposed by

section 507(c), for its sixth taxable year.

Beginning the first day of its seventh

taxable year, the organization will be

treated as a private foundation for all

purposes.

(2) Basic consideration. In

determining whether an organization

can reasonably be expected (within the

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

section) to meet the one-third support

test under section 509(a)(2)(A) and the

not-more-than-one-third support test

under section 509(a)(2)(B) described in

paragraph (a) of this section during its

first five taxable years, the basic

consideration is whether its

organizational structure, current or

proposed programs or activities, and

actual or intended method of operation

are such as to attract the type of broadly

based support from the general public,

public charities, and governmental units

that is necessary to meet such tests. The

factors that are relevant to this

determination, and the weight accorded

to each of them, may differ from case to

case, depending on the nature and

functions of the organization. An

organization cannot reasonably be

expected to meet the one-third support

test and the not-more-than-one-third

support test where the facts indicate

that an organization is likely during its

first five taxable years to receive less

than one-third of its support from

permitted sources (subject to the

limitations of paragraph (b) of this

section) or to receive more than onethird of its support from items described

in section 509(a)(2)(B).

(3) Factors taken into account. All

pertinent facts and circumstances shall

be taken into account under paragraph

(d)(2) of this section in determining

whether the organizational structure,

programs or activities, and method of

operation of an organization are such as

to enable it to meet the tests under

section 509(a)(2) during its first five

taxable years. Some of the pertinent

factors are:

(i) Whether the organization has or

will have a representative governing

body which is comprised of public

officials, or individuals chosen by

public officials acting in their capacity

as such; of persons having special

knowledge in the particular field or

discipline in which the organization is

operating; of community leaders, such

as elected officials, clergymen, and

educators; or, in the case of a

membership organization, of

individuals elected pursuant to the

organization's governing instrument or

bylaws by a broadly based membership.

This characteristic does not exist if the

membership of the organization's

governing body is such as to indicate

that it represents the personal or private

interests of disqualified persons, rather

than the interests of the community or

the general public.

(ii) Whether a substantial portion of

the organization's initial funding is to be

provided by the general public, by

public charities, or by government

grants, rather than by a limited number

of grantors or contributors who are

disqualified persons with respect to the

organization. The fact that the

organization plans to limit its activities

to a particular community or region or

to a special field which can be expected

to appeal to a limited number of persons

will be taken into consideration in

determining whether those persons

providing the initial support for the

organization are representative of the

general public. On the other hand, the

subsequent sources of funding which

the organization can reasonably expect

to receive after it has become

established and fully operational will

also be taken into account.

(iii) Whether a substantial proportion

of the organization's initial funds are

placed, or will remain, in an

endowment, and whether the

investment of such funds is unlikely to

result in more than one third of its total

support being received from items

described in section 509(a)(2)(B).

(iv) In the case of an organization that

carries on fundraising activities,

whether the organization has developed
Federal Register/Vol. 76, No. 174/Thursday, September 8, 2011/Rules and Regulations

a concrete plan for solicitation of funds

from the general public on a community

or area-wide basis; whether any steps

have been taken to implement such

plan; whether any firm commitments of

financial or other support have been

made to the organization by civic,

religious, charitable, or similar groups

within the community; and whether the

organization has made any

commitments to, or established any

working relationships with, those

organizations or classes of persons

intended as the future recipients of its

funds.

(v) In the case of an organization that

carries on community services, such as

combating community deterioration in

an economically depressed area that has

suffered a major loss of population and

jobs, whether the organization has a

concrete program to carry out its work

in the community; whether any steps

have been taken to implement that

program; whether it will receive any

part of its funds from a public charity

or governmental agency to which it is in

some way held accountable as a

condition of the grant or contribution;

and whether it has enlisted the

sponsorship or support of other civic or

community leaders involved in

community service programs similar to

those of the organization.

(vi) In the case of an organization that

carries on educational or other exempt

activities for, or on behalf of, members,

whether the solicitation for dues-paying

members is designed to enroll a

substantial number of persons in the

community, area, profession, or field of

special interest (depending on the size

of the area and the nature of the

organization's activities); whether

membership dues for individual (rather

than institutional) members have been

fixed at rates designed to make

membership available to a broad crosssection of the public rather than to

restrict membership to a limited number

of persons; and whether the activities of

the organization will be likely to appeal

to persons having some broad common

interest or purpose, such as educational

activities in the case of alumni

associations, musical activities in the

case of symphony societies, or civic

affairs in the case of parent-teacher

associations.

(vii) In the case of an organization that

provides goods, services, or facilities,

whether the organization is or will be

required to make its services, facilities,

performances, or products available

(regardless of whether a fee is charged)

to the general public, public charities, or

governmental units, rather than to a

limited number of persons or

organizations; whether the organization

will avoid executing contracts to

perform services for a limited number of

firms or governmental agencies or

bureaus; and whether the service to be

provided is one which can be expected

to meet a special or general need among

a substantial portion of the general

public.

(4) Example. The application of this

paragraph (d) may be illustrated by the

following example:

Example. (i) Organization X was formed in

January 2008 and uses a taxable year ending

December 31. After September 9, 2008, and

before December 31, 2008, Organization X

filed Form 1023 requesting recognition of

exemption as an organization described in

section 501(c)(3) and in section 509(a)(2). In

its application, Organization X established

that it can reasonably be expected to operate

as a publicly supported organization under

paragraph (d) of this section. Subsequently,

Organization X received a ruling or

determination letter that it is an organization

described in sections 501(c)(3) and 509(a)(2)

effective as of the date of its formation.

(ii) Organization X is described in section

509(a)(2) for its first five taxable years (for the

taxable years ending December 31, 2008,

through December 31, 2012).

(iii) Organization X can qualify as a

publicly supported organization beginning

with the taxable year ending December 31,

2013, if Organization X can meet the

requirements of either § 1.170A-9(f)(2) or

§ 1.170A-9(f)(3) or paragraphs (a) and (b) of

this section for the taxable years ending

December 31, 2009, through December 31,

2013, or for the taxable years ending

December 31, 2008, through December 31,

2012.

(e) Determinations on foundation

classification and reliance-(1) A ruling

or determination letter that an

organization is described in section

509(a)(2) may be issued to an

organization. Such determination may

be made in conjunction with the

recognition of the organization's taxexempt status or at such other time as

the organization believes it is described

in section 509(a)(2). The ruling or

determination letter that the

organization is described in section

509(a)(2) may be revoked if, upon

examination, the organization has not

met the requirements of this section.

The ruling or determination letter that

the organization is described in section

509(a)(2) also may be revoked if the

organization's application for a ruling or

determination contained one or more

material misstatements or omissions of

fact or such application was part of a

scheme or plan to avoid or evade any

provision of the Code. The revocation of

the determination that an organization

is described in section 509(a)(2) does

not preclude revocation of the

determination that the organization is

described in section 501(c)(3).

(2) Status of grantors or contributors.

(i) For purposes of sections 170, 507,

545(b)(2), 642(c), 4942, 4945, 4966,

2055, 2106(a)(2), and 2522, grantors and

contributors may rely upon a

determination letter or ruling that an

organization is described in section

509(a)(2) until the IRS publishes notice

of a change of status (for example, in the

Internal Revenue Bulletin or Publication

78, "Cumulative List of Organizations

described in Section 170(c) of the

Internal Revenue Code of 1986," which

can be searched at http://www.irs.gov).

For this purpose, grantors or

contributors may also rely on an

advance ruling that expires on or after

June 9, 2008. However, a grantor or

contributor may not rely on such an

advance ruling or any determination

letter or ruling if the grantor or

contributor was responsible for, or

aware of, the act or failure to act that

resulted in the organization's loss of

classification under section 509(a)(2) or

acquired knowledge that the IRS had

given notice to such organization that it

would be deleted from such

classification.

(ii) A grantor or contributor (other

than one of the organization's founders,

creators, or foundation managers

(within the meaning of section 4946(b)))

will not be considered to be responsible

for, or aware of, the act or failure to act

that resulted in the loss of the

organization's publicly supported

classification under section 509(a)(2) if

such grantor or contributor has made

such grant or contribution in reliance

upon a written statement by the grantee

organization that such grant or

contribution will not result in the loss

of such organization's classification as

not a private foundation under section

509(a). Such statement must be signed

by a responsible officer of the grantee

organization and must set forth

sufficient information, including a

summary of the pertinent financial data

for the five taxable years immediately

preceding the current taxable year, to

assure a reasonably prudent person that

his grant or contribution will not result

in the loss of the grantee organization's

classification as a publicly supported

organization under section 509(a). If a

reasonable doubt exists as to the effect

of such grant or contribution, or if the

grantor or contributor is one of the

organization's founders, creators, or

foundation managers, the procedure for

requesting a determination letter set

forth in paragraph (c)(5) of this section

may be followed by the grantee

organization for the protection of the

grantor or contributor.

55769
55770 Federal Register/Vol. 76, No. 174/Thursday, September 8, 2011/Rules and Regulations

(3) Examples. The provisions of this

paragraph (e) may be illustrated by the

following examples:

Example 1. Y, a calendar year organization

described in section 501(c)(3), is created in

February 2008 for the purpose of displaying

African art. On its exemption application Y

shows, under penalties of perjury, that it can

reasonably, in accordance with the

requirements of paragraph (d) of this section,

expect to receive support from the public in

2008 through 2012 that will satisfy the onethird support and not-more -than-one -third

support tests described in section 509(a)(2)

for its first five taxable years, 2008 through

2012. Y may therefore receive a

determination that it meets the requirements

of paragraph (a) of this section for its first five

taxable years (2008, 2009, 2010, 2011, and

2012), regardless of the public support Y in

fact receives during this period.

Example 2. Z, a calendar year organization

described in section 501(c)(3), is created in

July 2008. On its exemption application Z

shows, under penalties of perjury, that it can

reasonably, in accordance with the

requirements of paragraph (d) of this section,

expect to receive support from the public in

2008 through 2012 that will satisfy the onethird support and not-more -than-one -third

support tests described in section 509(a)(2)

for its first five taxable years, 2008 through

2012. Z receives a determination that it is

described in section 509(a)(2). However, the

support actually received from the public

over Z's first five taxable years (2008 through

2012) does not satisfy the one-third support

and not-more-than-one-third support tests

described in section 509(a)(2). Moreover, the

support Z receives from 2009 through 2013,

also does not meet the one-third support and

not-more-than-one -third support tests

described in section 509(a)(2). Z is described

in section 509(a)(2) during its first five years

for all purposes. However, because Z has not

met the requirements of paragraph (a) of this

section for either 2008 through 2012 or 2009

through 2013, Z is not described in section

509(a)(2) for its taxable year 2013. If Z is not

described in section 509(a)(1), section

509(a)(3), or section 509(a)(4), then Z will be

reclassified as a private foundation as of the

first day of 2013. However, for 2013, Z will

be treated as a private foundation only for

purposes of sections 507, 4940 and 6033. Z

must file Form 990-PF and will be liable for

the net investment tax imposed by section

4940 and, if applicable, the private

foundation termination tax imposed by

section 507(c) for 2013. For 2014 and

succeeding years, Z will be treated as a

private foundation for all purposes (except as

provided in paragraph (e)(2) of this section

with respect to grantors and contributors).

* * * * *

(k) Method of accounting. For

purposes of section 509(a)(2), an

organization's support will be

determined under the method of

accounting on the basis of which the

organization regularly computes its

income in keeping its books under

section 446. For example, if a grantor

makes a grant to an organization payable

over a term of years, such grant will be

includible in the support fraction of the

grantee organization under the method

of accounting on the basis of which it

regularly computes its income in

keeping its books under section 446.

(n) Transition rules. (1) An

organization that received an advance

ruling, that expires on or after June 9,

2008, that it will be treated as an

organization described in section

509(a)(2) will be treated as meeting the

requirements of paragraph (d)(1) of this

section for the first five taxable years of

its existence as a section 501(c)(3)

organization unless the IRS issued to the

organization a proposed determination

prior to September 9, 2008, that the

organization is not described in sections

170(b)(1)(A)(vi) and 509(a)(1) or in

section 509(a)(2).

(2) Paragraph (d)(1) of this section

shall not apply to an organization that

received an advance ruling that expired

prior to June 9, 2008, and that did not

timely file with the IRS the required

information to establish that it is an

organization described in sections

170(b)(1)(A)(vi) and 509(a)(1) or in

section 509(a)(2).

(3) An organization that fails to meet

a public support test for its first taxable

year beginning on or after January 1,

2008, under the regulations in this

section may use the prior test set forth

in §§ 1.509(a)-3(a)(2) and 1.509(a)-

3(a)(3) or § 1.170A-9(e)(2i) or § 1.170A9(e)(3) as in effect before September 9,

2008, (as contained in 26 CFR part 1

revised April 1, 2008) to determine

whether the organization may be

publicly supported for its 2008 taxable

year based on its satisfaction of a public

support test for taxable year 2007,

computed over the period 2003 through

2006.

(4) Examples. The application of this

paragraph (n) may be illustrated by the

following examples:

Example 1. (i) Organization M was formed

in January 2004, and uses a taxable year

ending June 30. Organization M received an

advance ruling letter that it is recognized as

an organization described in section 501(c)(3)

effective as of the date of its formation and

that it is treated as a publicly supported

organization under section 509(a)(2) during

the five-year advance ruling period that will

end on June 30, 2008. This date is on or after

June 9, 2008.

(ii) Under the transition rule, Organization

M is a publicly supported organization

described in section 509(a)(2) for the taxable

years ending June 30, 2004, through June 30,

2008. Organization M does not need to

establish within 90 days after June 30, 2008,

that it met a public support test under

§ 1.170A-9(e) or § 1.509(a)-3, as in effect

prior to September 9, 2008, (as contained in

26 CFR part 1 revised April 1, 2008) for its

advance ruling period.

(iii) Organization M can qualify as a public

charity beginning with the taxable year

ending June 30, 2009, if Organization M can

meet the requirements of § 1.170A-9(f)(2) or

§ 1.170A-9(f)(3) or paragraphs (a)(2) and

(a)(3) of this section for the taxable years

ending June 30, 2005, through June 30, 2009,

or for the taxable years ending June 30, 2004,

through June 30, 2008. In addition, for its

taxable year ending June 30, 2009,

Organization M may qualify as a publicly

supported organization by availing itself of

the transition rule contained in paragraph

(n)(iii) of this section, which looks to support

received by M in the taxable years ending

June 30, 2004, through June 30, 2007.

Example 2. (i) Organization N was formed

in January 2000 and uses a December 31

taxable year. Organization N received a final

determination that it was recognized as taxexempt under section 501(c)(3) and as a

public charity prior to September 9, 2008.

(ii) For taxable year 2008, Organization N

will qualify as publicly supported if it meets

the requirements under either § 1.170A9(f)(2) or § 1.170A-9(f)(3) or paragraphs (a)(2)

and (a)(3) of this section for the five-year

period January 1, 2004, through December

31, 2008. Organization N will also qualify as

publicly supported for taxable year 2008 if it

meets the requirements under either

§ 1.170A-9(e)(2) or § 1.170A-9(e)(3) or

§§ 1.509(a)-3(a)(2) and 1.509(a)-3(a)(3) as in

effect prior to September 9, 2008, (as

contained in 26 CFR part 1 revised April 1,

2008) for taxable year 2007, using the fouryear period from January 1, 2003, through

December 31, 2006.

(o) Effective/applicability date. This

section shall generally apply to taxable

years beginning after December 31, 1969

except paragraphs (a)(2), (a)(3)(i), (c),

(d), (e), (k) and (n) of this section shall

apply to tax years beginning on or after

January 1, 2008. For tax years beginning

after December 31, 1969 and beginning

before January 1, 2008, §§ 1.509(a)-

3(a)(2), 1.509(a)-3(a)(3)(i), 1.509(a)-3(c),

1.509(a)-3(d), 1.509(a)-3(e), and

1.509(a)-3(k) as in effect on December

31, 2007 (as contained in 26 CFR part

1 revised April 1, 2008) shall apply.

§ 1.509(a)-3T [Removed]

* Par. 7. Section 1.509(a)-3T is

removed.

* Par. 8. Section 1.6033-2 is amended

by revising paragraphs (a)(1), (a)(2)(ii)(g), (a)(2)(ii)(h), (g)(1)(iii),

(g)(1)(iv), (g)(6), (i)(1) and (k) to read as

follows:

§ 1.6033-2 Returns by exempt

organizations (taxable years beginning after

December 31, 1969) and returns by certain

nonexempt organizations (taxable years

beginning after December 31,1980).

(a) * * *

(1) Except as provided in section

6033(a)(3) and paragraph (g) of this
Federal Register/Vol. 76, No. 174/Thursday, September 8, 2011/Rules and Regulations

section, every organization exempt from

taxation under section 501(a) shall file

an annual information return

specifically setting forth its items of

gross income, gross receipts and

disbursements, and such other

information as may be prescribed in the

instructions, issued with respect to the

return. Except as provided in paragraph

(d) of this section, such return shall be

filed annually regardless of whether

such organization is chartered by, or

affiliated or associated with, any central,

parent, or other organization.

(2) * * *

(ii) * * *

(g) The names and addresses of all

officers, directors, or trustees (or any

person having responsibilities or powers

similar to those of officers, directors or

trustees) of the organization, and, in the

case of a private foundation, all persons

who are foundation managers, within

the meaning of section 4946(b)(1).

Organizations must also attach a

schedule showing the names and

addresses and/or total numbers of key

employees, highly compensated

employees, and independent contractors

as prescribed by publication, form, or

instructions.

(h) A schedule showing the

compensation and other payments made

to each person whose name is required

to be listed pursuant to paragraph

(a)(2)(ii)(g) of this section during the

calendar year ending within the

organization's annual accounting

period, or during such other period as

prescribed by publication, form, or

instructions.

(g) * , ,

(1) * * *

(iii) An organization (other than a

private foundation) described in section

6033(a)(3)(C), the gross receipts of

which in each taxable year are normally

not more than $5,000 (as described in

paragraph (g)(3) of this section);

(iv) A mission society (other than an

organization described in section

509(a)(3)) sponsored by or affiliated

with one or more churches or church

denominations, more than one-half of

the activities of which society are

conducted in, or directed at persons in

foreign countries; • * * * *

(6) The Commissioner may relieve

any organization or class of

organizations (other than an

organization described in section

509(a)(3)) from filing, in whole or in

part the annual return required by this

section where he determines that such

returns are not necessary for the

efficient administration of the internal

revenue laws.

(i) * * *

(1) An organization that is exempt

from taxation under section 501(a) and

is not required to file annually an

information return required by this

section shall immediately notify in

writing Exempt Organizations

Determinations, at an address

prescribed by publication (including

publication on the Internal Revenue

Service Web site), of any changes in its

character, operations, or purpose for

which it was originally created. • * * * *

(k) Effective/applicability date-(1)

Generally. The provisions of this section

shall apply with respect to returns filed

for taxable years beginning after

December 31, 1969.

(2) The applicability of paragraphs

(g)(1)(iii), (g)(1)(iv), and (g)(6) of this

section shall be limited to returns filed

for taxable years ending after August 17,

2006. For returns filed for taxable years

ending on or before August 17, 2006,

§§ 1.6033-(2)(g)(1)(iii), 1.6033-

(2)(g)(1)(iv), and 1.6033-(2)(g)(6) (as

contained in 26 CFR part 1 revised April

1, 2006) shall apply.

(3) The applicability of paragraphs

(a)(2)(ii)(g) and (a)(2)(ii)(h) of this

section shall be limited to returns filed

on or after January 1, 2008. For returns

filed before January 1, 2008, §§ 1.6033-

(a)(2)(ii)(g) and 1.6033-(2)(a)(2)(ii)(h) (as

contained in 26 CFR part 1 revised April

1, 2008) shall apply.

§ 1.6033-2T [Removed]

* Par. 9. Section 1.6033-2T is removed.

* Par. 10. Section 1.6043-3 is amended

by revising paragraphs (b)(8), (d) and (e)

to read as follows:

§ 1.6043-3 Returns regarding liquidation,

dissolution, termination, or substantial

contraction of organizations exempt from

taxation under section 501(a). • * * * *

(b) * * *

(8) Any organization no longer

exempt from taxation under section

501(a) and that during the period of its

exemption under such section was not

an organization described in section

501(c)(3), a corporation described in

section 501(c)(2) that held title to

property for an organization described

in section 501(c)(3), or an organization

described in such other section as

prescribed by publication, form, or

instructions.

(d) Definitions. (1) For the definition

of the term "normally" as used in

paragraph (b)(2) of this section, see

§ 1.6033-2(g)(3).

(2) For the definition of the term

"integrated auxiliaries" as used in

paragraph (b)(1) of this section, see

§ 1.6033-2(h).

(3) For returns filed for taxable years

beginning before January 1, 2008, for

purposes of this section the definition of

the term "substantial contraction" set

forth in § 1.6043-3(d)(1) (as contained

in 26 CFR part 1 revised April 1, 2008)

may be used.

(e) Effective/applicability date-(1)

Generally. The provisions of this section

shall apply with respect to returns filed

for taxable years beginning after

December 31, 1969.

(2) Paragraphs (b)(8) and (d) of this

section shall apply for taxable years

beginning on or after January 1, 2008.

For taxable years beginning before

January 1, 2008, §§ 1.6043-3(b)(8) and

1.6043-3(d) (as contained in 26 CFR

part 1 revised April 1, 2008) shall apply.

§ 1.6043-3T [Removed]

* Par. 11. Section 1.6043-3T is

removed.

PART 602-OMB CONTROL NUMBER

UNDER THE PAPERWORK

REDUCTION ACT

* Par. 12. The authority citation for part

602 continues to read as follows:

Authority: 26 U.S.C. 7805.

* Par. 13. In § 602.101, paragraph (b) is

amended as follows:

m 1. The following entry to the table is

removed:

§602.101 OMB Control numbers. * * * * *

(b)* * *

CFR part or section where Current OMB

identified Control No.

1.6033-2T ............................. 1545-2117

* 2. The following entry is added in

numerical order to the table:

§602.101 OMB Control numbers. * * * * *

(b)* * *

CFR part or section where Current OMB

identified and described Control No.

55771
55772 Federal Register/Vol. 76, No. 174/Thursday, September 8, 2011/Rules and Regulations

CFR part or section where Current OMB

identified and described Control No.

1.6033-2 ............................... 1545-2117

Steven T. Miller,

Deputy Commissioner for Services and

Enforcement.

Approved: August 19, 2011.

Emily S. McMahon,

Acting Assistant Secretary of the Treasury

(Tax Policy).

[FR Doe. 2011-22614 Filed 9-7-11; 8:45 am]

BILLING CODE 4830-01-P
FEDERAL REGISTER

Vol. 76 Thursday,

No. 174 September 8, 2011

Part III

Environmental Protection Agency

40 CFR Part 52

Approval and Promulgation of Implementation Plans and Designations of

Areas for Air Quality Planning Purposes; Alabama, Tennessee, and

Georgia: Chattanooga and Macon; Determination of Attainment by

Applicable Attainment Date for the 1997 Annual Fine Particulate Standards;

Final Rules
55774 Federal Register/Vol. 76, No. 174/Thursday, September 8, 2011/Rules and Regulations

ENVIRONMENTAL PROTECTION

AGENCY

40 CFR Part 52

[EPA-R04-OAR-2011-0408-201146; FRL9459-2]

Approval and Promulgation of

Implementation Plans and

Designations of Areas for Air Quality

Planning Purposes; Alabama,

Tennessee, and Georgia: Chattanooga

and Macon; Determination of

Attainment by Applicable Attainment

Date for the 1997 Annual Fine

Particulate Standards

AGENCY: Environmental Protection

Agency (EPA).

ACTION: Final rule.

SUMMARY: EPA is determining that the

Chattanooga, Alabama-TennesseeGeorgia, fine particulate (PM2.

5)

nonattainment area (hereafter referred to

as "the Chattanooga Area") and the

Macon, Georgia PM 2.5 nonattainment

area (hereafter referred to as "the Macon

Area") have attained the 1997 annual

PM 2.

5 national ambient air quality

standards (NAAQS) by the applicable

attainment date of April 5, 2010. The

determinations of attainment were

previously finalized by EPA on May 31,

2011, for the Chattanooga Area and June

2, 2011, for the Macon Area, and were

based on quality-assured and certified

monitoring data for the 2007-2009

monitoring period. The Chattanooga

Area is comprised of Hamilton County

in Tennessee, Catoosa and Walker

Counties in Georgia, and a portion of

Jackson County in Alabama. The Macon

Area is comprised of Bibb County in its

entirety and a portion of Monroe County

in Georgia. EPA is determining to find

that both of the above-identified areas

attained the 1997 annual PM 2.

5 NAAQS

by the applicable attainment date. EPA

is finalizing these actions because they

are consistent with the Clean Air Act

(CAA) and its implementing regulations.

DATES: Effective Date: This final rule is

effective on October 11, 2011.

ADDRESSES: EPA has established a

docket for this action under Docket ID

Number EPA-R04-OAR-2011-0408. All

documents in the docket are listed in

the http://www.regulations.gov Web

site. Although listed in the electronic

docket, some information is not publicly

available, i.e., confidential business

information (CBI) or other information

whose disclosure is restricted by statute.

Certain other material, such as

copyrighted material, is not placed on

the Internet and will be publicly

available only in hard copy form.

Publicly available docket materials are

available either electronically through

http://www.regulations.gov or in hard

copy for public inspection during

normal business hours at the Regulatory

Development Section, Air Planning

Branch, Air, Pesticides and Toxics

Management Division, U.S.

Environmental Protection Agency,

Region 4, 61 Forsyth Street, SW.,

Atlanta, Georgia 30303-8960.

FOR FURTHER INFORMATION CONTACT: Joel

Huey or Sara Waterson, Regulatory

Development Section, Air Planning

Branch, Air, Pesticides and Toxics

Management Division, U.S.

Environmental Protection Agency,

Region 4, 61 Forsyth Street, SW.,

Atlanta, Georgia 30303-8960. Mr.

Huey's telephone number is (404) 562-

9104. Mr. Huey can also be reached via

electronic mail at huey.joel@epa.gov.

Ms. Waterson may be reached by phone

at (404) 562-9061 or via electronic mail

at waterson.sara@epa.gov.

SUPPLEMENTARY INFORMATION:

I. What actions is EPA taking?

II. What is the effect of these actions?

IlL What are EPA's final actions?

IV. Statutory and Executive Order Reviews

I. What actions is EPA taking?

Based on EPA's review of the qualityassured and certified monitoring data

for 2007-2009, and in accordance with

section 179(c)(1) of the CAA and EPA's

regulations, EPA is determining that the

Chattanooga and Macon Areas attained

the 1997 annual PM 2.

5 NAAQS by the

applicable attainment date of April 5,

2010.

On May 31, 2011, for the Chattanooga

Area and June 2, 2011, for the Macon

Area, EPA published two final

rulemakings to make determinations of

attainment to suspend the requirements

for the Chattanooga and Macon Areas to

submit attainment demonstrations and

associated reasonably available control

measures (RACM), reasonable further

progress (RFP) plans, contingency

measures, and other planning State

Implementation Plan (SIP) revisions

related to attainment of the 1997 annual

PM 2.

5 NAAQS so long as the Areas

continue to attain the 1997 annual PM 2.5

NAAQS. See 76 FR 31239 for the final

rulemaking related to the Chattanooga

Area; see 76 FR 31858 for the final

rulemaking related to the Macon Area.

Those final rulemakings also include

useful background information on the

PM 2.

5 NAAQS relevant to the

Chattanooga and Macon Areas. Today's

actions make determinations that the

Chattanooga and Macon Areas attained

the1997 annual PM 2.

5 NAAQS by the

applicable attainment date of April 5,

2010. Today's actions are simply

focused on the date by which the areas

had attaining data.

Other specific requirements of the

determinations and the rationale for

EPA's actions are explained in the

notice of proposed rulemaking (NPR)

published on June 2, 2011 (76 FR

31900). The comment period closed on

July 5, 2011. No comments were

received in response to the NPR.

II. What is the effect of these actions?

Today's actions are determinations

that the Chattanooga and Macon Areas

attained the 1997 annual PM 2.

5 NAAQS

by the applicable attainment date of

April 5, 2010, consistent with CAA

section 179(c)(1). Finalizing these

actions does not constitute a

redesignation of either the Chattanooga

or Macon Areas to attainment of the

1997 annual PM 2.5 NAAQS under

section 107(d)(3) of the CAA. Further,

finalizing these actions does not involve

approving maintenance plans for either

the Chattanooga or Macon Areas as

required under section 175A of the

CAA, nor would it find that the

Chattanooga or Macon Areas have met

all other requirements for redesignation.

The designation status of the

Chattanooga and Macon Areas remains

nonattainment for the 1997 annual

PM 2.5 NAAQS until such time as EPA

determines that the individual area

meets the CAA requirements for

redesignation to attainment and takes

action to redesignate the individual

area.

III. What are EPA's final actions?

EPA is determining, based on qualityassured and certified monitoring data

for the 2007-2009 monitoring period,

that the Chattanooga and the Macon

Areas attained the 1997 annual PM 2.

5

NAAQS by the applicable attainment

date of April 5, 2010. These actions are

being taken pursuant to section

179(c)(1) of the CAA and are consistent

with the CAA and its implementing

regulations.

IV. Statutory and Executive Order

Reviews

These actions make determinations of

attainment based on air quality, and

would not impose additional

requirements beyond those imposed by

state law. For that reason, these actions:

* Are not a "significant regulatory

action" subject to review by the Office

of Management and Budget under

Executive Order 12866 (58 FR 51735,

October 4, 1993);

* Do not impose an information

collection burden under the provisions

of the Paperwork Reduction Act (44

U.S.C. 3501 et seq.);
Federal Register/Vol. 76, No. 174/Thursday, September 8, 2011/Rules and Regulations

* Are certified as not having a

significant economic impact on a

substantial number of small entities

under the Regulatory Flexibility Act

(5 U.S.C. 601 et seq.);

* Do not contain any unfunded

mandate or significantly or uniquely

affect small governments, as described

in the Unfunded Mandates Reform Act

of 1995 (Pub. L. 104-4);

* Do not have Federalism

implications as specified in Executive

Order 13132 (64 FR 43255, August 10,

1999);

* Are not an economically significant

regulatory action based on health or

safety risks subject to Executive Order

13045 (62 FR 19885, April 23, 1997);

* Are not a significant regulatory

action subject to Executive Order 13211

(66 FR 28355, May 22, 2001);

* Are not subject to requirements of

Section 12(d) of the National

Technology Transfer and Advancement

Act of 1995 (15 U.S.C. 272 note) because

application of those requirements would

be inconsistent with the CAA; and

* Do not provide EPA with the

discretionary authority to address, as

appropriate, disproportionate human

health or environmental effects, using

practicable and legally permissible

methods, under Executive Order 12898

(59 FR 7629, February 16, 1994).

In addition, these 1997 PM 2.5

determinations of attainment by

applicable attainment date for the

Chattanooga and Macon Areas do not

have tribal implications as specified by

Executive Order 13175 (65 FR 67249,

November 9, 2000), because the SIP is

not approved to apply in Indian country

located in the state, and EPA notes that

it will not impose substantial direct

costs on tribal governments or preempt

tribal law.

The Congressional Review Act, 5

U.S.C. 801 et seq., as added by the Small

Business Regulatory Enforcement

Fairness Act of 1996, generally provides

that before a rule may take effect, the

agency promulgating the rule must

submit a rule report, which includes a

copy of the rule, to each House of the

Congress and to the Comptroller General

of the United States. EPA will submit a

report containing this action and other

required information to the U.S. Senate,

the U.S. House of Representatives, and

the Comptroller General of the United

States prior to publication of the rule in

the Federal Register. A major rule

cannot take effect until 60 days after it

is published in the Federal Register.

This action is not a "major rule" as

defined by 5 U.S.C. 804(2).

Under section 307(b)(1) of the CAA,

petitions for judicial review of this

action must be filed in the United States

Court of Appeals for the appropriate

circuit by November 7, 2011. Filing a

petition for reconsideration by the

Administrator of these final rules do not

affect the finality of these actions for the

purposes of judicial review nor does it

extend the time within which a petition

for judicial review may be filed, and

shall not postpone the effectiveness of

such rule or action. These actions may

not be challenged later in proceedings to

enforce its requirements. (See section

30 7(b)(2)).

For purposes of judicial review, the

two determinations approved by today's

action are severable from one another.

List of Subjects in 40 CFR Part 52

Environmental protection, Air

pollution control, Incorporation by

reference, Intergovernmental relations,

Particulate matter, Reporting and

recordkeeping requirements.

Dated: August 18, 2011.

Beverly H. Banister,

Acting Regional Administrator, Region 4.

40 CFR part 52 is amended as follows:

PART 52-[AMENDED]

m 1. The authority citation for part 52

continues to read as follows:

Authority: 42 U.S.C. 7401 et seq.

Subpart B-Alabama

* 2. Section 52.64 is added to read as

follows:

§52.64 Determination of attainment.

Based upon EPA's review of the air

quality data for the 3-year period 2007-

2009, EPA determined that the

Chattanooga, Alabama-GeorgiaTennessee PM 2.5 nonattainment area

attained the 1997 annual PM 2.

5 NAAQS

by the applicable attainment date of

April 5, 2010. Therefore, EPA has met

the requirement pursuant to CAA

section 179(c) to determine, based on

the Area's air quality as of the

attainment date, whether the Area

attained the standard. EPA also

determined that the Chattanooga,

Alabama-Georgia-Tennessee PM 2.

5

nonattainment area is not subject to the

consequences of failing to attain

pursuant to section 179(d).

Subpart L-Georgia

* 3. Section 52.577 is added to read as

follows:

§52.577 Determination of attainment.

(a) Based upon EPA's review of the air

quality data for the 3-year period 2007-

2009, EPA determined that the

Chattanooga, Alabama-GeorgiaTennessee PM 2.5 nonattainment area

attained the 1997 annual PM 2.

5 NAAQS

by the applicable attainment date of

April 5, 2010. Therefore, EPA has met

the requirement pursuant to CAA

section 179(c) to determine, based on

the Area's air quality as of the

attainment date, whether the Area

attained the standard. EPA also

determined that the Chattanooga,

Alabama-Georgia-Tennessee PM 2.5

nonattainment area is not subject to the

consequences of failing to attain

pursuant to section 179(d).

(b) Based upon EPA's review of the air

quality data for the 3-year period 2007-

2009, EPA determined that the Macon,

Georgia PM 2.

5 nonattainment Area

attained the 1997 annual PM 2.

5 NAAQS

by the applicable attainment date of

April 5, 2010. Therefore, EPA has met

the requirement pursuant to CAA

section 179(c) to determine, based on

the Area's air quality as of the

attainment date, whether the Area

attained the standard. EPA also

determined that the Macon, Georgia

PM 2.5 nonattainment Area is not subject

to the consequences of failing to attain

pursuant to section 179(d).

Subpart RR-Tennessee

* 4. Section 52.2232 is added to read as

follows:

§52.2232 Determination of attainment.

Based upon EPA's review of the air

quality data for the 3-year period 2007-

2009, EPA determined that the

Chattanooga, Alabama-GeorgiaTennessee PM 2.5 nonattainment Area

attained the 1997 annual PM 2.

5 NAAQS

by the applicable attainment date of

April 5, 2010. Therefore, EPA has met

the requirement pursuant to CAA

section 179(c) to determine, based on

the Area's air quality as of the

attainment date, whether the Area

attained the standard. EPA also

determined that the Chattanooga,

Alabama-Georgia-Tennessee PM 2.

5

nonattainment Area is not subject to the

consequences of failing to attain

pursuant to section 179(d).

[FR Doe. 2011-22831 Filed 9-7-11; 8:45 am]

BILLING CODE 6560-50-P

55775
55776 Federal Register/Vol. 76, No. 174/Thursday, September 8, 2011/Rules and Regulations

ENVIRONMENTAL PROTECTION

AGENCY

40 CFR Part 52

[EPA-R04-OAR-2010-0798-201147; FRL9459-3]

Approval and Promulgation of

Implementation Plans and

Designations of Areas for Air Quality

Planning Purposes; Georgia: Rome;

Determination of Attainment by

Applicable Attainment Date for the

1997 Annual Fine Particulate

Standards

AGENCY: Environmental Protection

Agency (EPA).

ACTION: Final rule.

SUMMARY: EPA is determining that the

Rome, Georgia, fine particulate (PM2.5)

nonattainment area (hereafter referred to

as "the Rome Area") has attained the

1997 annual PM 2.5 national ambient air

quality standards (NAAQS) by the

applicable attainment date of April 5,

2010. The determination of attainment

was previously finalized by EPA on

April 5, 2011, and was based on qualityassured and certified monitoring data

for the 2007-2009 monitoring period.

The Rome Area is comprised of Floyd

County, Georgia, in its entirety. EPA is

determining that the Area attained the

1997 annual PM 2.

5 NAAQS by its

applicable attainment date. EPA is

finalizing this action because it is

consistent with the Clean Air Act (CAA)

and its implementing regulations.

DATES: Effective Date: This final rule is

effective on October 11, 2011.

ADDRESSES: EPA has established a

docket for this action under Docket ID

Number EPA-R04-OAR-2010-0798. All

documents in the docket are listed in

the http://www.regulations.gov Web

site. Although listed in the electronic

docket, some information is not publicly

available, i.e., confidential business

information (CBI) or other information

whose disclosure is restricted by statute.

Certain other material, such as

copyrighted material, is not placed on

the Internet and will be publicly

available only in hard copy form.

Publicly available docket materials are

available either electronically through

http://www.regulations.gov or in hard

copy for public inspection during

normal business hours at the Regulatory

Development Section, Air Planning

Branch, Air, Pesticides and Toxics

Management Division, U.S.

Environmental Protection Agency,

Region 4, 61 Forsyth Street, SW.,

Atlanta, Georgia 30303-8960.

FOR FURTHER INFORMATION CONTACT: Joel

Huey or Sara Waterson, Regulatory

Development Section, Air Planning

Branch, Air, Pesticides and Toxics

Management Division, U.S.

Environmental Protection Agency,

Region 4, 61 Forsyth Street, SW.,

Atlanta, Georgia 30303-8960. Mr.

Huey's telephone number is (404) 562-

9104. Mr. Huey can also be reached via

electronic mail at huey.joel@epa.gov.

Ms. Waterson may be reached by phone

at (404) 562-9061 or via electronic mail

at waterson.sara@epa.gov.

SUPPLEMENTARY INFORMATION:

I. What action is EPA taking?

II. EPA's Response to Comment

IL What is the effect of this action?

IV. What is EPA's final action?

V. Statutory and Executive Order Reviews

I. What action is EPA taking?

Based on EPA's review of the qualityassured and certified monitoring data

for 2007-2009, and in accordance with

section 179(c)(1) of the CAA and EPA's

regulations, EPA is determining that the

Rome Area attained the 1997 annual

PM 2.5 NAAQS by the applicable

attainment date of April 5, 2010.

On April 5, 2011, EPA published a

final rulemaking to make a

determination of attainment and to

suspend the requirements for the Rome

Area to submit an attainment

demonstration and associated

reasonably available control measures

(RACM), reasonable further progress

(RFP) plan, contingency measures, and

other planning State Implementation

Plan (SIP) revisions related to

attainment of the 1997 annual PM 2.5

NAAQS so long as the Area continues

to attain the 1997 annual PM 2.5 NAAQS.

See 76 FR 18650. That final rulemaking

also includes useful background

information on the PM 2.

5 NAAQS

relevant to the Rome Area. Today's

action makes a determination that the

Rome Area attained the1997 annual

PM 2.

5 NAAQS by the applicable

attainment date of April 5, 2010.

Today's action is simply focused on the

date by which the Area had attaining

data.

Other specific requirements of the

determination and the rationale for

EPA's action are explained in the notice

of proposed rulemaking (NPR)

published on June 2, 2011 (76 FR

31898). The comment period closed on

July 5, 2011. One comment was received

in response to the NPR.

II. EPA's Response to Comment

EPA received one comment on the

June 2, 2011, proposed rulemaking to

determine the Rome Area attained the

1997 PM 2.

5 NAAQS by its applicable

attainment date of April 5, 2010. The

comment, from the Labor-Management

Standards Office, is provided in the

docket for this final action and can be

accessed at http://www.regulations.gov

using Docket ID No. EPA-R04-OAR2010-0798. The Commenter stated,

"[n]o more rules." The comment

provides insufficient information upon

which to base a response. As a point of

clarification, today's action is required

by section 179(c)(1) of the CAA. For that

reason, this rulemaking is both

necessary and appropriate.

III. What is the effect of this action?

Today's action is a determination that

the Rome Area attained the 1997 annual

PM 2.5 NAAQS by its applicable

attainment date of April 5, 2010,

consistent with CAA section 179(c)(1).

Finalizing this action does not

constitute a redesignation of the Rome

Area to attainment of the 1997 annual

PM 2.5 NAAQS under section 107(d)(3) of

the CAA. Further, finalizing this action

does not involve approving

maintenance plans for the Rome Area as

required under section 175A of the

CAA, nor does it involve a

determination that the Rome Area has

met all requirements for a redesignation.

The designation status of the Rome Area

remains nonattainment for the 1997

annual PM 2.5 NAAQS until such time as

EPA determines that the Area meets the

CAA requirements for redesignation to

attainment and takes formal action to

redesignate the Area.

IV. What is EPA's final action?

EPA is determining, based on qualityassured and certified monitoring data

for the 2007-2009 monitoring period,

that the Rome Area attained the 1997

annual PM2.5 NAAQS by the applicable

attainment date of April 5, 2010. This

action is being taken pursuant to section

179(c)(1) of the CAA and is consistent

with the CAA and its implementing

regulations.

V. Statutory and Executive Order

Reviews

This action makes a determination of

attainment based on air quality and does

not impose additional requirements

beyond those imposed by state law. For

that reason, this action:

e Is not a "significant regulatory

action" subject to review by the Office

of Management and Budget under

Executive Order 12866 (58 FR 51735,

October 4, 1993); e Does not impose an information

collection burden under the provisions

of the Paperwork Reduction Act (44

U.S.C. 3501 et seq.);

e Is certified as not having a

significant economic impact on a

substantial number of small entities
Federal Register/Vol. 76, No. 174/Thursday, September 8, 2011/Rules and Regulations

under the Regulatory Flexibility Act

(5 U.S.C. 601 et seq.);

* Does not contain any unfunded

mandate or significantly or uniquely

affect small governments, as described

in the Unfunded Mandates Reform Act

of 1995 (Pub. L. 104-4);

* Does not have Federalism

implications as specified in Executive

Order 13132 (64 FR 43255, August 10,

1999);

* Is not an economically significant

regulatory action based on health or

safety risks subject to Executive Order

13045 (62 FR 19885, April 23, 1997);

* Is not a significant regulatory action

subject to Executive Order 13211 (66 FR

28355, May 22, 2001);

* Is not subject to requirements of

Section 12(d) of the National

Technology Transfer and Advancement

Act of 1995 (15 U.S.C. 272 note) because

application of those requirements would

be inconsistent with the CAA; and

* Does not provide EPA with the

discretionary authority to address, as

appropriate, disproportionate human

health or environmental effects, using

practicable and legally permissible

methods, under Executive Order 12898

(59 FR 7629, February 16, 1994).

In addition, this determination that

the Rome Area attained the 1997 annual

average PM 2.5 NAAQS by the applicable

attainment date does not have tribal

implications as specified by Executive

Order 13175 (65 FR 67249, November 9,

2000), because the SIP is not approved

to apply in Indian country located in the

state, and EPA notes that it will not

impose substantial direct costs on tribal

governments or preempt tribal law.

The Congressional Review Act, 5

U.S.C. 801 et seq., as added by the Small

Business Regulatory Enforcement

Fairness Act of 1996, generally provides

that before a rule may take effect, the

agency promulgating the rule must

submit a rule report, which includes a

copy of the rule, to each House of the

Congress and to the Comptroller General

of the United States. EPA will submit a

report containing this action and other

required information to the U.S. Senate,

the U.S. House of Representatives, and

the Comptroller General of the United

States prior to publication of the rule in

the Federal Register. A major rule

cannot take effect until 60 days after it

is published in the Federal Register.

This action is not a "major rule" as

defined by 5 U.S.C. 804(2).

Under section 307(b)(1) of the CAA,

petitions for judicial review of this

action must be filed in the United States

Court of Appeals for the appropriate

circuit by November 7, 2011. Filing a

petition for reconsideration by the

Administrator of these final rules does

not affect the finality of these actions for

the purposes of judicial review nor does

it extend the time within which a

petition for judicial review may be filed,

and shall not postpone the effectiveness

of such rule or action. This action may

not be challenged later in proceedings to

enforce its requirements. (See section

30 7(b)(2).)

List of Subjects in 40 CFR Part 52

Environmental protection, Air

pollution control, Incorporation by

reference, Intergovernmental relations,

Particulate matter, Reporting and

recordkeeping requirements.

Dated: August 18, 2011.

Beverly H. Banister,

Acting Regional Administrator, Region 4.

40 CFR part 52 is amended as follows:

PART 52-[AMENDED]

m l. The authority citation for part 52

continues to read as follows:

Authority: 42 U.S.C. 7401 et seq.

Subpart L-Georgia

* 2. Section 52.577 is amended by

adding paragraph (c) to read as follows:

§52.577 Determination of attainment.

(c) Based upon EPA's review of the air

quality data for the 3-year period 2007-

2009, EPA determined that the Rome,

Georgia PM 2.

5 nonattainment area

attained the 1997 annual PM 2.

5 NAAQS

by the applicable attainment date of

April 5, 2010. Therefore, EPA has met

the requirement pursuant to CAA

section 179(c) to determine, based on

the Area's air quality as of the

attainment date, whether the Area

attained the standard. EPA also

determined that the Rome, Georgia

PM 2.5 nonattainment area is not subject

to the consequences of failing to attain

pursuant to section 179(d).

[FR Doe. 2011-22833 Filed 9-7-11; 8:45 am]

BILLING CODE 6560-50-P

55777
Reader Aids Federal Register

Vol. 76, No. 174

Thursday, September 8, 2011

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FEDERAL REGISTER PAGES AND DATE, SEPTEMBER

54373-54688 ...................... 1

54689-54920 ...................... 2

54921-55208 ...................... 6

55209-55552 ...................... 7

55553-55778 ...................... 8

CFR PARTS AFFECTED DURING SEPTEMBER

At the end of each month the Office of the Federal Register

publishes separately a List of CFR Sections Affected (LSA), which

lists parts and sections affected by documents published since

the revision date of each title.

3 CFR

Proclamations:

8700 ................................. 54919

8701 ................................. 54921

8702 ................................. 55207

8703 ................................. 55209

8704 ................................. 55211

8705 ................................. 55549

8706 ................................. 55551

5 CFR

843 ................................... 55213

7 CFR

Proposed Rules:

1033 ................................. 55608

8 CFR

103 ................................... 55502

214 ................................... 55502

274a ................................. 55502

299 ................................... 55502

Proposed Rules:

204 ................................... 54978

205 ................................... 54978

245 ................................... 54978

9 CFR

88 ..................................... 55213

10 CFR

Proposed Rules:

Ch. I ................................. 54986

2 ....................................... 54392

430 ................................... 55609

810 ................................... 55278

12 CFR

Ch. VI ............................... 54638

Proposed Rules:

225 ................................... 55288

241 ................................... 54717

704 ................................... 54991

14 CFR

17 ..................................... 55217

23 ..................................... 55230

25 ..................................... 54923

33 ..................................... 55553

39 ......................... 54373,54926

71 ........... 54689,54690,55232,

55553,55554,55555

97 ......................... 55233,55235

Proposed Rules:

23 ..................................... 55293

39 ........... 54397,54399,54403,

54405,55296,55614

71 ..................................... 55298

15 CFR

738 ................................... 54928

740 ..............................54928

745 ..............................54928

748 ..............................54928

16 CFR

2 ................................5 4 6 9 0

17 CFR

4 9 ...............................

5 4 5 3 8

240 ..............................54374

2 7 1 ..............................55 23 7

Proposed Rules:

270 ....................... 55300, 55308

19 CFR

10 2 ..............................5 4 6 9 1

3 5 1 ..............................54 69 7

20 CFR

422 ..............................54700

21 CFR

Proposed Rules:

5 0 ...............................5 4 4 0 8

5 6 ...............................5 4 4 0 8

7 3 ...............................5 5 3 2 1

1308 .............................556 16

25 CFR

Proposed Rules:

C h . III ............................... 5 44 08

26 CFR

1 .............. 55255, 55256, 55746

3 0 1 ..............................

55 25 6

602 ..............................55746

Proposed Rules:

1 .............. 54409, 55321, 55322

29 CFR

Proposed Rules:

570 ..............................54836

579 ..............................54836

33 CFR

100 .......... 55556,55558, 55561

1 17 ..............................5 5 5 6 3

165 ......... 54375, 54377, 54380,

54382, 54703, 55261, 55564,

55566

38 CFR

17 ...............................5 5 5 7 0

5 1 ...............................5 5 5 7 0

39 CFR

1 1 1 ..............................5 4 9 3 1

Proposed Rules:

3055 .............................556 19

40 CFR

52 ........... 54384, 54706, 55542,
ii Federal Register/Vol. 76, No. 174/Thursday, September 8, 2011/Reader Aids

55544, 55572, 55577, 55581,

55774,55776

86 ..................................... 54932

116 ................................... 55583

180 .......... 55264,55268,55272

302 ................................... 55583

704 ................................... 54932

710 ................................... 54932

711 ................................... 54932

Proposed Rules:

52 ........... 54410, 54993, 55325,

55621

81 ..................................... 54412

180 ................................... 55329

721 ................................... 55622

41 CFR

300-3 ................................ 55273

301-2 ................................ 55273

301-10 .............................. 55273

301-11 .............................. 55273

301-52 .............................. 55273

301-70 .............................. 55273

301-71 .............................. 55273

Proposed Rules:

128-1 ................................ 55332

42 CFR

414 ................................... 54953

417 ................................... 54600

422 ................................... 54600

423 ................................... 54600

Proposed Rules:

5 ....................................... 5 4 9 9 6

44 CFR

64 ..................................... 54708

Proposed Rules:

67 ......................... 54415, 54721

45 CFR

154 ................................... 54969

Proposed Rules:

46 ..................................... 54408

160 ................................... 54408

164 ................................... 54408

46 CFR

Proposed Rules:

8 ....................................... 54419

47 CFR

73 ..................................... 55585

79 ..................................... 55585

90 ..................................... 54977

Proposed Rules:

1 ....................................... 54422

49 CFR

Proposed Rules:

10 ..................................... 55334

Ch. II ................................ 55622

269 ................................... 55335

Ch. III ............................54721

50 CFR

1 7 ...............................5 4 7 1 1

20 ......................... 54658,54676

648 ..............................54385

660 ..............................54713

665 ..............................54715

679 .......... 54716,55276,55606

Proposed Rules:

17 ........... 54423,55170,55623,

55638

300 ..............................55343

622 ..............................54727

640 ..............................

54727

660 ....................... 54888,55344

679 ..............................55343
Federal Register/Vol. 76, No. 174/Thursday, September 8, 2011/Reader Aids iii

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H.R. 2553/P.L. 112-27

Airport and Airway Extension

Act of 2011, Part IV (Aug. 5,

2011; 125 Stat. 270)

H.R. 2715/P.L. 112-28

To provide the Consumer

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12, 2011; 125 Stat. 273)

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