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Citation: 76 Fed. Reg. 55746 2011

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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 1and 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 usingthe organization's overall method of accounting. All tax-exempt organizations required to file annual information returns are affected by these regulations. DATES: EffectiveDate:These regulations

are effective on September 8, 2011.

ApplicabilityDate: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 (nota toll-free number). SUPPLEMENTARY INFORMATION: PaperworkReduction Act

The collection ofinformation contained in these final regulations has been reviewed and approved by the Office ofManagement 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 willvary, depending on individual circumstances. The collection ofinformation 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 tobe collected for purposes of

### §1.6033-2 is required tobe submitted on Form 990, "Return ofOrganization Exempt From Income Tax." Forfurther 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 ofthe estimated burden, please refer to the instructions ofthe 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 ofinformation unless it displays avalid control number assigned by the Office of Management and Budget.

Books or records relating to a collection ofinformation mustbe 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 ofthe 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 ofPrivate 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 ofthe exempt sector. With the exception ofcertain 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

anotice ofproposed 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 apublic hearing. The IRS received

one written comment responding to this notice. After consideration ofthe comment, the proposed regulations are revised and published infinal form substantially as proposed. The major

areas ofcomment and revision are discussed in the following Explanation ofProvisions. Summary ofComments and Explanation ofProvisions

PrivateFoundationStatusandAdvance 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 ofits private foundation
status or public charity status, that is, whether itis a private foundation and, ifnot, the Code provision excepting it from private foundation classification. Under the current statute andprior 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 rulingprocess and provided instead that an organization would be a publicly supported organization (thus qualifying for public charity status) in its first fiveyears ifit could show, in its application for exemption, that it could reasonably be expected toreceive the requisite public support during such period.

The comment suggested thatthe 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

2IRB 294 and its successors. Thus,the final regulations do not incorporate this suggestion. ComputationPeriod forPublicSupport
The proposed regulations changed the computation period for public support from a four-year period comprised ofthe 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 notmeet

apublic support testfor ataxable year may be atrisk ofbeing classified as a private foundation as ofthe first day of the succeeding taxable year ifthe 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 ofproposed rulemaking requested comments on specific situations that might warrant relieffrom the imposition of Chapter 42 excise
taxes. In addition, organizations that believed that it wouldbe unfair or inequitable to impose the private foundation excise taxes or penalties against them for all or part ofthe 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 thatthe final regulations should treat organizations that fail a public support test for two consecutive years as private foundations

as ofthe beginning ofthe second test year only for purposes of section 507 (termination ofprivate foundation status) and section 4940 (excisetax on investment income), and that such an organization should not be treated as a private foundation for all other purposes until the beginning ofthe 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 thatpreviously applied when

anew 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 ofthe advance ruling period, or, ifForm 8734, "Support Schedule for Advance Ruling Period," was timely submitted, until the IRS made afinal determination ofits 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 wouldbe subject to all the Chapter 42 excise taxes applicable to private foundations and disqualified persons only after the end ofthe 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 willbe treated

as aprivate foundation as ofthe beginning ofthe second year offailure 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 ofthe 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 ofthe 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 testin §1.170A-9(f)(9). The final regulations retain the examples in the proposed regulations but do not include additional examples, as itwas 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 ofaccounting to report the
amount ofpublic support it received on Schedule A, "Public Charity Status and Public Support," even ifthe 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 ituses to keep its books under section 446 and that it otherwise uses to report onits 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 presentvalue ofa multi-year grant as support in the year inwhich the grant commitment isreceived. The
commenter suggested thatthis 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 ofmulti-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 andthe 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 ofrecognizing a larger amount of support from one source in a single year.

In addition, one ofthe goals ofthe redesign ofthe 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 ofan organization's normal method of accounting for calculation ofits 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 ofthe general public torely on an organization's Form 990 as an accurate reflection ofthe organization's financial circumstances. Consistent reporting thus assists in the oversight ofthe 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 oflarge donors, and IRS and the Treasury Department do not believe it should exclude a large contribution from a single donor simply because itis paid out over a number ofyears. 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, attimes to the benefit and at times to the detriment ofthe recipient organization. The unusual grant exclusion generally applies to substantial contributions orbequests that (1)Are attracted bythe publicly supported nature ofthe organization, (2)

are unusual or unexpected intheir amount, and (3)would adversely affect the organization's public charity status because oftheir 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 fromthe 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 ofpublic 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, thatwill be considered unusual grants under 

### §§ 1.170A-9(f)(6)(ii) and 1.509(a)-3(c)(3) and related provisions without aprivate letterruling 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 ofa change in status is provided to the public (such

as by publication inthe Internal Revenue Bulletin), unlessthe donor was responsible for, or aware of,the act or failure to act that results in the organization's loss ofpublic charity
status. The proposed regulations further provided that donors may rely on advance rulings that expire on or after June 9, 2008, until notice ofa change in
status isprovided to the public (suchas 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 asthose 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 awritten
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 itmakes 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, ataxable 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 ofthe 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 ofDAFs 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 wouldbe

ataxable distribution under section 4966. The IRS and the Treasury Department agree that reliance relieffor sponsoring organizations ofDAFs is appropriate. Accordingly, the final regulations provide that, for purposes of section 4966, sponsoring organizations ofDAFs 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 ofDAFs to rely on a favorable determination issued to a grantee that a grant is an unusual grant.
PrivateFoundationTermination

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 ofsection 509(a)(1), (a)(2), or (a)(3) (andthus operating as a public charity) for a continuous period of60 months, provided the organization (1)Prior to commencement ofthe 60-month period, notifies the Secretary in the manner prescribed by regulations that itis terminating private foundation status, and (2)later establishes to the satisfaction ofthe 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 ofthe 60- month period to allow the IRS to make

a determination on public charity status.

The comment suggested thatthe final regulations should simplify the process ofterminating private foundation status under §1.507-2 byeliminating 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 ofthe advance ruling period. As stated in the notice ofproposed rulemaking, approximately 95 percent ofthe 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, ifthe organization fails to qualify as a public charity for the entire 60-month period, it will continue tobe treated as a private foundation forthe 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 ofits advance rulingperiod.

SubstantialContributor

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

anew organization thatfails to qualify

as publicly supported after its first five years of existence willnot be treated as

aprivate foundation for any purpose during its first fiveyears, 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 ofthese 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 allpertinent facts and circumstances, and notjustthose 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) ofthe Code underthe PPA. Since the date of enactment ofthe 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) ofthe Code. Section 1.6033- 2(g)(6), which provides the general
statement ofthe 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 ofwhich modify the substance ofthe proposed regulations.

Additionally, the final regulations include a correction in §1.6033-2(i) to the place to which an organization's change ofoperation notifications is sent. Effective/ApplicabilityDateand TransitionRules

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 ofthese regulations, must use the new five-year computation period to calculate public support for their first taxable year beginning on or afterJanuary 1, 2008, and for all subsequent taxable years. Special Analyses

It has been determined thatthis Treasury decision is not a significant regulatory action as defined in Executive Order 12866, as supplemented byExecutive 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. Itis hereby certified thatthe collection of information in this regulation will not have a significant economic impact on

a substantial number of small entities. This certification isbased on the fact thatburden 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 underwhich reporting isrequired. Accordingly, a Regulatory Flexibility Analysis under the Regulatory Flexibility Act (5U.S.C. chapter 6) is notrequired. Pursuant to section 7805(f) ofthe Code, these regulations havebeen submitted to the Chief Counsel for Advocacy of the Small Business Administration for comment

on its impact on smallbusiness.

Statement ofAvailability for Documents Published in the Internal Revenue Bulletin

For copies ofrecently 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 ofthis regulation is Terri Harris, Office ofAssociate Chief Counsel (TaxExempt and Government Entities). However, other personnel from the IRS and the Treasury Department participated in their development.

List of Subjects

26CFRPart1

Income taxes, Reporting and recordkeeping requirements.

26CFRPart602

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 1and 602

are amended as follows:

PART 1-INCOME TAXES

* Paragraph 1. The authority citation for part 1 continues to read inpart 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 ofsection 170(b)(1)(A) organization.

(f)Definitionofsection 170(b)(1)(A)(vi) organization-(1) In general.An organization is described in section 170(b)(1)(A)(vi) ifit-

(i) Is referred to in section 170(c)(2) (otherthan an organization specifically described in paragraphs (b) through (e) ofthis section); and (ii)Normally receives a substantial part ofits support from agovernmental unit referred to in section 170(c)(1) or from direct or indirect contributions from the general public ("publicly supported"). For purposes ofthis paragraph (f), an organization is publicly supported ifit meets the requirements of either paragraph (f)(2) ofthis section (331/3 percent support test) orparagraph (f)(3) ofthis section (facts and circumstances test). Paragraph (f)(4) ofthis section defines "normally" for purposes ofthe 331/3 percent support test and the facts and circumstances test, and for new organizations in the first five years ofthe organization's existence as a section 501(c)(3) organization. Paragraph (f)(5) ofthis section provides for determinations of foundation classification and rules for reliance by donors and contributors. Paragraphs (f)(6), (f)(7), and (f)(8) ofthis section list the items that are included and excluded from the term support. Paragraph (f)(9) ofthis section provides examples ofthe application ofthis paragraph. Types oforganizations that, subject to the provisions ofthis 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 ofan opera, symphony orchestra, ballet, or repertory drama or for some other direct service to the general public. (2)Determination whetheran organizationis "publiclysupported"; 33113percentsupporttest.An organization is publicly supported ifthe total amount of support (see paragraphs (f)(6), (f)(7), and (f)(8) ofthis section) that the organization normally (see paragraph (f)(4)(i) ofthis 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 ofthese sources, equals
at least 331/3 percent ofthe total support normally received bythe organization. See paragraph (f)(9), Example 1 ofthis section.

(3)Determinationwhetheran organizationis "publiclysupported"; factsandcircumstancestest.Even ifan organization fails to meet the 331/3 percent support test described in paragraph (f)(2) ofthis section, itis publicly supported ifit normally (see paragraph (f)(4)(i) ofthis section) receives a substantial part ofits support from governmental units, from contributions made directly or indirectly by the general public, or from

a combination ofthese sources, and
meets the other requirements ofthis paragraph (f)(3). In order to satisfy the facts and circumstances test, an organization must meet the requirements ofparagraphs (f)(3)(i) and (f)(3)(ii) ofthis section. In addition, the organization must be in the nature ofan 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) ofthis section.

(i) Ten-percentsupportlimitation. The percentage ofsupport (see paragraphs (f)(6), (f)(7) and (f)(8) ofthis section) normally received by an organization from governmental units, from contributions made directly or indirectly by the general public, or from

a combination ofthese sources, must be substantial. For purposes ofthis paragraph (f)(3), an organization will not be treated as normally receiving a substantial amount ofgovernmental or public support unless the total amount of governmental and public support normally received equals at least 10 percent ofthe total support normally received by such organization. (ii)Attractionof 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 ifitmaintains a continuous and bona fide program for solicitation offunds from the general public, community, or membership group involved, or ifit 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 andbona fide program for solicitation of fundsfrom the general public or community, consideration will be given to whether the scope ofits fundraising activities is reasonable in light ofits charitable activities. Consideration will also be given to the fact that an organization, in its early years ofexistence, may limit the scope ofits 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) ofthis section thatmust be satisfied, all pertinent facts and circumstances, including the following factors, willbe taken into consideration in determining whether an organization is "publicly supported" within the meaning ofparagraph (f)(1) ofthis section. However, an organization is not generally required to satisfy all ofthe factors in paragraphs (f)(3)(iii)(A) through (f)(3)(iii)(E) ofthis section. The factors relevant to each case and the weight accorded to any one ofthem may differ depending upon the nature and purpose ofthe organization and the length oftime it has been in existence. (A) Percentageof financialsupport. The percentage ofsupport received by

an organization from public or governmental sources willbe 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) ofthis section from public or governmental sources, the lesser will be the burden ofestablishing the publicly supported nature ofthe organization through other factors, including those described in this paragraph (f)(3), while the lowerthe percentage, the greater willbe the burden. Ifthe percentage ofthe organization's support from public or governmental sources is low because it receives a high percentage ofits total support from investment income on its endowment funds, such fact willbe treated as evidence ofan organization being "publicly supported" ifsuch endowment funds were originally contributed bya governmental unit or by the general public. However, if such endowment funds were originally contributed bya few individuals or members oftheir families, such fact will increase the burden on the organization of establishing thatit is "publicly supported" taking into account all pertinent facts and circumstances,

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

including the other factors described in paragraph (f)(3)(iii) ofthis section. (B) Sourcesofsupport.The fact that

an organization meets the requirement ofparagraph (f)(3)(i) ofthis section through support from governmental units or directly or indirectly from a representative number ofpersons, rather than receiving almost all ofits support from the members ofa single family, will be considered evidence ofan organization being "publicly supported." In determining what is a "representative number ofpersons," consideration will be given to the type of organization involved, the length of time it has been in existence, and whether itlimits its activities to a particular community or region or to a special field which canbe expected to appeal to a limited number ofpersons. (C) Representativegoverningbody. The fact that an organization has a governing body which represents the broad interests ofthe public, rather than the personal or private interests ofa 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 ofan organization being "publicly supported." An organization will be treated as having a representative governing body ifit has

a governing body (whether designated in the organization's governing instrument or bylaws as a Board of Directors, Board ofTrustees, or similar governing body) which is comprised of public officials acting in their capacities

as such; ofindividuals selected by public officials acting in their capacities

as such; ofpersons having special knowledge or expertise in the particular field or discipline inwhich the organization is operating; ofcommunity leaders, such as elected or appointed officials, clergymen, educators, civic leaders, or other such persons representing a broad cross-section ofthe views and interests of the community;
or, in the case of amembership organization, ofindividuals elected pursuant to the organization's governing instrument or bylaws by a broadly based membership. (D)Availabilityof public facilitiesor services;public participation in
programsor policies.(1)The fact that an organization generally provides facilities or services directly for the benefit ofthe general public on a continuing basis (such as amuseum 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 ofthe 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 widelyused by colleges and universities or by members ofthe general public will alsobe 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 ofthe organization by members ofthe 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 inthe community, such as combating community deterioration in an economically depressed area that has suffered a major loss ofpopulation and jobs. (iii) The receipt ofa significant part of its funds from apublic charity or governmental agency to which it is in

some way held accountable as a condition ofthe grant, contract, or contribution. (E)Additional factorspertinentto membershiporganizations. The following are additional factors tobe considered in determining whether a membership organization is "publicly supported":

(1)Whether the solicitation for duespaying members is designed to enroll a substantial number ofpersons in the community or area, or in a particular profession or field of special interest (takinginto account the size ofthe area and the nature ofthe organization's activities). (2)Whether membership dues for individual (ratherthan institutional) members have been fixed at rates designed to make membership available
to a broad cross section ofthe interested public, rather than to restrict membership to a limited number of persons. (3)Whether the activities ofthe organization will be likely to appeal to persons having some broad common interest or purpose, such as educational activities in the case ofalumni associations, musical activities in the

case of symphony societies, or civic affairs in the case ofparent-teacher associations. See Example2through Example 5 contained in paragraph (f)(9) ofthis section for illustrations ofthis paragraph (f)(3). (4)Definitionofnormally;general rule-(i)Normally;33113percentsupport
test.An organization "normally" receives the requisite amount ofpublic support and meets the 331/3 percent support test for a taxable year andthe 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 andcircumstances
test.An organization "normally" receives the requisite amount ofpublic support and meets the facts and circumstances test ofparagraph (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 ofparagraphs (f)(3)(iii)(A) and (f)(3)(iii)(B) ofthis 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) ofthis section that an organization normally
must meet does not have tobe the same for each five-year period so long as there exists a sufficient combination offactors
to show compliance with the facts and circumstances test. (iii)Specialrule.The fact that an organization has normally met the requirements ofthe 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 itselfprevent 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) ofthis 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 ofsupport received during taxable years 2008, 2009, 2010, 2011, and 2012, in the aggregate, X receives at least 331/3 percent ofits support from governmental units referred to in section 170(c)(1), from contributions made directly
orindirectly bythe general public, or from

a combination ofthese sources. Consequently, Xmeets the 3 31/3 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, inthe aggregate, X does not receive
at least 3 31/3 percent ofits support from governmental unitsreferred to in section 170(c)(1), from contributions made directly

orindirectly bythe general public, or from

a combination ofthese sources. However, X still meets the 331/3 percent support test for taxable year 2013 based onthe aggregate support received for taxable years 2008 through 2012.

(iii)Intaxable years 2010, 2011, 2012, 2013, and 2014, inthe aggregate, X does not receive at least 331/3 percent ofits 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 ofthese 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 fortaxable year 2014 (the immediately succeeding taxable year) based on the aggregate support X receives, X's fundraising program, and consideration ofother factors, including those listed inparagraphs (f)(3)(iii)(A) through (f)(3)(iii)(E) ofthis section, during taxable years 2009, 2010, 2011, 2012, and 2013. Therefore, even though X does not meet the 331/3 percent support test fortaxable
year 2014, X is still an organization described in section 170(b)(1)(A)(vi) for that year. (v)Normally; first fiveyears ofan organization'sexistence.(A) An organization "normally" receives the requisite amount ofpublic 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 ofthe 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) ofthis 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 (butnot its seventh taxable year) if it meets the 331/3 percent support test or the facts and circumstances test under the definition ofnormally set forth in paragraphs (f)(4)(i), (f)(4)(ii), and (f)(4)(iii) ofthis section for its fifth taxable year (basedon support received in its first through fifth taxable years). (B) Basicconsideration. In determining whether an organization

can reasonably be expected (withinthe meaning ofparagraph (f)(4)(v)(A) ofthis section) to meet the requirements ofthe 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 ofbroadly 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 ofthe organization. The information to be considered for this purpose shall consist ofall pertinent facts and circumstances, including the factors set forth in paragraph (f)(3) ofthis section. (vi)Example.The application of paragraph (f)(4)(v) ofthis section may be illustrated by the following example:

Example.(i) Organization Ywasformed in January 2008, and uses ataxable year ending December 31. After September 9,2008, and before December 31, 2008, Organization Y filed Form 1023 requestingrecognition of exemption asan organization described in section 501(c)(3) and in sections 170(b)(1)(A)(vi) and 509(a)(1). In its application, Organization Yestablished that it can reasonablybe expected to operate as
apublicly supported organization under paragraph (f)(2) or(f)(3) and paragraph (f)(4)(v) ofthis section. Subsequently, Organization Yreceived aruling 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 ofits formation.

(ii)Organization Yis described in sections 170(b)(1)(A)(vi) and 509(a)(1) forits first five taxable years (thetaxable years ending December 31, 2008, through December 31, 2012).

(iii) Organization Y canqualify 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 reclassifiedas private foundations.(A)Newpublicly supportedorganizations. Ifa new publicly supported organization described under section 170(b)(1)(A)(vi)
cannot meet the requirements ofthe 331/3 percent test ofparagraph (f)(2) or the facts and circumstances test of paragraph (f)(3) for its sixth taxable year under the general definition ofnormally
set forth in paragraphs (f)(4)(i), (f)(4)(ii), and (f)(4)(iii) ofthis section or under the alternate rule set forth in paragraph (f)(4)(v) ofthis 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 ofthe first day ofits sixthtaxable 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

aPrivate Foundation," and willbe 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 publiclysupported 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 andthe facts and circumstances test for any two consecutive taxable years willbe treated

as a private foundation as ofthe first day ofthe 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 willbe 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 classificationandreliance.(i) Aruling

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 ofthe organization's taxexempt status or at such other time as the organization believes itis 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 ofparagraph (f)of this section. The ruling or determination letter that the organization is described in section 170(b)(1)(A)(vi) also maybe revoked ifthe organization's application for aruling or determination contained

one or more material misstatements or omissions offact or if such application

was part ofa scheme orplan to avoid

or evade any provision ofthe Internal Revenue Code. The revocation ofthe determination that an organization is described in section 170(b)(1)(A)(vi) does not preclude revocation ofthe

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determination that the organization is described in section 501(c)(3).

(ii)Status of grantorsorcontributors. For purposes ofsections 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) ofthe Internal Revenue Code of 1986," which canbe searched
at http://www.irs.gov.)Forthis 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 ifthe 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 itwould be deleted from such classification. (iii)Reliancebygrantorsor contributors.A grantor or contributor, other than one ofthe 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 awritten
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 ofthe grantee organization and must setforth sufficient information, including a summary ofthe 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 notresult in the loss ofthe 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 ifthe grantor or contributor is one of the organization's founders, creators, or foundation managers, the procedure set forth in paragraph (f)(6)(iv) ofthis section for requesting a determination fromthe IRS may be followed by the grantee organization for the protection ofthe grantor or contributor. (6) Definitionofsupport;meaningof generalpublic-(i)Ingeneral.In determining whether the 331/2 percent support test or the 10 percent support limitation described in paragraph (f)(3)(i) ofthis 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 ofthe contributions by any such individual, trust, or corporation during the period described in paragraph (f)(4)(i) or paragraph (f)(4)(ii) ofthis section does not exceed two percent of the organization's total support for such period, except as provided in paragraph (f)(6)(ii) ofthis section. Therefore, for example, any contribution by one individual will be included infull in the denominator ofthe 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 ofthe denominator. In applying the two percent limitation, all contributions made by a donor andby 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) ofthis section. For purposes ofparagraphs (f)(2), (f)(3)(i), and (f)(7)(iii)(A)(2) ofthis section, the
term indirectcontributions from the general publicincludes contributions received by the organization from organizations (suchas 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) ofthis section. See the examples in paragraph (f)(9) ofthis section for the application ofthis paragraph (f)(6)(i). Forpurposes ofthis paragraph (f), the term contributionsincludes qualified sponsorship payments (as defined in §1.513-4) in the form ofmoney or property (butnot services). (ii)Exclusionofunusualgrants.(A) For purposes ofapplying the two percent limitation described in paragraph (f)(6)(i) ofthis section to determine whether the 331/3 percent support test or the 10 percent support limitation in paragraph (f)(3)(i) ofthis section is satisfied, one or more contributions may be excluded from both the numerator and the denominator ofthe applicable support fraction ifsuch contributions meet the requirements ofparagraph (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 ofthe publicly supported nature ofthe organization; (2) Are unusual or unexpected with respect to the amount thereof; and (3) Would,by reason oftheir size, adversely affect the status ofthe organization as normally being publicly supported for the applicable period described in paragraph (f)(4) ofthis section.

(B) In the case of agrant (as defined in §1.509(a)-3(g)) that meets the requirements ofthis paragraph (f)(6)(ii), ifthe terms ofthe granting instrument require that the funds be paid to the recipient organization over a period of years, the grant amounts received bythe organization may be excluded for such year oryears in which they would otherwise be includible in computing support under the method of accounting

on the basis ofwhich 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 ofthis paragraph (f)(6) shall apply to exclude unusual grants made during any ofthe 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 agrantee 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) ofthis section, all pertinent facts and circumstances will be taken into consideration. No single factor will necessarily be determinative. For some ofthe factors similar to the factors tobe considered, see §1.509(a)- 3(c)(4).

(iv) Grantors andcontributors. Prior
to the making of any grant or contribution that will allegedly meet the requirements for exclusion under paragraph (f)(6)(ii) ofthis section, a potential grantee organization may request a determination whether such grant or contribution maybe so excluded. Requests for such 

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determination may be filedby the grantee organization in the time and

manner specified by revenue procedure

or other guidance published in the Internal Revenue Bulletin. The issuance ofsuch determination willbe at the sole discretion ofthe Commissioner. The organization must submit all information necessary to make a determination on the factors referred to in paragraph (f)(6)(iii) ofthis section. If

afavorable determination is issued, such determination may be relied upon by the grantor or contributor ofthe 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 bythe grantee organization for purposes ofparagraph (f)(6)(ii) ofthis section.

(v)Grants frompublic charities. Pursuant to paragraph (f)(6)(i) ofthis section, contributions received from a governmental unit or from a section 170(b)(1)(A)(vi) organization are not subject to the twopercent limitation described in paragraph (f)(6)(i) ofthis section unless such contributions represent amounts which havebeen 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 ofthis paragraph (f)(6)(v).

(7)Definitionofsupport;specialrules andmeaningofterms-(i)Definitionof support.For purposes ofthis 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 ofits 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 ofwhich is substantially related to the furtherance ofsuch purpose orfunction (otherthan through the production of income); or (B) Contributions of services for which a deduction is not allowable. (ii)Forpurposes ofthe 331/3 percent support test and the 10 percent support limitation in paragraph (f)(3)(i) ofthis section, all amounts received that are described in paragraph (f)(7)(i)(A) or paragraph (f)(7)(i)(B) ofthis section are tobe excluded from both the numerator and the denominator ofthe fractions determining compliance with such tests, except as provided in paragraph (f)(7)(iii) ofthis section. (iii)Organizations dependent primarilyongrossreceipts from related activities.(A) Notwithstanding the provisions ofparagraph (f)(7)(i) ofthis 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) ofthis section ifitreceives-

(1)Almost all ofits support (as defined in section 509(d)) from gross receipts from related activities; and (2) An insignificant amount ofits support from governmental units (withoutregard to amounts referred to in paragraph (f)(7)(i)(A) ofthis section) and contributions made directly or indirectly by the general public. (B) Example.The application ofthis paragraph (f)(7)(iii) maybe 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 ofthe 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 bythe Federal government. During this same period, the only other support received byZ 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) ofthis section and will not be treated as meeting the requirements ofeither the 331/3 percent support test or thefacts and circumstances test. As to the rules applicable
to organizations that fail to qualify under section 170(b)(1)(A)(vi) because ofthe provisions ofthis paragraph (f)(7)(iii), see section 509(a)(2) and the related regulations. For the distinction between grossreceipts (as referred to in section 509(d)(2)) and gross investment income (as referred to insection 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) (thatis, ifthe basic purpose formaking a payment isto provide support for the organization rather than to purchase admissions, merchandise, services, or the use offacilities). (8) Support from agovernmentalunit. (i) For purposes ofthe 331/3 percent support test and the 10 percent support limitation described in paragraph (f)(3)(i) ofthis section, the term support froma governmentalunitincludes 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 ofservices or in connection with a government research grant. However, such amounts will not constitute support from a governmental unit for such purposes ifthey constitute
amounts received from the exercise or performance ofthe organization's exempt functions as provided in paragraph (f)(7)(i)(A) ofthis section. (ii)Forpurposes ofparagraph (f)(8)(i) ofthis section, any amount paidby a governmental unit to an organization is
not to be treated as received from the exercise or performance ofits charitable, educational, or other purpose or function constituting the basis for its exemption under section 501(a) (within the meaning ofparagraph (f)(7)(i)(A) of this section) ifthe purpose ofthe payment is primarily to enable the organization to provide a service to, or maintain a facility for, the direct benefit ofthe public (regardless ofwhether part ofthe expense ofproviding such service

orfacility ispaid for bythe public), rather than to serve the direct and immediate needs ofthe payor. For example-

(A) Amounts paid for the maintenance oflibrary 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

orchild guidance organizations under government programs for services rendered to children in the community,

are considered payments the purpose of which isprimarily to enable the recipient organization to provide a service or maintain a facility for the direct benefit ofthe public, rather than to serve the direct and immediate needs ofthe 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

agovernmental unit" described in this paragraph (f)(8), rather than an amount described in paragraph (f)(7)(i)(A) ofthis section.

(9)Examples.The application of paragraphs (f)(1) through (f)(8) ofthis 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) ofthis section), M received support (as defined in paragraphs (f)(6) through (8)ofthis section) of $600,000 from the following sources:

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Investment income ..................................................................................................................................................................................... City R (a governmental 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 ofthe two-percent lim it, totaling $170,000)

..................................................... $300,000 40,000 40,000 220,000

Total support

....................................................................................................................................................................................... 600,000

(ii)With respect to the taxable year 2012, M's public support is computed as follows:

Support from a governmental unit described in section 170(c)(1)

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

............................................................................................................... Contributions by various donors that were not in excess of $12,000, or two 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

$12,0 00

....................................................................................................................................................................................................

Total support

....................................................................................................................................................................................... $40,000 40,000 50,000

72,000

202,000

(iii)M's support fromgovernmental units referred to in section 170(c)(1) and from direct and indirect contributions from the general public (as defined in paragraph (f)(6) ofthis section) with respect to the taxable year 2012 normally exceeds 331/3 percent ofM'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 ofart, and a large endowment were all contributed by a single contributor. The members ofthe governing body ofthe organization are unrelated to its
creator. The gardens are open to the public without charge and attract a substantial number ofvisitors each year. Forthe current taxable yearand the four taxable years immediately preceding the current taxable year, 95 percent ofthe organization's total support was received frominvestment income from its original endowment. N also maintains a membership society that is supportedby members ofthe general public who wish to contribute to the upkeep ofthe gardens bypaying a small annual membership fee. Over the five-year period in question, these fees from the general public constituted the remaining five percent ofthe organization's total supportfor such period.

(ii)Under these circumstances, N does not meet the 331/3 percent support test forits
current taxable year. Furthermore, because only five percent ofits 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) ofthis section and therefore does not qualify as publicly supported under thefacts and circumstances
test. Because N has failed to satisfy the 10 percent support limitationunder paragraph (f)(3)(i)of this section, none ofthe 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 ofa single familyto collect, preserve, interpret, and display to the public important works ofart. 0 is governed by a Board ofTrustees that originally consisted almost entirely ofmembers of the founding family. However, since 1945, members ofthe 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 ofthe Board of Trustees. The remaining board members are citizens ofS City from a variety of professions and occupations who represent the interests and views ofthe people ofS City inthe activities carried on by the organization rather than the personal or private interests ofthefounding 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 (insmall sums ofless than $100, none ofwhich 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 ofthe organization's total support for such five-year period. Forthis same period, investment income from several large endowment funds has constituted 75 percent ofO's total support. 0 expends substantially all ofits annual income for its exempt purposes and thus depends upon the funds it annually solicits fromthe public aswell asits investment income in orderto carry out its activities on a normal and continuing basis and to acquire new works ofart. 0 has, for the entire period ofits existence, been open to the public and more than 300,000 people (from S City and elsewhere) have visited the

museum in each ofthe 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 ofits 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) ofthis section, as well as the requirements ofparagraph (f)(3)(ii) ofthis section. Under all ofthe facts
set forth in this example, 0 is considered as meeting the requirements ofthe facts and circumstances test on the basis ofsatisfying paragraphs (f)(3)(i) and (f)(3)(ii) ofthis section and the factors set forth in paragraphs (f)(3)(iii)(A) through (f)(3)(iii)(D) ofthis 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 ofa local music society and a local women's club to present to the public a wide variety ofmusical programs intended to fostermusic appreciation in the community. P is recognized as an organization described in section 501(c)(3). The orchestra is composed ofprofessional 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 (notmembers ofa 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 ofthis 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 ofDirectors comprised of five individuals. A faculty member ofa local college, the president ofa local music society, the head ofa local banking institution, a prominent doctor, and

a member ofthe governing body ofthe 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

ofthe community inthe 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 ofthe current taxable year and the four

Contributions .............................................................................................................................................................................................. $520,000 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) ofthis section

................................................................................... 520,000
(iii)For purposes ofparagraphs (f)(2) and (f)(3)(i) ofthis 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

Total

..................................................................................................................................................................................................... 140,800

(iv)Under these circumstances, P does not meet the 331/3 percent support test for its current year because ithas received only 27 percent ofits total support ($140,800/$520,000)for the applicable five-year period fromthe general public. However, under the facts
setforth above, P meets the 10 percent support limitation under paragraph (f)(3)(i) ofthis section, aswell as the requirements ofparagraph (f)(3)(ii) of this section. Under all ofthe facts set forth in this example, Pis considered as meeting the requirements ofthe facts and circumstances test on the basis of satisfying paragraphs (f)(3)(i) and (f)(3)(ii) ofthis section and the factors set forth in paragraphs (f)(3)(iii)(A) through (f)(3)(iii)(D) ofthis 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 ofmaking annual contributions to worthy charities. C created Q asa charitable trust bythe transfer of appreciated securities worth $500,000 to Q. Pursuant to the trust agreement, C and two other members ofhis family are the sole
trustees ofQ and are vested with theright to appoint successor trustees. In each ofthe current taxable yearand the fourtaxable
years immediately preceding the current taxable year, Qreceived $12,000 in investment income fromits original endowment. Each year Qmakes a solicitation for fundsby 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 ofthese
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 bythe
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:

Investment income

..................................................................................................................................................................... $60,000 Contributions

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

Total support

................................................................................................................................................................... 100,000

(iii)For purposes ofparagraphs (f)(2) and (f)(3)(i) ofthis 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 otal

..................................................................................................................................................................................................... $ 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 ithas received only 17 percent ofits total support ($17,000/$100,000) for the applicable five-year period fromthe general public. Thus, Q's classification

as a "publicly supported" organization depends on whether it meets the requirements ofthe facts and circumstances test. Even though it satisfies the 10percent support limitation under paragraph (f)(3)(i) of this section, its method of solicitation makes it questionable whether Q satisfies the requirements ofparagraph (f)(3)(ii) ofthis section. Because ofits method ofoperating, Qalso has a greater burden ofestablishing its publicly supported nature under paragraph (f)(3)(iii)(A) ofthis 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) ofthis section, Q does not satisfy the facts and circumstances test. (10) Communitytrust;introduction. Community trusts have often been established to attract large contributions ofa capital or endowment nature forthe benefit ofa 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 ofrepresentatives ofthe particular community or area, its contributions are often received and maintained in the form of separate trusts

orfunds, which are subject to varying

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degrees ofcontrol by the governing body. To qualify as a "publicly supported" organization, a community trust must meet the 331/3 percent support test, or, ifit cannot meet that test, be organized and operated so asto 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 ofpublic support in paragraph (f)(3)(ii) ofthis section which, as applied to community trusts, generally willbe satisfied ifthey seek gifts andbequests from awide range ofpotential donors in the community orarea served, through banks or trust companies, through attorneys or other professional persons,

orin other appropriate ways that call attention to the community trust as a potential recipient of gifts andbequests made for the benefit ofthe community

or area served. A community trustis not required to engage in periodic, community-wide, fundraising campaigns directed toward attracting a large number of small contributions in

amanner similar to campaigns conducted by a community chest or united fund.Paragraph (f)(11) ofthis 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 (hereincollectively referred to as a "community trust," and sometimes referred to as an "organization") for purposes ofmeeting the requirements ofthis paragraph for classification as a publicly supported organization. Paragraph (f)(12) ofthis section contains rules fortrusts or funds that are prevented from qualifying as component parts of a community trust by paragraph (f)(11) ofthis section. (11) Communitytrusts;requirements fortreatmentasa singleentity-(i) Generalrule.For purposes ofsections 170, 501, 507, 508, 509, and Chapter 42, any organization that meets the requirements contained in paragraphs (f)(11)(iii) through (f)(11)(vi) ofthis 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) ofthis section will be treated as component parts of such organization.

(ii)Componentpartofa community
trust.In order to be treated as a component part of a community trust referred to in this paragraph (f)(11) (ratherthan 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 istreated as a single entity under this paragraph (f)(11); and

(B) May not be directly or indirectly subjected bythe transferor to any material restriction or condition (within the meaning of §1.507-2(a)(7)) with respect to the transferred assets. For purposes ofthis paragraph (f)(11)(ii)(B), ifthe transferor is not a private foundation, the provisions of § 1.507- 2(a)(7) shallbe applied to the trust or fund as ifthe 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 acomponent part of a community trust under thisparagraph (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) ifsuch community
trust meets the requirements ofsection 170(b)(1)(A)(vi) as a "publicly supported" organization at the time of the transfer, except as provided in paragraph (f)(5)(ii) ofthis section or §§ 1.508-1(b)(4) and 1.508-1(b)(6) (relating, generally, toreliance 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 mustbe commonly known as a community trust, fund, foundation, or other similar name conveying the concept ofa capital or endowment fund to support charitable activities (withinthe meaning ofsection 170(c)(1) or section 170(c)(2)(B)) in the community or area it serves. (iv) Common instrument.All funds of the organization mustbe 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 ormaster trust or agency agreement will satisfy the requirements ofthis paragraph (f)(11)(iv). In addition, ifa community
trust adopts a newgoverning instrument (orcreates a corporation) to putinto effect new provisions (applying to future transfers to the community trust), the adoption of such new governing instrument (orcreation of a corporation with a governing instrument) which contains common language with the existing governing instrument shall not preclude the community trustfrom meeting the requirements ofthis paragraph (f)(11)(iv). (v)Common governingbody.(A) The organization must have a common governing body or distribution committee (hereinreferred to as the "governing body") which either directs
or, in the case of afund designated for specified beneficiaries, monitors the distribution ofall ofthe funds exclusively for charitable purposes (withinthe meaning ofsection 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 ifno person is left with the discretion to direct the distribution of the fund. (B) Powersofmodificationand removal.The fact thatthe exercise of any power described inthis paragraph (f)(11)(v)(B) is reviewable by an appropriate State authority will not preclude the community trustfrom meeting the requirements ofthis 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 oftransfer, the resolutions or by-laws ofthe governing body, a written agreement, or otherwise- (1)To modify any restriction or condition on the distribution offunds for any specified charitable purposes or to specified organizations ifin the sole judgment ofthe governing body (withoutthe necessity ofthe approval of any participating trustee, custodian, or agent), such restriction or condition becomes, in effect, unnecessary, incapable offulfillment, or inconsistent with the charitable needs ofthe 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 ofnet income (withinthe meaning of paragraph (f)(11)(v)(F) of this section)

over a reasonable period oftime (as determined by the governing body). (C) Transitional rule-(1) Notwithstanding paragraph (f)(11)(v)(B) ofthis section, ifa community trust meets the requirements ofparagraph (f)(11)(v)(C)(3) ofthis section, then in the case ofany instrument oftransfer which is executed before July 19, 1977, 

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and is not revoked or amended thereafter (withrespect to any dispositive provision affecting the transfer to the community trust), and in the case ofany instrument oftransfer which is irrevocable onJanuary 19, 1982, the governing body must have the power to cause proceedings tobe instituted (byrequest to the appropriate State authority)-

(i)To modify any restriction or condition on the distribution offunds for any specified charitable purposes or to specified organizations ifin the judgment ofthe governing body such restriction or condition becomes, in effect, unnecessary, incapable of fulfillment, or inconsistent with the charitable needs ofthe 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 ofa participating trustee to exercise the powers described in paragraph (f)(11)(v)(C)(1) ofthis section shall be treated as not preventing the governing body from having such power, unless (anduntil) such approval has been (or is) requested by the governing body and has been (or is) denied. (3) Paragraph (f)(11)(v)(C)(1) ofthis section shall not apply unlessthe community trust meets the requirements ofparagraph (f)(11)(v)(B) ofthis section, with respect to funds other than those under instruments oftransfer described in the first sentence of such paragraph (f)(11)(v)(C)(1) ofthis 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 ofparagraph (f)(11)(v)(B) ofthis section.

(D) InconsistentStatelaw-(1) For purposes ofparagraphs (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) ofthis section, ifa power described in such aprovision is inconsistent with State law even ifsuch power were expressly granted to the governing bodyby 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 ifit 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 ofparagraph (f)(11)(v)(D)(1) ofthis section, the power to modify is inconsistent with State law,but the power to institute proceedings to modify, ifso expressly granted, would be consistent with State law, the community trust willbe treated as meeting such requirements to the fullest
extent possible ifthe governing body has the power (in the governing instrument or otherwise) to institute proceedings to modify a condition or restriction. On the other hand, ifin such

a case the community trust has onlythe 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 ofparagraph (f)(11)(v)(D)(1) ofthis 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 wouldbe consistent with State law, ifit were expressly granted in the governing instrument and ifthe approval ofthe State Attorney General were obtained, then the community trust will be treated

as meeting such requirements to the fullest extent possible ifithas the power (inthe governing instrument or otherwise) to cause such proceedings to be instituted, even if suchproceedings

can be instituted only with the approval ofthe State Attorney General. (E) Exerciseof powers.The governing body shall (byresolution or otherwise) commit itselfto exercise the powers described in paragraphs (f)(11)(v)(B), (f)(11)(v)(C), and (f)(11)(v)(D) ofthis section in the best interests ofthe community trust. The governing body will be considered not tobe so committed where it has grounds to exercise such a power and fails to exercise itby 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)Reasonablereturn.In addition to the requirements ofparagraphs (f)(11)(v)(B), (f)(11)(v)(C), (f)(11)(v)(D), or (f)(11)(v)(E) ofthis section, the governing body shall (byresolution or otherwise) commit itselfto 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 fundthat is, and with respect to the aggregate ofthe unrestricted trusts

or funds that are, a component part of the community trust, administers such
trust or fundin accordance with the terms ofits governing instrument and accepted standards offiduciary conduct
to produce a reasonable return ofnet income (orappreciation where not inconsistent with the community trust's need for current income), with due regard to safety ofprincipal, in furtherance ofthe exempt purposes of the community trust (except for assets held for the active conduct ofthe community trust's exempt activities). In the case ofa low return ofnet income (and,where appropriate, appreciation), the IRS will examine carefully whether the governing body has, in fact, committed itselfto take the appropriate steps. For purposes ofthis paragraph (f)(11)(v)(F), any income that has been designated by the donor ofthe gift or bequest to which such income is attributable as being available only for the use or benefit of abroad 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 ofwhich 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 ofthe funds which are heldby the community trust, either directly or in component parts, as funds ofthe organization. (12) Community trusts;treatmentof
trustsandnot-for-profitcorporations andassociations notincludedas components.(i) For purposes ofsections 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 ofparagraph (f)(11)(ii) ofthis section, shall notbe treated as a component part of a community trust and, ifa trust, shall be treated as a separate trust and be subject to the provisions ofsection 501, section 4947(a)(1), or section 4947(a)(2), as the case may be. Ifsuch organization is a not-for-profit corporation or association, it will be treated as a separate entity, and, ifit is described in section 501(c)(3), it will be treated as a private foundation unlessit is described in section 509(a)(1), section 509(a)(2), section 509(a)(3), or section 509(a)(4). In the case of afund that is ultimately treated as not being a component part of a community trust pursuant to this paragraph (f)(12), ifthe Forms 990 filed annually by the community trust included financial

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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 itwill 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 willbe treated asthe notification required ofthe separate entity for purposes ofsection 508(a).

(ii)Ifa transfer is made in trust to a community trust to make income or other payments for aperiod of a life or lives in being or a term ofyears to any individual or for any noncharitable purpose, followed by payments to or for the use ofthe community trust (such as in the case ofa 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 trustwill be treated as a component part ofthe community trust upon the termination ofall intervening noncharitable interests and rights to the actual possession or enjoyment ofthe property ifsuch trust satisfies the requirements ofparagraph (f)(11) ofthis section at such time. Until such time, the trustwill be treated as a separate trust. Ifa transfer is made in trust to a community trust to make income or otherpayments to or for the

use ofthe community trust, followed by payments to any individual or for any noncharitable purpose, such trustwill be treated as a separate trust rather than

as a component part ofthe community
trust. See section 4947(a)(2) and the related regulations for the treatment of such split-interest trusts. The provisions ofthis 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

orpooled 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) ofthis section because ofthe unqualified right ofthe donor to designate the recipients ofthe income and principal ofthe trust. Such organization will therefore ordinarily be treated as other than a component part ofa community trustunder paragraph (f)(12)(i) ofthis section. However, see section 170(b)(1)(F)(iii) and the related regulations with respect to the treatment of contributions to such organizations. (13)Methodofaccounting.For purposes of section 170(b)(1)(A)(vi), an organization's support will be determined under the method of accounting on the basis ofwhich the organization regularly computes its income in keeping its books under section 446. For example, ifa grantor makes a grant to an organization payable

over a term ofyears, such grant willbe includible in the support fraction ofthe grantee organization under the method of accounting on the basis ofwhich the grantee organization regularly computes its income in keeping its books under section 446.

(14) Transitionrules.(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) willbe treated as meeting the requirements of paragraph (f)(2) or paragraph (f)(3) of this section for the first five taxable years ofits 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) ofthis section shall not apply with respect to an organization that received an advance ruling thatexpired prior to June 9, 2008, and that did not timely file with the Internal Revenue Service the required information to establish that itis 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 effectbefore 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 ofthis paragraph (f)(14) maybe illustrated by the following examples:

Example 1.(i) Organization X was formed in January 2004 and uses a taxable year ending June 30. Organization Xreceived an advance ruling letter that itisrecognized as an organization described in section 501(c)(3) effective as ofthe date ofits 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 orafter 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, asin effectprior to September 9, 2008, (as contained in 26 CFR part 1 revised April 1, 2008), forits advance ruling period.

(iii)Organization X can qualifyas a publicly supported organization for the taxable year ending June 30, 2009, if Organization X can meet therequirements of paragraph (f)(2) or (f)(3) ofthis 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, orfor 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 ofthe transition rule contained in paragraph (f)(14)(iii) ofthis section, which looks to support received byX in the taxable years ending June 30, 2004, through June 30, 2007.

Example 2. (i) Organization Y was formed in January 2000, anduses 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 ifitmeets the requirements under either paragraph (f)(2) or (f)(3) ofthis 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 Ywill also qualify as publicly supported fortaxable year 2008 ifit
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 CFRpart 1revised April 1, 2008) fortaxable year 2007, using the fouryear period from January 1, 2003, through December 31, 2006.

(k)Effective/applicabilitydate-(1)In general.These regulations shall apply to taxable years beginning after December 31, 1969.

(2)Applicabilitydate.The regulations in paragraph (f)ofthis section shall apply to taxable years beginning on or after January 1, 2008. Fortax 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]

mPar.3.Section 1.170A-9T isremoved. 

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* Par.4. Section 1.507-2 is revised to read as follows: 

### §1.507-2 Special rules; transfer to,or operation as, publiccharity. (a) Transfertopubliccharities-(1) Generalrule.Under section 507(b)(1)(A)

a private foundation, with respectto which there have not been either willful repeated acts (or failures to act) or a willful and flagrant act (orfailure 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 ormore organizations described in section 170(b)(1)(A) (other than in clauses (vii) and (viii)) each ofwhich has been in existence and so described for a continuous period ofat 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). Aprivate foundation that terminates its private foundation status under section 507(b)(1)(A) does not incur taxunder section 507(c) and, therefore, no abatement of such tax under section 507(g)is required.

(2)Effect ofcurrentruling.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 describedinmore thanoneclause ofsection170(b)(1)(A). For purposes ofthis 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 notbe precluded from being a distributee described in section 507(b)(1)(A) merelybecause 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)ApplicabilityofChapter 42 to foundationsterminatingundersection 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 ofits net assets to distributee organizations described in section 507(b)(1)(A) has been completed.

(5)Returnrequired from organizations terminating private foundationstatusundersection 507(b)(1)(A)-(i) An organization that terminates its private foundation status under section 507(b)(1)(A) isrequired 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 ofnet assets.A private foundation will meet the requirement to "distribute all ofits net assets" within the meaning of section 507(b)(1)(A) only ifittransfers all ofits right, title, and interest in andto all of its net assets to one or more organizations referred to in section 507(b)(1)(A).

(7)Effect ofrestrictions and conditionsupon distributionsofnet assets-(i)In general.In order to effectuate a transfer of"all ofits right, title, and interest in and to all ofits net assets" within the meaning ofparagraph (a)(6) ofthis section, a transferor private foundation may not impose any material restriction or condition thatprevents 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 ofits exempt purposes. Whether or not aparticular condition or restriction imposed upon a transfer of assets is material (withinthe meaning ofthis paragraph (a)(7)) must be determined from all ofthe facts and circumstances ofthe transfer. Some of the more significant facts and circumstances tobe considered in making such a determination are- (A) Whether the public charity (including a participating trustee, custodian, or agent in the case ofa community trust) is the owner in fee of the assets it receives fromthe private foundation; (B) Whether such assets are to be held and administered by the public charity in amanner consistent with one ormore ofits exempt purposes; (C) Whether the governing body ofthe public charity has the ultimate authority and control over such assets, andthe income derived therefrom; and (D) Whether, and to what extent, the governing body ofthe public charity is organized and operated so as to be independent from the transferor. (ii)Independentgoverningbody.As provided in paragraph (a)(7)(i)(D) ofthis section, one ofthe more significant facts and circumstances tobe considered in making the determination whether a particular condition or restriction imposed upon a transfer of assets is material within the meaning ofthis 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 ofthe facts and circumstances. Some ofthe more significant facts and circumstances tobe considered in making such a determination are- (A) Whether, and to what extent, members ofthe governing body are comprised ofpersons selected by the transferor private foundation or disqualified persons withrespect thereto or are themselves such disqualified persons; (B) Whether, and to what extent, members ofthe governing body are selected by public officials acting in their capacities as such; and (C) How long a period oftime each member ofthe governing body may
serve in such capacity. Inthe 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 aperiod ofnot

more than ten consecutive years; and (2) Upon completion ofa period of service (beginningbefore or after the date oftransfer), no member may serve again within a period consisting ofthe lesser offiveyears or the number of consecutive years the member has immediately completed serving. (iii)Factors not adverselyaffecting determination. The presence ofsome or all ofthe 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 ofits exempt purposes" (withinthe meaning ofparagraph (a)(7)(i) ofthis section): (A)Name.The fund is given a name

or other designation which is the same

as or similar to that ofthe transferor private foundation or otherwise memorializes the creator ofthe 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 otherbasis for the

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exempt status ofthe public charity under section 501(c)(3). (C)Administration.The transferred
assets are administered in an identifiable or separate fund, some or all ofthe principal ofwhich is not tobe distributed for a specified period, ifthe public charity (including a participating trustee, custodian, or agent in the case of a community trust)isthe 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. Inthe case of a community trust, the transferred assets mustbe administered in or as a component part ofthe community trust within the meaning of§ 1.170A-9 (f)(11). (D) Restrictionson disposition.The transferor private foundation transfers property the continued retention of which by the transferee is required by the transferor if suchretention is important to the achievement of charitable or other similar purposes in the community because ofthe peculiar features of such property, as, for example, where a private foundation transfers awoodland preserve which is
tobe maintained by the public charity

as an arboretum for the benefit ofthe community. Such a restriction does not include a restriction on the disposition of an investment asset or the distribution ofincome. (iv)Adversefactors.The presence of any ofthe following factors willbe considered as preventing the transferee "from freely and effectively employing the transferred assets, or the income derived therefrom, in furtherance ofits exempt purposes" (withinthe meaning ofparagraph (a)(7)(i) ofthis 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 thanby designation in the instrument oftransfer ofparticular 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 ofsuch distributions (otherthan by direction inthe instrument of transfer that some or all ofthe principal,

as opposed to specific assets, notbe distributed for a specified period) as, for example, by a power of appointment. The IRS will examine carefully whether the seeking of advice bythe 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 rightto direct such distributions. In any such
case, the reservation ofsuch 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 ofsuch a right will be determined from all ofthe facts and circumstances, including, but not limited to, the factors contained in paragraphs (a)(7)(iv)(A)(2) and (a)(7)(iv)(A)(3) ofthis section.

(2) The presence of some or all ofthe following factors will indicate that the reservation ofa right to direct distributions does not exist: (i)There has been an independent investigation by the staffofthe 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 ofthe 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 ofthe 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 ofthe following factors will indicate the reservation ofa right to direct distributions does exist: (i)The solicitations (written or oral) of funds by the public charity state or imply, or a pattern ofconduct on the part ofthe public charity creates an expectation, that the donor's advice will be followed. (ii)The advice ofa donor (whether or not restricted to a distribution ofincome

or principal from the donor's trust or fund) is limited to distributions of
amounts from the donor's fund, andthe factors described in paragraph (a)(7)(iv)(A)(2)(i) or paragraph (a)(7)(iv)(A)(2)(ii) ofthis section are not present. (iii) Only the advice ofthe 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 ofthe time. (B) Otheractionorwithholdingof action.The terms ofthe transfer agreement, or any expressed orimplied understanding, required the public charity to take or withhold action with respect to the transferred assets which is
not designed to further one ormore of the exempt purposes ofthe public charity, and such action or withholding of action would, ifperformed bythe transferor private foundation with respect to such assets, have subjected the transferor to tax under Chapter 42 (otherthan with respect to the minimum investment return requirement of section 4942(e)). (C)Assumption ofleases,contractual obligations,orliabilities. The public charity assumes leases, contractual obligations, or liabilities ofthe transferor private foundation, ortakes 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 ofthe public charity, other than the payment ofthe transferor's Chapter 42 taxes incurred prior to the transfer to the public charity
to the extent ofthe value ofthe assets transferred. (D) Retention ofinvestmentassets. The transferee public charity is required by any restriction or agreement (other than a restriction or agreement imposed

or required by law orregulatory authority), express or implied, to retain any securities or other investment assets transferred to itby the private foundation. In a case where such transferred assets consistently produce a low annual return ofincome, the IRS will examine carefully whether the transferee is required by any such restriction or agreement to retain such
assets. (E) Right of firstrefusal.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 offirst refusal with respect to the transferred securities or otherproperty when and ifdisposed ofbythe public charity, unless such securities or other property was acquired by the transferor 

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private foundation subject to suchright offirst refusal prior to October 9, 1969.

(F)Relationships.An agreement is entered intobetween 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 ofproperty 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 withrespect 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 ifthe continuation ofsuch contractual obligations is inthe best interests ofthe public charity. (G) Otherconditions.Any other condition is imposed on action bythe public charity which prevents itfrom exercising ultimate control over the
assets received from the transferor private foundation forpurposes consistent with its exempt purposes. (v)Examples.The provisions ofthis paragraph (a)(7) may be illustrated by the following examples:

Example 1.The M Private Foundation transferred all ofits 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 ofV'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 ofits 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 atthe university to be known as the "John J.Doe Memorial Professorship," named afterN's
creator. Although the transferred assets are to be usedfor a specified purposeby W,this purpose is infurtherance ofW's exempt educationalpurposes, and there are no conditions on investment or reinvestment of the principal or income. The use ofthe name of the foundation's creator for the chair is not

a restriction which wouldprevent the transfer from being a distribution for purposes ofsection 507(b)(1)(A).

Example 3. The 0 Private Foundation transferred all ofits net assets to X Bank as trustee for the QCommunity Trust, a community trust that is a public charity described in section 170(b)(1)(A)(vi). Under the terms ofthe 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 ofincome to Y Church is consistent with Q's exempt purposes. Ifthe trust created by this transfer otherwise meets therequirements of § 1.170A-9(f)(11) as a component part ofthe Q Community Trust, the assets transferred by 

### O to X willbe 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 ofparagraph (a)(7)(iii)(B) ofthis section andwill therefore not disqualify the transfer under section 507(b)(1)(A).

Example 4. (i) The P Private Foundation transferred all ofits net assets to Z Bank as trustee for the RCommunity Trust, a community trust that is a public charity described in section 170(b)(1)(A)(vi). Under the terms ofthe transfer, Z is to hold the
assets in trust forR and distribute the income
to those public charities described insection 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 ofthe transfer, it is intended that Z retain the transferred assets in theirpresent form for a period of20 years, oruntil the date of B's death ifit occurs before the expiration of such period. Upon the death ofB, Rwill have the power to distribute the income to such public charities as it selects and may dispose ofthe corpus as it sees fit.

(ii)Under paragraph (a)(7)(iv)(A) or paragraph (a)(7)(iv)(D) of this section, as a result ofthe restrictions imposed with respect to the transferred assets, there has been no distribution ofall P's net assets within the meaning ofsection 507(b)(1)(A) at the time ofthe transfer. In addition, P has not transferred its net assets to a component part of RCommunity Trust, but rather to a separate trust described in § 1.170A-9(f)(12).

(b) Operationas apubliccharity-(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 of60 calendar months beginning with the first day ofany 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 ofsuch 60-month period, that itis terminating its private foundation status; and (iii)Properly establishes immediately after the expiration ofsuch 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) ofthis section. (2)Relationshipofsection 507(b)(1)(B) tosections507(a),507(c), and507(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 notbe treated

as a notification described in section 507(a) even ifthe 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)Notificationoftermination.In order to comply with the requirements under section 507(b)(1)(B)(ii), an organization shall before the
commencement ofthe 60-month period under section 507(b)(1)(B)(i) notify the IRS, in such manner as maybe provided by published guidance, publication, form or instructions, ofits intention to terminate its private foundation status. Such notification shall contain the following information- (i) The name and address ofthe 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)Ifsection 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 ofthe 60-month period.

(4)Establishmentoftermination.In order to comply with the requirements under section 507(b)(1)(B)(iii), an organization shall within 90 days after the expiration ofthe 60-month period file such information with the IRS, in such manner as may be provided by published guidance, publication, form

orinstructions, 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

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related regulations. See paragraph (c) of this section as to the information required to be submitted under this paragraph (b)(4). (5)Incompleteinformation.The failure to supply, within the required time, all ofthe 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 willbe considered timely.

(6)Application ofspecialrulesand filingrequirements.An organization that has terminated its private foundation status under section 507(b)(1)(B) is not required to comply with the special rules setforth in sections 508(a) and 508(b). Such organization is also not required to file

areturn under the provisions ofsection 6043(b)by reason oftermination ofits private foundation status under the provisions of section 507(b)(1)(B). (7) Extension oftime to assess deficiencies.Ifa private foundation files

anotification (described in paragraph (b)(3) ofthis section) thatit intends to begin a 60-month termination pursuant to section 507(b)(1)(B) and does notfile

arequest for an advance ruling pursuant to paragraph (d) ofthis section, such private foundation may file with the notification described in paragraph (b)(3) ofthis section a consent under section 6501(c)(4) to the effect that the period oflimitation 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 ofexpiration ofthe time prescribed by law for the assessment of

a deficiency for the last taxable year within the 60-month period. Such consents, iffiled, will ordinarily be accepted by the Commissioner. See paragraph (e)(3) ofthis section for an illustration ofthe procedure required to obtain a refund ofthe taximposed by section 4940 in a case where such a consent is not in effect.

(c) Sixty-month terminations-(i) Method ofdeterminingnormalsources ofsupport.(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 ofsection 509(a)(1) or section 509(a)(2), as the case may be, for

a continuous period ofat 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 intaxable years prior to the commencement ofthe 60-month period shall notbe taken into consideration, except as otherwise provided in this section. (ii)For purposes of section 507(b)(1)(B), an organization willbe 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 ifthe 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 ofthe
commencement ofthe 60-month period, and ending with the last day ofthe 60- month period. (iii)Forpurposes of section 507(b)(1)(B), an organization willbe considered to be a section 509(a)(2) organization only ifsuch 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 of60 calendar months prescribed under section 507(b)(1)(B). The calculation ofpublic support shall be made over the period beginning with the date ofthe commencement ofthe 60-month period, and ending with the last day ofthe 60-month period. (2) Organizational andoperational
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 ofthe applicable provisions for a continuous period ofat least 60 calendar months. For purposes of section 507(b)(1)(B), an organization will be considered to be such an organization only ifit satisfies the requirements ofthe applicable provision (including withrespect 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 for60-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 ifthe organization can reasonably be expected
to meet the requirements ofsection 507(b)(1)(B)(i) during the 60-month period. The issuance ofa ruling willbe discretionary with the Commissioner. (2)Basicconsideration. In determining whether an organization

can reasonably be expected (withinthe meaning ofparagraph (d)(1) ofthis 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 (takinginto account any revisions made prior to the beginning ofthe 60-month period), current or proposed programs

or activities, actual or intended method of operation, and current or projected

sources ofsupport are such asto indicate that the organization is likelyto satisfy the requirements ofsection 509(a)(1), section 509(a)(2), or section 509(a)(3) and paragraph (c) ofthis section during the 60-month period. In making such a determination, all pertinent facts and circumstances shall be considered. (3)Reliancebygrantorsand contributors.Forpurposes 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 asby publication in the Internal Revenue Bulletin). However, a grantor or contributor may not rely on such an advance ruling ifthe 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 givennotice 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. Arequest for suchruling maybe filed bythe grantee organization with the IRS. The issuance ofsuch ruling will be at the sole discretion of the Commissioner. 

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The organization must submit all information necessary to make a determination on the factors referred to in paragraph (d)(2) ofthis section. Ifa favorable ruling is issued, such ruling may be relied uponby the grantor or contributor ofthe 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)Relianceby 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 oryears during the 60-month period, and it is subsequently determined that such taxis due for such year oryears (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 oftax 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 priorto the revocation ofsuch 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 oftime to assess deficiencies.The advance ruling described in paragraph (d)(1) ofthis section shallbe issued only ifsuch organization's request for an advance ruling is filed with a consent under section 6501(c)(4) to the effect that the period oflimitations upon assessment under section 4940 for any taxable year within the advance ruling period shall
not expire prior to one year after the date ofthe expiration ofthe time prescribed by law for the assessment of

a deficiency for the last taxable year within the 60-month period. (e) Effect ongrantorsorcontributors andon the organizationitself (1)Effect ofsatisfactionofrequirements for termination; treatmentduringthe termination period.In the event that an organization satisfies the requirements ofsection 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 ofits 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, andgrants

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) Certain60-month terminations. Notwithstanding paragraph (e)(2)(i) of this section, ifan organization fails to satisfy the requirements ofsection 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 oryears 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 inthe 60- month period, the calculation ofpublic support shall be made over the period beginning with the date ofthe
commencement ofthe 60-month period, and ending with the last day ofthe taxable year being tested. The organization shall notbe treated as a section 509(a)(1) or section 509(a)(2) organization for any taxable year during the 60-month period solelyby 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 taxbenefit.For purposes of section 507(d), the organization's aggregate tax benefit resulting from the organization's section 501(c)(3) status shall continue tobe 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 businessholdings.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 ofthis 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) ofthis section. Based uponits support for 2010, Ydoes not qualify as apublicly supported organization within the meaning of§1.170A-9(f) and this paragraph for 2010. Consequently, in orderto avoid the risks ofpenalties and interest ifY fails toterminate within the 60-month period, Y files its 2010return as a private foundation and pays the tax imposed by section 4940. Because a consent (described in paragraph (b)(7) ofthis section),which would prevent the period oflimitations for all years in the 60-month period from expiring, is not in effect, in order to be able tofile a claim forrefund, Yand the IRS must agree to extend the period oflimitation 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, Yistreated as apubliclysupported organization forthe entire 60- month period. Yfiles a claimfor refundfor 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)Applicabilitydate.The regulations in this section shall apply to tax years beginning on or afterJanuary 1, 2008. For taxable years beginning after December 31, 1969, andbeginning before January 1, 2008, see § 1.507-2 (as contained in 26 CFR part 1revised 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:

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§1.509(a)-3 Broadly, publiclysupported organizations. (a) * * * (2) One-thirdsupporttest.An organization will meet the one-third support test ifit normally (withinthe meaning ofparagraph (c) or paragraph (d) ofthis section) receives from permitted sources more than one-third ofits support in each taxable year from any combination of-

(i) Gifts, grants, contributions, or membership fees; and (ii)Gross receipts from admissions, sales ofmerchandise, performance of services, orfurnishing offacilities, in an activity that is not an unrelated trade or business (withinthe meaning ofsection 513), subject to certain limitations described in paragraph (b) ofthis section. Forpurposes ofthis 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 ofthis section, the amount of support received from the sources described in paragraph (a)(2)(i) ofthis 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 ofthe one-third support fraction, and the total amount of support received (as defined in section 509(d)) will be referred to as the denominator ofthe 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 ofa governmental unit"; §1.509(a)-3(j) describes the
treatment of certain indirectforms of support; paragraph (k)ofthis section describes the method ofaccounting 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) Ingeneral.An organization will
meet the not-more-than-one-third support test under section 509(a)(2)(B) if it normally (withinthe meaning of paragraph (c) or (d)ofthis section) receives not more than one-third ofits support in each taxable year from the

sum ofits gross investment income (as defined in section 509(e)) and the excess (ifany) ofthe amount ofits unrelated business taxable income (as defined in section 512) derived fromtrades or businesses thatwere acquired bythe organization after June 30, 1975, over the amount oftax imposed on such income by section 511. For purposes of this section the amount ofsupport received from items described in section 509(a)(2)(B) will be referred to asthe
numerator ofthe 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 ofthe not-more-than-onethird support fraction. Forpurposes of section 509(a)(2), paragraph (m)ofthis section distinguishes gross receipts from gross investment income. Forpurposes of section 509(e), gross investment income includes the items ofinvestment income described in § 1.512(b)-1(a).

* * * * *

(c) Normally-(1) Ingeneral-(i) Definition.The support tests setforth in section 509(a)(2) are to be computed on the basis ofthe nature ofthe organization's normal sources of support. An organization will be considered as "normally" receiving one third ofits support from any combination ofgifts, 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 ofits 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 ofthe 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 ofthe support received from items described in section 509(a)(2)(B) is not more than one third, ofthe total support ofthe organization for such five-year period. Apublicly supported organization described under section 509(a)(2) that has failed to meet either the one-third support test of paragraph (a)(2) ofthis section orthe not-more-than-one-third support test of paragraph (a)(3) ofthis section for two consecutive years willbe treated as a private foundation as ofthe 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 ofPrivate Foundation or Section 4947(a)(1) Nonexempt Charitable Trust Treated as

a Private Foundation," andwill be liable for the netinvestment tax imposed by section 4940 and, if applicable, the private foundation termination tax imposed by section 507(c), for that second consecutive failed year. Forthe succeeding years, the organization willbe treated as a private foundation for allpurposes. (ii)First fiveyearsofan organization's existence.See paragraph (d)(1) ofthis section forthe definition of "normally" for organizations in the first five years oftheir existence. (2) Terminationsundersection 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 ofunusualgrants.For purposes of applying the tests for support set forth in paragraphs (a)(2) and (a)(3) ofthis section, one ormore contributions may be excluded from the
numerator ofthe 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 ofthis 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 orbequests- (i) Are attracted by reason ofthe publicly supported nature ofthe organization; (ii)Are unusual or unexpected with respect to the amount thereof; and (iii)Would byreason oftheir size, adversely affect the status ofthe organization as normally meeting the one-third support test for any ofthe applicable periods described in this paragraph (c) or paragraph (d) ofthis section. In the case of a grant (as defined in §1.509(a)-3(g)) that meets the requirements ofthis paragraph (c)(3), if the terms ofthe granting instrument require that the funds be paid to the recipient organization over a period of years, the grant amounts maybe excluded for such year oryears in which they would otherwise be includible in computing support under the method ofaccounting on the basis ofwhich 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 underthis paragraph (c)(3). The provisions ofthisparagraph (c)(3) shall apply to exclude unusual grants made during any ofthe applicable periods described in this 

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paragraph (c) or paragraph (d) ofthis section. See paragraph (c)(5) ofthis 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) ofthis 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 (orpersons 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 ofits support or endowment, or stood in

aposition ofauthority, such as a foundation manager (within the meaning ofsection 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 aperson described in this paragraph (c)(4)(i);

(ii)Whether the contribution was a bequest or an intervivos transfer. A bequest will ordinarily be given more favorable consideration than an inter vivos transfer; (iii)Whether the contribution was in the form ofcash, readily marketable securities, or assets which furtherthe exempt purposes ofthe organization, such as a gift of a painting to a museum;

(iv)Except in the case ofa new organization, whether, prior to the receipt ofthe particular contribution, the organization has carried on an actual program ofpublic solicitation and exempt activities and has been able to attract a significant amount ofpublic support;

(v)Whether the organization may reasonably be expected to attract a significant amount ofpublic 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) maybe 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) ofthis section without the benefit ofany exclusions ofunusual 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 andcontributors. Prior to the making ofany grant or contribution expected to meet the requirements for exclusion under paragraph (c)(3) ofthis section, a potential grantee organization may request a determination whether such grant or contribution maybe 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 ofsuch determination willbe at the sole discretion ofthe Commissioner. The organization must submit all information necessary to make a determination ofthe applicability of paragraph (c)(3) ofthis section, including all information relating to the factors described in paragraph (c)(4) of this section. Ifa favorable determination is issued, such determination may be relied upon bythe grantor or contributor ofthe 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 bythe grantee organization for purposes of paragraph (c)(3) ofthis section. (6)Examples.The application ofthe principles set forth in this paragraph is illustrated by the examples asfollows. For purposes ofthese examples, the
term general publicis defined as persons other than disqualified persons and other than persons from whom the foundation received gross receipts in

excess ofthe greater of$5,000 or 1 percent ofits support in any taxable year, the term grossinvestmentincome is as defined in section 509(e), and the
term grossreceiptsis limited toreceipts from activities which are not unrelated trades or businesses (withinthe meaning ofsection 513).

Example 1. (i) Forthe years 2008 through 2012, X, an organization exempt under section 501(c)(3) that makes scholarship
grants to needy students ofa particular city,
received support from the following sources:

2008: Gross receipts (general public)

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

............................................................................................................................................ Gross investment income ....................................................................................................................................................................

Total support

............................................................................................................................................................. ............. 100,000
2009: Gross receipts (general public)

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

............................................................................................................................................ Gross investment income....................................................................................................................................................................

Total support

............................................................................................................................................................. ............. 100,000 2010: Gross receipts (general public)

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

............................................................................................................................................ Gross investment income ....................................................................................................................................................................

Total support

............................................................................................................................................................. ............. 100,000 2011: Gross receipts (general public)

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

............................................................................................................................................ Gross investment income ....................................................................................................................................................................

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

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2012: Gross receipts (general public)

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

............................................................................................................................................ Gross investment income ....................................................................................................................................................................

Total support

................................................................................................................................................................................

(ii) In applying section 509(a)(2) to the taxable year 2012, on the basis ofparagraph (c)(1)(i) ofthis 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 ofsupport 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 ofits support from the public sources described in section 509(a)(2)(A) and less than one third ofits support from items described in section 509(a)(2)(B). The fact that X received less than one third ofits support from section 509(a)(2)(A) sources in 2012 and more than

one third ofits 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 ofX, but had no otherrelationship 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 notbe more than one-third ofits 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) ofthis section, A'sbequest
may be excluded as an unusual grant under paragraph (c)(3) ofthis 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 ofall the common stock in M corporation; B, A's wife; and C, A's business associate. The purpose ofY was to sponsor and equip athletic teams for underprivileged children in the community. Each ofthe three
creators makes small cash contributions to Y. A, B, and C have been active participants in the affairs ofY since its creation. Yregularly raises small amounts ofcontributions through fundraising drives and selling admission to some ofthe sponsored sporting

events. The operations ofY are carried out

on a small scale, usually being restricted to the sponsorship oftwo to four baseball teams ofunderprivileged children. In 2009, M recapitalizes and creates a first and second class of6 percent nonvoting preferred stock,
most ofwhich is held by A and B. In 2010, A contributes 49 percent ofhis common stock in M to Y. A's contribution ofM's

common stockwas substantial and constitutes 90 percent ofY'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) ofthis 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 ofballet in a particular region ofthe United States. Its principal activities consist oferecting a theater for the performance ofballet and the organization and operation ofa 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 ofM consists ofnine prominent unrelated citizens residing in the region who have either an expertise in ballet or a strong interest in encouraging appreciation ofthe 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 ofZ, is one ofthe nine members of M's governing body, was one ofM'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 ofsmaller contributions and pledges from other members ofthe 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 ofwhether M

meets the one-third support test under section 509(a)(2) for the 2014 taxable year, using the computation period 2010 through 2014. Withinthe 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 ofM, M may exclude Z's contribution of $500,000 in 2010 as an unusual grant under paragraph (c)(3) ofthis section for purposes ofdetermining 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, Mreceived approximately $450,000 from receipts for admissions and contributions from the general public. At the time ofB'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 ofM's governing body. B's bequest

was in the form ofcash and readily marketable securities. The only condition placed upon the bequest was that it be used by M to advance the art ofballet.

(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 ofwhether 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) ofthis 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 ofcarrying on economic studies primarily through persons receiving grants from N and engaging in the sale ofeconomic 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 ofA; 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 ofthe general public averaging $15,000 per year and receipts from the sale ofits 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 ofwhether 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 

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and (d)(3)(i) ofthis section, N cannot exclude B's contribution of$600,000 in 2013 as an unusual grant under paragraph (c)(3) ofthis section forpurposes ofdetermining 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 itis a public charity described in section 509(a)(2). The governing body of0 has 9 members, consisting ofA, a prominent civic leader, and 8 other unrelated civic leaders and educators in the community, all ofwhom participated in the creation of0. During 2009 through 2013, the principal source ofincome for 0 has beenreceipts from the sale ofits 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 ofthe governing body, including A,

as well as other members ofthe general public.

(ii)In 2013, A contributed $750,000 ofthe nonvoting stock of S, a closely held corporation, to 0. Aretained a substantial portion ofthe voting stock of S. By a majority vote, the governing body of 0 decided to retain the S stock for a period ofat 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, itwill be relevant to the determination ofwhether 0
meets the one-third support test under section 509(a)(2) for future years. In determining whether A's contribution ofthe 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 ofsection 4946(b) and A's contribution is inthe form ofclosely held stock, 0 cannot exclude A's contribution ofthe S stock in 2013 as an unusual grant under paragraph (c)(3) ofthis section forpurposes ofdetermining whether 0 meets the one-third support test under section 509(a)(2) for 2014 and future years.

(d)Definitionofnormally; first five
yearsofan organization'sexistence-(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 ifthe 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 respectto an organization's sixth taxable year, the general definition ofnormally in paragraph (c)(1) ofthis 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 (butnot its seventh taxable year) ifitmeets the one-third support test and the not-more-than-one-third support test underthe definition of normally set forth in paragraph (c)(1)(i) ofthis section for its fifth taxable year (based on support received in its first through fifth taxable years). Ifa new publicly supported organization described under section 509(a)(2)
cannot meet the requirements ofthe one-third support test orthe not-morethan-one-third support test for its sixth taxable year using either the general definition ofnormally in paragraph (c)(1) ofthis section or the alternate rule above (effectively failing to meet a public support test forboth its fifth and sixth years), itwill be reclassified as a private foundation as ofthe 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 ofPrivate Foundation or Section 4947(a)(1) Nonexempt Charitable Trust Treated as aPrivate Foundation," and is liable for the net investment tax imposed by section 4940 and, ifapplicable, the private foundation termination tax imposed by section 507(c), for its sixth taxable year. Beginning the first day ofits seventh taxable year, the organization will be treated as a private foundation for all purposes. (2)Basicconsideration. In determining whether an organization

can reasonably be expected (within the meaning ofparagraph (c)(1)(i) ofthis 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) ofthis 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 ofbroadly 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 ofthem, may differ from case to
case, depending on the nature and functions ofthe 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 ofits support from permitted sources (subject to the limitations ofparagraph (b) ofthis section) or to receive more than onethird ofits support from items described in section 509(a)(2)(B). (3)Factorstaken intoaccount.All pertinent facts and circumstances shall be taken into account under paragraph (d)(2) ofthis 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 ofthe pertinent factors are: (i) Whether the organization has or will have a representative governing body which is comprised ofpublic officials, orindividuals chosen by public officials acting in their capacity

as such; ofpersons having special knowledge in the particular field or discipline in which the organization is operating; ofcommunity 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 abroadly based membership. This characteristic does not exist ifthe membership ofthe organization's governing body is such as to indicate that itrepresents the personal orprivate interests ofdisqualified persons, rather than the interests ofthe community or the general public. (ii)Whether a substantial portion of the organization's initial funding is tobe provided by the general public, by public charities, orby government grants, rather than by a limited number of grantors or contributors who are disqualified persons withrespect to the organization. The fact thatthe organization plans to limitits activities
to a particular community or region or to a special field which can be expected to appeal to a limited number ofpersons 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 otherhand, the subsequent sources offunding which the organization can reasonably expect to receive after ithas become established and fully operational will also be taken into account. (iii)Whether a substantial proportion ofthe organization's initial funds are placed, or will remain, in an endowment, and whether the investment ofsuch funds is unlikelyto result in more than one third ofits 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

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a concrete plan for solicitation offunds 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 havebeen 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 ofits 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 ofpopulation and jobs, whether the organization has a concrete program to carry outits work in the community; whether any steps have been taken to implement that program; whether it will receive any part ofits funds from a public charity

or governmental agency to which itis in

some way held accountable as a condition ofthe grant or contribution; and whether ithas enlisted the sponsorship or support ofother civic or community leaders involved in community service programs similar to those ofthe organization. (vi)In the case of an organization that carries on educational or other exempt activities for, or onbehalf of, members, whether the solicitation for dues-paying members is designed to enroll a substantial number ofpersons in the community, area, profession, or field of special interest (depending on the size ofthe area and the nature ofthe 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 ofthe public rather than to restrict membership to a limited number ofpersons; and whether the activities of the organization willbe likely to appeal
to persons having some broad common interest or purpose, such as educational activities in the case ofalumni associations, musical activities in the

case ofsymphony societies, or civic affairs in the case ofparent-teacher associations.

(vii)In the case of an organization that provides goods, services, or facilities, whether the organization is or willbe required to make its services, facilities, performances, or products available (regardless ofwhether a fee is charged)
to the general public, public charities, or governmental units, rather than to a limited number ofpersons 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 tobe provided is one which canbe expected
to meet a special or general need among

a substantial portion ofthe general public. (4) Example.The application ofthis paragraph (d)may be illustrated bythe 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 itcan reasonably be expected to operate

as a publicly supported organization under paragraph (d) ofthis 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 ofits formation.

(ii)Organization X is described in section 509(a)(2) forits first five taxable years (for the taxable years ending December 31, 2008, through December 31, 2012).

(iii) Organization X canqualify as a publicly supported organization beginning with the taxable year ending December 31, 2013, ifOrganization X can meet the requirements ofeither § 1.170A-9(f)(2) or § 1.170A-9(f)(3) or paragraphs (a) and (b) of this section forthe taxable years ending December 31, 2009, through December 31, 2013, orfor the taxable years ending December 31, 2008, through December 31, 2012. (e)Determinationsonfoundation classificationandreliance-(1)Aruling

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 ofthe organization's taxexempt status or at such other time as the organization believes itis 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 ofthis section. The ruling or determination letter that the organization is described in section 509(a)(2) also may be revoked ifthe organization's application for a ruling or determination contained one or more material misstatements or omissions of fact or such application was part ofa scheme or plan to avoid or evade any provision ofthe Code. The revocation of the determination that an organization is described in section 509(a)(2) does
not preclude revocation ofthe determination that the organization is described in section 501(c)(3). (2)Status of grantorsorcontributors. (i) Forpurposes 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 ofa change of status (forexample, in the Internal Revenue Bulletin or Publication 78, "Cumulative List ofOrganizations described in Section 170(c) ofthe 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 ifthe 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 ofthe organization's founders, creators, or foundation managers (withinthe meaning ofsection 4946(b))) will not be considered to be responsible for, or aware of,the act orfailure to act that resulted in the loss ofthe 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 bythe grantee organization that such grant or contribution will not result in the loss ofsuch organization's classification as not a private foundation under section 509(a). Such statement mustbe signed by a responsible officer ofthe grantee organization and must set forth sufficient information, including a summary ofthe 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 notresult in the loss ofthe grantee organization's classification as a publicly supported organization under section 509(a). Ifa reasonable doubt exists as to the effect ofsuch grant or contribution, or ifthe grantor orcontributor is one ofthe organization's founders, creators, or foundation managers, the procedure for requesting a determination letter set forth in paragraph (c)(5) ofthis section may be followed by the grantee organization for the protection ofthe grantor orcontributor. 

### 55769

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

(3)Examples.The provisions ofthis 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 ofdisplaying African art. Onits exemption application Y shows, under penalties of perjury, that it can reasonably, in accordance with the requirements ofparagraph (d) ofthis section, expect toreceive 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 ofparagraph (a) ofthis 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 ofparagraph (d) ofthis section, expect toreceive 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 ofparagraph (a) ofthis section for either 2008 through 2012 or 2009 through 2013, Z is not described in section 509(a)(2) for its taxable year 2013. IfZ 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 ofthe first day of2013. 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) ofthis section with respect to grantors and contributors).

* * * * *

(k)Method ofaccounting.For purposes of section 509(a)(2), an organization's support will be determined under the method of accounting on the basis ofwhich the organization regularly computes its income in keeping its books under section 446. For example, ifa grantor makes a grant to an organization payable over a term ofyears, such grant willbe includible in the support fraction ofthe grantee organization under the method of accounting on the basis ofwhich it regularly computes its income in keeping its books under section 446.

(n) Transitionrules.(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 ofparagraph (d)(1) ofthis 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, thatthe 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) ofthis 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 itis 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 apublic support test for taxable year 2007, computed over the period 2003 through 2006.

(4) Examples.The application ofthis paragraph (n)may be illustrated bythe 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 ofits 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 afterJune 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) ofthis 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) ofthis 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) ofthis 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 CFRpart 1 revised April 1, 2008) for taxable year 2007, using the fouryear period from January 1, 2003, through December 31, 2006. (o)Effective/applicabilitydate.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)ofthis section shall apply to taxyears beginning on or after January 1, 2008. For taxyears 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) ofthis

### 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 maybe prescribed in the instructions, issued with respect to the
return. Except as provided in paragraph (d) ofthis section, such return shall be filed annually regardless ofwhether 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 ofofficers, directors or trustees) ofthe organization, and, in the

case ofa private foundation, allpersons who are foundation managers, within the meaning ofsection 4946(b)(1). Organizations must also attach a schedule showing the names and addresses and/or total numbers ofkey 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 isrequired
to be listed pursuant to paragraph (a)(2)(ii)(g) ofthis section during the calendar year ending within the organization's annual accounting period, orduring 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) ofthis 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-halfof the activities ofwhich society are conducted in, or directed at persons in foreign countries;

• * * * *

(6) The Commissioner may relieve any organization or class of organizations (otherthan an organization described in section 509(a)(3)) from filing, in whole or in part the annual returnrequired bythis section where he determines that such
returns are not necessary for the efficient administration ofthe 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), ofany changes in its character, operations, or purpose for which it was originally created.

• * * * *

(k)Effective/applicability date-(1) Generally. The provisions ofthis section shall apply with respect to returns filed for taxable years beginning after December 31, 1969. (2)The applicability ofparagraphs (g)(1)(iii), (g)(1)(iv), and (g)(6) ofthis 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 1revised April 1, 2006) shall apply.

(3)The applicability ofparagraphs (a)(2)(ii)(g) and (a)(2)(ii)(h) ofthis 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 1revised April 1, 2008) shall apply.

§1.6033-2T [Removed]
* Par. 9. Section 1.6033-2T isremoved.

* 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 ofits 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 ofthe term "normally" as used in paragraph (b)(2) ofthis section, see §1.6033-2(g)(3).

(2)Forthe definition ofthe term "integrated auxiliaries" as used in paragraph (b)(1) ofthis section, see §1.6033-2(h).

(3)Forreturns filed fortaxable years beginning before January 1, 2008, for purposes ofthis section the definition of the term "substantial contraction" set forth in § 1.6043-3(d)(1) (as contained in 26 CFR part 1revised April 1, 2008) may be used. (e) Effective/applicabilitydate-(1) Generally. The provisions ofthis section shall apply with respect to returns filed for taxable years beginning after December 31, 1969. (2)Paragraphs (b)(8) and (d)ofthis section shall apply fortaxable years beginning on or afterJanuary 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 1revised 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 toread 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 tableis 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

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CFR part or section where Current OMB

identified and described Control No.

1.6033-2

............................... 1545-2117 Steven T. Miller, DeputyCommissioner forServicesand Enforcement.

Approved: August 19, 2011. Emily S. McMahon, ActingAssistantSecretaryofthe Treasury (TaxPolicy). [FRDoe. 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 forthe 1997 Annual Fine Particulate Standards

AGENCY: Environmental Protection Agency (EPA).
ACTION: Final rule.

SUMMARY: EPA is determining thatthe Chattanooga, Alabama-TennesseeGeorgia, fine particulate (PM2. 5) nonattainment area (hereafter referred to

as "the Chattanooga Area") and the Macon, Georgia PM2.5nonattainment

area (hereafter referred to as "the Macon Area") have attained the 1997 annual PM2.5 national ambient air quality standards (NAAQS) by the applicable attainment date ofApril 5,2010. The determinations of attainment were previously finalizedby EPA on May 31, 2011, for the Chattanooga Area and June 2, 2011, for the Macon Area, andwere based on quality-assured and certified monitoring data for the 2007-2009 monitoring period. The Chattanooga Area is comprised ofHamilton County in Tennessee, Catoosa and Walker Counties in Georgia, and aportion of Jackson County in Alabama. The Macon Area is comprised ofBibb County in its entirety and a portion ofMonroe County in Georgia. EPA is determining to find thatboth ofthe above-identified areas attained the 1997 annual PM2. 5 NAAQS by the applicable attainment date. EPA is finalizing these actionsbecause they

are consistent with the Clean AirAct (CAA) and its implementing regulations.
DATES: EffectiveDate:This final ruleis 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.govWeb 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 willbe 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 alsobe reached via electronic mail athuey.joel@epa.gov. Ms. Waterson may be reached byphone
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 ofthese 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 ofthe qualityassured and certified monitoring data for 2007-2009, and in accordance with section 179(c)(1) ofthe CAA and EPA's regulations, EPA is determining that the Chattanooga and Macon Areas attained the 1997 annual PM2. 5NAAQS by the applicable attainment date ofApril 5, 2010.

OnMay 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 ofthe 1997 annual PM2. 5NAAQS so long asthe Areas continue to attain the 1997 annual PM2.5 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 PM2. 5NAAQS relevant to the Chattanooga and Macon Areas. Today's actions make determinations that the Chattanooga and Macon Areas attained the1997 annual PM2.5NAAQS bythe applicable attainment date ofApril 5, 2010. Today's actions are simply focused on the date by which the areas had attaining data.

Other specific requirements ofthe determinations and the rationale for EPA's actions are explained in the notice ofproposed rulemaking (NPR) published onJune 2,2011 (76 FR 31900). The comment period closed on July 5, 2011. No comments were received in response to the NPR.

II.Whatisthe effect ofthese actions?

Today's actions are determinations that the Chattanooga and Macon Areas attained the 1997 annual PM2. 5NAAQS by the applicable attainment date of April 5, 2010, consistent with CAA section 179(c)(1). Finalizing these actions does not constitute a redesignation ofeither the Chattanooga

or Macon Areas to attainment ofthe 1997 annual PM2.5NAAQS under section 107(d)(3) ofthe CAA. Further, finalizing these actions does notinvolve approving maintenance plans for either the Chattanooga or Macon Areas as required under section 175A ofthe CAA, nor would it find that the Chattanooga or Macon Areas have met all other requirements for redesignation. The designation status ofthe Chattanooga and Macon Areas remains nonattainment for the 1997 annual PM2.5NAAQS 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 PM2. 5 NAAQS by the applicable attainment date ofApril 5, 2010. These actions are being taken pursuant to section 179(c)(1) ofthe CAA and are consistent with the CAA and its implementing regulations.

IV. Statutory andExecutive Order Reviews

These actions make determinations of attainment based on air quality, and would not impose additional requirements beyond those imposed by
state law. Forthatreason, these actions:

* Are not a "significant regulatory action" subject to review by the Office ofManagement and Budget under Executive Order 12866 (58 FR 51735, October 4, 1993);

* Do not impose an information collection burden under the provisions ofthe 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 (5U.S.C. 601 etseq.);

* Do not contain any unfunded mandate or significantly or uniquely affect small governments, as described in the Unfunded Mandates Reform Act of1995 (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 onhealth 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) ofthe National Technology Transfer and Advancement Act of 1995 (15 U.S.C. 272 note) because application ofthose 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 etseq., as added by the Small Business Regulatory Enforcement Fairness Act of 1996, generally provides thatbefore a rule may take effect, the agency promulgating the rulemust submit a rule report, which includes a copy ofthe rule, to each House ofthe Congress and to the Comptroller General ofthe United States. EPA will submit a report containing this action and other required information to the U.S. Senate, the U.S. House ofRepresentatives, and the Comptroller General ofthe United States prior to publication ofthe rule in the FederalRegister. A majorrule
cannot take effect until 60 days after it is published in the Federal Register. This action is not a "major rule" as defined by 5U.S.C. 804(2).

Under section 307(b)(1) ofthe CAA, petitions forjudicial review ofthis action must be filed inthe United States Court ofAppeals for the appropriate circuit byNovember 7, 2011. Filing a petition for reconsideration by the Administrator ofthese final rules do not affect the finality of these actions for the purposes ofjudicial review nor does it extend the time within which apetition forjudicial review maybe filed, and shall not postpone the effectiveness of such rule or action. These actions may not be challenged laterin proceedings to enforce its requirements. (Seesection 307(b)(2)).

For purposes ofjudicial review, the
two determinations approved by today's action are severable from one another.

List of Subjects in 40 CFRPart52

Environmental protection, Air pollution control, Incorporation by reference, Intergovernmental relations, Particulate matter, Reporting and recordkeeping requirements.

Dated: August 18, 2011. Beverly H. Banister, ActingRegionalAdministrator, Region4.
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 toread as follows:
§52.64 Determination of attainment.

Based upon EPA's review ofthe air quality data for the 3-year period 2007- 2009, EPA determined thatthe Chattanooga, Alabama-GeorgiaTennessee PM2.5 nonattainment area attained the 1997 annual PM2. 5NAAQS 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 ofthe attainment date, whether the Area attained the standard. EPA also determined that the Chattanooga, Alabama-Georgia-Tennessee PM2. 5 nonattainment area is not subject to the
consequences offailing to attain pursuant to section 179(d).

Subpart L-Georgia
* 3.Section 52.577 is added toread as
follows:
§52.577 Determination ofattainment.

(a) Based upon EPA's review ofthe air quality data for the 3-year period 2007- 2009, EPA determined thatthe Chattanooga, Alabama-GeorgiaTennessee PM2.5 nonattainment area attained the 1997 annual PM2. 5NAAQS 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 ofthe attainment date, whether the Area attained the standard. EPA also determined that the Chattanooga, Alabama-Georgia-Tennessee PM2.5 nonattainment area is not subject to the
consequences offailing to attain pursuant to section 179(d). (b) Based upon EPA's review ofthe air quality data for the 3-year period 2007- 2009, EPA determined that the Macon, Georgia PM2. 5 nonattainment Area attained the 1997 annual PM2. 5NAAQS 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 ofthe attainment date, whether the Area attained the standard. EPA also determined that the Macon, Georgia PM2.5 nonattainment Area is not subject
to the consequences offailing to attain pursuant to section 179(d).
Subpart RR-Tennessee

* 4. Section 52.2232 is added toread as follows:
§52.2232 Determination of attainment.

Based upon EPA's review ofthe air quality data for the 3-year period 2007- 2009, EPA determined that the Chattanooga, Alabama-GeorgiaTennessee PM2.5 nonattainment Area attained the 1997 annual PM2. 5NAAQS 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 ofthe attainment date, whether the Area attained the standard. EPA also determined that the Chattanooga, Alabama-Georgia-Tennessee PM2.5 nonattainment Area is not subject to the
consequences offailing to attain pursuant to section 179(d).
[FRDoe. 2011-22831 Filed 9-7-11; 8:45 am]

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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 thatthe Rome, Georgia, fine particulate (PM2.5) nonattainment area (hereafter referred to

as "the Rome Area") has attained the 1997 annual PM2.5 national ambient air quality standards (NAAQS) by the applicable attainment date ofApril 5, 2010. The determination ofattainment

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 ofFloyd County, Georgia, in its entirety. EPA is determining that the Area attained the 1997 annual PM2.5NAAQS byits applicable attainment date. EPA is finalizing this action because itis consistent with the Clean AirAct (CAA) and its implementing regulations. DATES: Effective Date: This final ruleis 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.govWeb 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 willbe 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 alsobe reached via electronic mail athuey.joel@epa.gov. Ms. Waterson may be reached byphone
at (404) 562-9061 or via electronic mail
at waterson.sara@epa.gov.
SUPPLEMENTARY INFORMATION: I.What action isEPA taking? II.EPA's Response to Comment IL Whatis the effect ofthis action? IV. What isEPA's final action? V. Statutoryand Executive Order Reviews

I.What action is EPA taking?

Based on EPA's review ofthe qualityassured and certified monitoring data for 2007-2009, and in accordance with section 179(c)(1) ofthe CAA and EPA's regulations, EPA is determining that the Rome Area attained the 1997 annual PM2.5NAAQS by the applicable attainment date ofApril 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 relatedto attainment ofthe 1997 annual PM 2.5 NAAQS so long as the Area continues
to attain the 1997 annual PM2.5NAAQS. See 76 FR 18650. That final rulemaking also includes useful background information on the PM2. 5NAAQS relevant to the Rome Area. Today's action makes a determination that the Rome Area attained the1997 annual PM2. 5NAAQS by the applicable attainment date ofApril 5, 2010. Today's action is simply focused on the date by which the Area had attaining data.

Other specific requirements ofthe determination and the rationale for EPA's action are explained in the notice ofproposed 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 onthe June 2, 2011, proposed rulemaking to determine the Rome Area attained the 1997 PM2. 5NAAQS by its applicable attainment date ofApril 5, 2010. The comment, from the Labor-Management Standards Office, is provided in the docket for this final action and canbe accessed athttp://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 tobase a response. As a point of clarification, today's action isrequired by section 179(c)(1) ofthe CAA. Forthat
reason, this rulemaking is both necessary and appropriate.

III.What is the effect ofthisaction?

Today's action is a determination that the Rome Area attained the 1997 annual PM2.5NAAQS by its applicable attainment date ofApril 5,2010, consistent with CAA section 179(c)(1). Finalizing this action does not constitute a redesignation ofthe Rome Area to attainment ofthe 1997 annual PM2.5NAAQS 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 ofthe CAA, nor does it involve a determination that the Rome Area has
met all requirements for a redesignation. The designation status ofthe Rome Area remains nonattainment for the 1997 annual PM2.5NAAQS 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 ofApril 5,2010. This action is being takenpursuant to section 179(c)(1) ofthe CAA andis consistent with the CAA and its implementing regulations.

V. Statutoryand 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 ofManagement and Budget under Executive Order 12866 (58 FR 51735, October 4, 1993);

e Does not impose an information collection burden under the provisions ofthe Paperwork Reduction Act (44 U.S.C. 3501 etseq.);

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 (5U.S.C. 601 etseq.);

* Does not contain any unfunded mandate or significantly or uniquely affect small governments, as described in the Unfunded Mandates Reform Act of1995 (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 onhealth 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 (66FR 28355, May 22, 2001);

* Is not subject to requirements of Section 12(d) ofthe National Technology Transfer and Advancement Act of 1995 (15 U.S.C. 272 note) because application ofthose 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 PM2.5NAAQS bythe 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 ontribal governments or preempt tribal law. The Congressional Review Act, 5 U.S.C. 801 etseq., as added bythe Small Business Regulatory Enforcement Fairness Act of 1996, generally provides thatbefore a rulemay take effect, the agency promulgating the rule must submit a rule report, which includes a copy ofthe rule, to each House ofthe Congress and to the Comptroller General ofthe United States. EPA will submit a report containing this action and other required information to the U.S. Senate, the U.S. House ofRepresentatives, and the Comptroller General ofthe United States prior to publication ofthe rule in the FederalRegister. 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 5U.S.C. 804(2).

Under section 307(b)(1) ofthe CAA, petitions forjudicial review ofthis action must be filed in the United States Court ofAppeals for the appropriate circuit byNovember 7, 2011. Filing a petition for reconsideration by the Administrator ofthese final rules does
not affect the finality ofthese actions for the purposes ofjudicial review nor does it extend the time within which a petition forjudicial review maybe filed, and shall not postpone the effectiveness of such rule or action. This action may not be challenged laterin proceedings to enforce its requirements. (Seesection 307(b)(2).)

List of Subjects in 40 CFRPart52

Environmental protection, Air pollution control, Incorporation by reference, Intergovernmental relations, Particulate matter, Reporting and recordkeeping requirements.

Dated: August 18, 2011. Beverly H. Banister,
ActingRegional Administrator, Region4.

40 CFR part 52 is amended as follows:

PART 52-[AMENDED]

ml. The authority citation for part52 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 ofthe air quality data for the 3-year period 2007- 2009, EPA determined that the Rome, Georgia PM2. 5 nonattainment area attained the 1997 annual PM2. 5NAAQS 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 ofthe attainment date, whether the Area attained the standard. EPA also determined that the Rome, Georgia PM2.5 nonattainment area is not subject
to the consequences offailing to attain pursuant to section 179(d).

[FRDoe. 2011-22833 Filed 9-7-11; 8:45 am]

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FEDERAL REGISTER PAGES AND DATE, SEPTEMBER

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At the end ofeach month the Office ofthe Federal Register publishes separately a List ofCFR Sections Affected (LSA), which lists parts and sections affected by documents published since the revision date of each title.

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