82 Federal Register / Vol. 60, No. 1 / Tuesday, January 3, 1995 / Proposed Rules

19. AD methodology issues other than

those outlined above;

Procedural Issues

20. Initiation of petitions;

21. Evidence;

22. Facts available;

23. De Minimis (address separately for

AD and CVD);

24. Reviews, other than five-year

reviews (if specific to AD or CVD, please

specify);

25. Five-year reviews and revocation;

26. Repeal of Section 303;

27. Regional industries;

28. Critical circumstances;

29. Simplification;

30. Business proprietary information

and administrative protective orders;

31. Ministerial errors;

32. Procedural issues other than those

outlined above;

33. Other issues.

List of Subjects in 19 CFR Parts 353,

355, and 356

Business and industry, Foreign trade,

Imports, Trade practices.

Dated: December 27, 1994.

Barbara R. Stafford,

Acting Assistant Secretary for Import

Administration.

[FR Doc. 94–32332 Filed 12–30–94; 8:45 am]

BILLING CODE 3510–DS–P

DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 53

[EE–56–94]

RIN 1545–AT03

Excise Tax On Self-Dealing By Private

Foundations.

AGENCY: Internal Revenue Service (IRS),

Treasury.

ACTION: Notice of proposed rulemaking.

SUMMARY: This document contains

proposed amendments to the

regulations that define self-dealing by

private foundations. The proposed

amendments modify the application of

the self-dealing rules to the provision by

a private foundation of director’s and

officer’s liability insurance to

disqualified persons. These

amendments provide that

indemnification by a private foundation

or provision of insurance for purposes

of covering the liabilities of the person

in their capacity as a manager of the

private foundation is not self-dealing.

Additionally, the amounts expended by

the private foundation are not included

in the compensation of the disqualified

person for purposes of determining

reasonable compensation of the

disqualified person.

DATES: Written comments and requests

for a public hearing must be received by

April 3, 1995.

ADDRESSES: Send submissions to:

CC:DOM:CORP:T:R (EE–56–94), room

5228, Internal Revenue Service, POB

7604, Ben Franklin Station, Washington,

DC 20044. In the alternative,

submissions may be hand delivered

between the hours of 8 a.m. and 5 p.m.

to: CC:DOM:CORP:T:R (EE–56–94),

Courier’s Desk, Internal Revenue

Service, 1111 Constitution Avenue, NW,

Washington DC.

FOR FURTHER INFORMATION CONTACT:

Terri Harris or Paul Accettura at 202–

622–6070 (not a toll-free number).

SUPPLEMENTARY INFORMATION:

Background

Section 4941(a) imposes a tax on each

act of self-dealing between a

disqualified person and a private

foundation. Section 4941(d)(1)(E)

defines self-dealing as any direct or

indirect transfer to, or use by or for the

benefit of, a disqualified person of the

income or assets of a private foundation.

Section 53.4941(d)–2(f)(1) currently

provides that provision of insurance for

the payment of chapter 42 taxes by a

private foundation for a foundation

manager is self-dealing unless the

premium amounts are included in the

compensation of the foundation

manager. Direct indemnification for the

payment of chapter 42 taxes to the

foundation manager from the private

foundation is self-dealing whether or

not the amounts are included in the

manager’s compensation.

Section 53.4941(d)–2(f)(3) currently

provides that the indemnification of

certain expenses by a private foundation

for a foundation manager’s defense in a

judicial or administrative proceeding

involving chapter 42 taxes is not selfdealing. Such expenses must have been

reasonably incurred by the manager in

connection with such proceeding. Also,

the manager must be successful in such

defense, or such proceeding must be

terminated by settlement, and the

manager must not have acted willfully

and without reasonable cause with

respect to the act or failure to act which

led to the liability for tax under chapter

42.

Revenue Ruling 82–223, 1982–2 C.B.

301, discussed the application of the

self-dealing rules to the provision of

insurance by a private foundation for

the indemnification of a foundation

manager’s defense in actions involving

state laws relating to the

mismanagement of funds of charitable

organizations. Rev. Rul. 82–223 implied

that the private foundation’s provision

of insurance is includible in the

foundation manager’s taxable income.

This position created a situation in

which private foundation managers who

were ‘‘employees’’ of the private

foundation could exclude the insurance

premiums from their income under the

section 132(d) fringe benefit exclusion;

however, this raised the possibility that

unpaid ‘‘volunteer’’ managers would

have to include the premiums in their

income and, since they had no profit

motive with which to support a working

condition fringe benefit exclusion,

could not exclude the income.

This situation has recently been

corrected by the publication of

amendments to regulations under

section 132. Section 1.132–5(r) currently

provides that bona fide volunteers for

exempt organizations are deemed to

have a profit motive for purposes of

excluding a working condition fringe

benefit.

Although these benefits are excluded

from compensation under section

132(d), the problem of including the

income excluded under section 132 in

the compensation paid to the

foundation manager still remains for

purposes of determining whether a

foundation managers’s compensation is

reasonable. These amendments to

§ 53.4941(d)–2(f) are intended to clarify

the IRS’s position that, generally, the

payment of indemnification and

insurance by a private foundation for a

foundation manager in situations arising

from the performance of services on

behalf of the private foundation are not

self-dealing and are not considered

when determining reasonable

compensation of the foundation

manager.

Explanation of Provisions

The proposed regulations provide that

it generally will not be self-dealing, or

treated as the payment of compensation,

if a private foundation indemnifies or

provides insurance to a foundation

manager in any civil judicial or civil

administrative proceeding arising out of

the manager’s performance of services

on behalf of the foundation.

An indemnification or purchase of

insurance would be an act of selfdealing if the expenses relating to such

defense are not reasonably incurred by

the manager in connection with such

proceeding. Additionally, the manager

must not have acted willfully and

without reasonable cause with respect

to the act or failure to act which led to

such proceeding or to such liability.
Federal Register / Vol. 60, No. 1 / Tuesday, January 3, 1995 / Proposed Rules 83

Also, if the indemnification or

insurance is to pay chapter 42 tax, it

will be an act of self-dealing unless the

amounts are treated as compensation.

Special Analyses

It has been determined that these

proposed rules are not major rules as

defined in EO 12866. 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) and the

Regulatory Flexibility Act (5 U.S.C.

chapter 6) do not apply to these

regulations, and, therefore, a Regulatory

Flexibility Analysis is not required.

Pursuant to section 7805(f) of the

Internal Revenue Code, a copy of these

proposed regulations will be submitted

to the Chief Counsel for Advocacy of the

Small Business Administration for

comment on its impact on small

business.

Comments and Requests for a Public

Hearing

Before these proposed regulations are

adopted as final regulations,

consideration will be given to any

written comments that are submitted

timely (preferably a signed original and

eight (8) copies) to the IRS. All

comments will be available for public

inspection and copying. A public

hearing may be scheduled if requested

in writing by any person that timely

submits written comments. If a public

hearing is scheduled, notice of the date,

time, and place for the hearing will be

published in the Federal Register.

Drafting Information

The principal author of these

proposed regulations is Terri Harris,

Office of the Assistant Chief Counsel

(Employee Benefits and Exempt

Organizations), IRS. However, personnel

from other offices of the IRS and

Treasury Department participated in

their development.

List of Subjects in 26 CFR Part 53

Excise taxes, Foundations,

Investments, Lobbying, Reporting and

recordkeeping requirements.

Proposed Amendments to the

Regulations

Accordingly, 26 CFR part 53 is

proposed to be amended as follows:

PART 53—FOUNDATION AND SIMILAR

EXCISE TAXES

Paragraph 1. The authority for part 53

continues to read as follows:

Authority: 26 U.S.C. 7805.

Par. 2. Section 53.4941(d)-2 is

amended as follows:

1. Paragraphs (f)(1) and (3) are

revised.

2. Paragraph (f)(4) is redesignated as

paragraph (f)(5).

3. New paragraph (f)(4) is added.

The additions and revisions read as

follows:

§ 53.4941(d)–2 Specific acts of selfdealing.

* * * * *

(f) Transfer or use of the income or

assets of a private foundation—(1) In

general. The transfer to, or use by or for

the benefit of, a disqualified person of

the income or assets of a private

foundation shall constitute an act of

self-dealing. For purposes of the

preceding sentence, the payment by a

private foundation of any tax imposed

on a foundation manager by chapter 42

shall be treated as a transfer of the

income or assets of a private foundation

for the benefit of a disqualified person

unless such payment is treated as part

of the compensation to such manager.

Similarly, the payment by a private

foundation of the premiums for an

insurance policy providing liability

insurance to a foundation manager for

chapter 42 taxes shall be an act of selfdealing under this paragraph unless

such premiums are treated as part of the

compensation paid to such manager.

* * * * *

(3) Indemnification of foundation

managers against liability for defense in

civil proceedings. Except as provided in

§ 53.4941(d)-3(c), section 4941(d)(1)

shall not apply to the indemnification

by a private foundation of a foundation

manager, with respect to the manager’s

defense in any civil judicial or civil

administrative proceeding arising out of

the manager’s performance of services

on behalf of the foundation, against all

expenses (other than taxes, penalties, or

expenses of correction) including

attorneys’ fees, if—

(i) Such expenses are reasonably

incurred by the manager in connection

with such proceeding; and

(ii) The manager has not acted

willfully and without reasonable cause

with respect to the act or failure to act

which led to such proceeding or to

liability for tax under chapter 42.

Similarly, except as provided in

§ 53.4941(d)-3(c), section 4941(d)(1)

shall not apply to premiums for

insurance to reimburse a foundation for

an indemnification payment allowed

pursuant to this paragraph (f)(3)(ii).

Neither shall such indemnification or

payment of insurance be treated as part

of the compensation paid to such

manager. Thus, a private foundation

shall not be engaged in an act of selfdealing if the foundation purchases a

single insurance policy to provide its

managers both the noncompensatory

and the compensatory coverage

discussed in this paragraph (f), provided

that the total insurance premium is

allocated to include, in each manager’s

compensation, that manager’s portion of

the premium attributable to the

compensatory coverage, which is the

coverage for the amount of penalty, tax,

expense of correction, judgment or

expense, that is owed by the manager.

(4) Indemnification. For purposes of

this paragraph (f), the term

indemnification shall include not only

reimbursement by the foundation for

losses and expenses that the foundation

manager has already incurred but also

direct payment by the foundation of

such expenses as the expenses arise.

* * * * *

Margaret Milner Richardson,

Commissioner of Internal Revenue.

[FR Doc. 94–31666 Filed 12–30–94; 8:45 am]

BILLING CODE 4830–01–U

26 CFR Part 301

[GL–0038–93]

RIN 1545–AS61

Seals of Office

AGENCY: Internal Revenue Service (IRS),

Treasury.

ACTION: Notice of Proposed Rulemaking.

SUMMARY: This document contains a

proposed regulatory amendment

relating to the authority contained

within section 7514 of the Internal

Revenue Code to prescribe or modify

seals of office for the district directors,

service center directors, and compliance

center directors (directors) and other

officers or employees of the Treasury

Department to whom any of the

functions of the Secretary of the

Treasury are or may be delegated. The

proposed regulations provide an

additional or alternative uniform seal to

various Internal Revenue offices

throughout the country. This

amendment is intended to eliminate the

need to publish facsimiles of seals in the

Federal Register as new internal

revenue offices are established or

relocated or as replacement of existing

seals becomes necessary.

DATES: Written comments and requests

for a public hearing must be received by

March 6, 1995.

ADDRESSES: Send submissions to:

CC:DOM:CORP:T:R (GL–0038- 93), room

5228, Internal Revenue Service, P.O.B.