Source: https://www.irs.gov/irb/2010-14_IRB
Timestamp: 2019-04-25 16:21:51+00:00

Document:
Federal rates; adjusted federal rates; adjusted federal long-term rate and the long-term exempt rate. For purposes of sections 382, 642, 1274, 1288, and other sections of the Code, tables set forth the rates for April 2010.
This notice provides the face amount of qualified school construction bonds (QSCBs) allocated by the Department of the Treasury to each state and large local education agency for 2010 under section 54F(d) of the Code. This notice does not contain any other guidance. Notice 2009-35 supplemented.
This notice provides guidance to assist state housing credit agencies in determining how to reduce the state housing credit ceiling under section 42(h)(3) of the Code when credits are exchanged for funds under section 1602 of the American Recovery and Reinvestment Tax Act of 2009, including guidance concerning the effect of section 1602 funds on building basis and taxpayer income.
This notice provides taxpayers with interim guidance on measurement of continuity of interest of reorganizations during the period between expiration of the current temporary regulations and the issuance of new regulations.
Chile earthquake in 2010. This notice designates the Chile earthquake occurring in February 2010 as a qualified disaster for purposes of section 139 of the Code.
This announcement provides procedures that a charitable trust may use to request a ruling that it was and continues to be a Type III supporting organization described in section 509(a)(3) of the Code and to obtain a refund of any section 4940 tax paid with respect to its 2008 taxable year.
Nonshareholder contribution to capital under section 118(a). This procedure provides that the Service will not challenge a corporation’s treatment of a Smart Grid Investment Grant made by the Department of Energy to the corporation as a nonshareholder contribution to the capital of the corporation under section 118(a) of the Code if the corporation properly reduces the basis of its property under section 362(c)(2) and the regulations thereunder.
 Acquiesces in result only relating to whether an interest in a limited liability company (LLC) is a limited partnership interest as defined under section 1.469-5T(e)(3).
This revenue ruling provides various prescribed rates for federal income tax purposes for April 2010 (the current month). Table 1 contains the short-term, mid-term, and long-term applicable federal rates (AFR) for the current month for purposes of section 1274(d) of the Internal Revenue Code. Table 2 contains the short-term, mid-term, and long-term adjusted applicable federal rates (adjusted AFR) for the current month for purposes of section 1288(b). Table 3 sets forth the adjusted federal long-term rate and the long-term tax-exempt rate described in section 382(f). Table 4 contains the appropriate percentages for determining the low-income housing credit described in section 42(b)(1) for buildings placed in service during the current month. However, under section 42(b)(2), the applicable percentage for non-federally subsidized new buildings placed in service after July 30, 2008, and before December 31, 2013, shall not be less than 9%. Finally, Table 5 contains the federal rate for determining the present value of an annuity, an interest for life or for a term of years, or a remainder or a reversionary interest for purposes of section 7520.
This notice sets forth the maximum face amount of qualified school construction bonds (“QSCBs”) allocated by the Department of the Treasury (Treasury) to each State and large local educational agency for 2010 under § 54F(d) of the Internal Revenue Code (Code). For this purpose, § 54A(e)(3) provides that the term “State” includes the District of Columbia and any possession of the United States. This notice supplements Notice 2009-35, 2009-17 I.R.B. 876 (April 27, 2009).
Section 1521(a) of Title I of Division B of the American Recovery and Reinvestment Act of 2009, Pub. L. No. 111-5, 123 Stat. 115 (2009) (“Act”) added new § 54F to the Code, setting forth program provisions for QSCBs.
(3) the issuer designates such bond for purposes of this section.
Section 54F(c) provides a national bond limitation authorization for QSCBs of $11 billion for 2009 and $11 billion for 2010 (each, a “calendar year volume cap” and together “volume cap”). Section 54F(c)(3) provides that except for carryforwards provided for in § 54F(e), there is no calendar year volume cap for calendar years after 2010.
Section 54F(b) provides that the maximum aggregate face amount of bonds issued during any calendar year that may be designated under § 54F(a) by any issuer shall not exceed the portion of the calendar year volume cap allocated to such issuer for the calendar year under § 54F(d).
Section 54F(d)(1) provides that, except as provided in § 54F(d)(2)(C), the calendar year volume cap shall be allocated by the Treasury among the States in proportion to the respective amounts each State is eligible to receive under § 1124 of the Elementary and Secondary Education Act of 1965 (20 U.S.C. 6333) (the “Education Act”) for the most recent fiscal year ending before the calendar year. Section 54F(d)(1) further provides that the calendar year volume cap amount allocated to each State is to be further allocated by the State to issuers within the State.
Section 54F(d)(2)(A) provides that 40 percent of the calendar year volume cap for any calendar year is to be allocated under § 54F(d)(2)(B) by the Treasury among local educational agencies that are large local agencies for the calendar year. Section 54F(d)(2)(B) provides that 40 percent of the calendar year volume cap is to be allocated among large local educational agencies in proportion to the respective amounts each such agency received under § 1124 of the Education Act for the most recent fiscal year ending before the calendar year.
Section 54F(d)(2)(C) provides that the allocation of calendar year volume cap to any State under § 54F(d)(1) is reduced by the aggregate amount of allocations under § 54F(d)(2) to large local educational agencies within the State.
Section 54F(d)(2)(E) defines a large local educational agency as any local educational agency if such agency is: (1) among the one hundred local educational agencies with the largest number of children aged 5 through 17 from families living below the poverty level, as determined by the Treasury using the most recent data available from the Department of Commerce that are satisfactory to the Treasury; or (2) one of not more than twenty-five additional local educational agencies that the Secretary of Education determines (based on the most recent data available satisfactory to the Treasury) are in particular need of assistance, based on a low level of resources for school construction, a high level of enrollment growth, or such other factors as the Treasury deems appropriate.
Section 54F(d)(3) provides that the amount allocated under § 54F(d)(1) to any United States possession other than Puerto Rico is an amount that would have been allocated to such possession if all allocations under § 54F(d)(1) were made on the basis of respective populations of individuals below the poverty line (as defined by the Office of Management and Budget). Section 54F(d)(3) further provides that in making the other allocations, the amount to be allocated under § 54F(d)(1) to the States is reduced by the aggregate amount allocated under § 54F(d)(3) to the United States possessions.
Section 54F(d)(4) provides for additional calendar year volume cap amounts of $200 million for calendar year 2009 and $200 million for calendar year 2010 (each an “Indian tribal government calendar year volume cap” and together the “Indian tribal government volume cap”) to be allocated by the Secretary of Interior for purposes of the construction, rehabilitation, and repair of schools funded by the Bureau of Indian Affairs. This $200 million Indian tribal government calendar year volume cap allocated to the Indian tribal governments does not reduce the $11 billion calendar year volume cap allocated to the States and the large local educational agencies. Section 54F(d)(4) further provides that, for amounts of Indian tribal government volume cap allocated, Indian tribal governments (as defined in § 7701(a)(40)) are to be treated as qualified issuers.
The 2010 national bond volume cap for QSCBs is $11 billion. This amount is allocated among the States and large local educational agencies as set forth in this notice. The 2010 allocations to 103 large local educational agencies reflects the determination by the Secretary of Education to select 3 additional large local educational agencies under § 54F(d)(2)(E)(ii) for such year. The first chart below allocates $6.6 billion of the $11 billion 2010 calendar year volume cap for QSCBs to States to be issued by such State or further allocated to the issuers within such State. The second chart below allocates $4.4 billion of the $11 billion 2010 calendar year volume cap for QSCBs to large local educational agencies.
The allocations of the national bond volume cap for QSCBs in Section 3 are effective for QSCBs issued, pursuant to an allocation of 2010 calendar year volume cap, after March 16, 2010.
The Department of the Interior is exclusively responsible for making the allocations of the Indian tribal government volume cap and published a notice in the Federal Register, 74 F.R. 56211-02 (October 30, 2009), soliciting applications for allocations of such volume cap. Interested parties may also contact John Rever, Director, Office of Facilities, Environment and Cultural Resources, Bureau of Indian Affairs, at (703) 390-6314 or John.Rever@bia.gov.
The principal authors of this notice are Aviva M. Roth and Johanna Som de Cerff of the Office of Associate Chief Counsel (Financial Institutions & Products). For further information regarding this notice, contact Johanna Som de Cerff at (202) 622-3980 (not a toll-free call).
This notice clarifies certain issues under sections 1404 and 1602 of the American Recovery and Reinvestment Tax Act of 2009 (Pub. L. 111-5) (the Act). Specifically, this notice provides guidance on how to take into account the amount of a grant under section 1602 of the Act in reducing the amount of a state’s housing credit ceiling, on the exclusion of the amount of grants from the recipients’ gross income, and on the effect of such grants on the depreciable or eligible basis of property.
Section 42 of the Internal Revenue Code allows a 10-year tax credit for investment in qualified low-income buildings placed in service after December 31, 1986. Section 42(h)(1) provides, generally, that the amount of credit under § 42 for any taxable year for any building shall not exceed the housing credit dollar amount allocated to the building. Section 42(h)(3)(A) provides, in part, that the aggregate housing credit dollar amount that a State housing credit agency may allocate for any calendar year is limited to that year’s State housing credit ceiling (Ceiling).
(iv) the amount, if any, allocated to the State by the Secretary under § 42(h)(3)(D) from a national pool (National Pool) of unused credit.
Section 42(h)(3)(H) of the Code provides that for calendar years after 2002, the $2,000,000 and $1.75 amounts in § 42(h)(3)(C)(ii) shall be increased by a cost-of-living adjustment (COLA). Section 42(h)(3)(I) increases the Ceiling for 2009 by adding (i) $0.20 for the dollar amount in effect under § 42(h)(3)(C)(ii)(I) after application of the § 42(h)(3)(H) COLA, and (ii) an amount equal to 10 percent for the dollar amount in effect under § 42(h)(3)(C)(ii)(II) (rounded to the next lowest multiple of $5,000) after application of the § 42(h)(3)(H) COLA. For the 2009 Ceiling, the § 42(h)(3)(C)(ii)(I) and (II) amounts are $2.30 and $2,665,000, respectively. See Section 3.07 of Rev. Proc. 2008-66, 2008-45 I.R.B. 1107, 1111.
A list of the Designated Agencies is provided, and background information to the Application states, on page 3, that a Designated Agency is one that files Form 8610, “Annual Low-Income Housing Credit Agencies Report,” for all agencies within the State. Paragraph 2.a. of the Terms and Conditions provides that the grantee is the housing credit agency that files Form 8610. Paragraph 7.a. of the Terms and Conditions provides that the grantee shall track (1) the credit equivalent of all grant election amounts to ensure that the 2009 Ceiling is appropriately reduced as required by § 42(i)(9)(A) of the Code and (2) total grant election amounts to ensure that these amounts do not exceed the amount authorized by section 1602(b) of the Act. Paragraph 7.b. provides that the grantee shall track the total of credits allocated under § 42(h)(1). Paragraph 7.c. provides that the grantee shall ensure that the credit equivalent of all elected grant amounts through 2010, plus the credits allocated under § 42(h)(1) during 2009, do not exceed the 2009 Ceiling. The Terms and Conditions do not explain how the credit equivalent of a grant election amount is determined.
Section 42(d)(1) of the Code provides that the eligible basis of a new building is its adjusted basis as of the close of the first tax year of the credit period. Section 42(d)(4)(A) provides that, except as provided in § 42(d)(4)(B) and (C), the adjusted basis of any building is determined without regard to the adjusted basis of any property that is not residential rental property. Section 42(d)(4)(B) provides that the adjusted basis of any building includes the adjusted basis of property of a character subject to the allowance for depreciation used in common areas or provided as comparable amenities to all residential rental units in the building. Section 42(d)(5)(A) provides that the eligible basis of a building shall not include any costs financed with the proceeds of a federally funded grant. Section 42(i)(9)(B), as added by section 1404 of the Act, provides that the basis of a qualified building shall not be reduced by the amount of any grant described in § 42(i)(9)(A). The legislative history to the Act provides that grants received under this provision (i.e., cash assistance received under section 1602 of the Act) do not reduce [the] tax basis of a qualified low-income building. The legislative history to the Act further provides that grants under this provision are not taxable income to recipients. See H.R. Conf. Rep. No. 16, 111th Cong., 1st Sess. 532, 533 (2009).
Section 42(i)(9)(A) of the Code, as added by section 1404 of the Act, requires that the amounts in § 42(h)(3)(C)(i) through (iv) shall each be reduced by so much of such amount as is taken into account in determining the amount of any grant (cash assistance) under section 1602 of the Act. Thus, similar to the way the Designated Agency tracks allocations of credit during the course of a calendar year to ensure that total credits allocated do not exceed the Ceiling for that year, § 42(i)(9)(A) implies a duty (and paragraph 7 of the grant application Terms and Conditions imposes a duty) by the Designated Agency to track credits allocated and the credit equivalent of cash assistance amounts to ensure that total credits allocated from the 2009 Ceiling and the credit equivalent of total cash assistance amounts do not exceed the 2009 Ceiling. A Designated Agency may determine the credit equivalent of a cash assistance amount by dividing the cash assistance amount by 8.5 and rounding the result up to the nearest dollar.
For example, in computing the reduction with respect to the § 42(h)(3)(C)(ii) component of the Ceiling (and using an actual figure published by the Department of the Treasury in the List of Designated Agencies attached to the Application), assume that the maximum cash assistance amount permissible from the 2009 Ceiling for State X with respect to that component is $9,061,000. State X is a state whose population qualifies for $2,665,000 in credits under § 42(h)(3)(C)(ii)(II), as adjusted for inflation under § 42(h)(3)(H). The Department of the Treasury determined the maximum cash assistance amount of $9,061,000 available to State X by multiplying total available credits of $2,665,000 under § 42(h)(3)(C)(ii)(II) by the formula prescribed by section 1602(b) of the Act for credits under § 42(h)(3)(C)(ii)(II) (i.e., 0.85 x ([$2,665,000 x 0.4] x 10)). Of this amount, assume the Designated Agency of State X elects under section 1602(b) of the Act a cash assistance amount of $5 million. The credit equivalent of $5 million is $588,236 (i.e., $5 million/8.5 = $588,235.29, rounded up to the nearest dollar). For purposes of making the reduction required by § 42(i)(9)(A) to State X’s 2009 Ceiling, the $2,665,000 in credits under § 42(h)(3)(C)(ii) must be reduced by $588,236, the credit equivalent of the $5 million cash assistance amount, not by the $5 million cash assistance amount. The $2,076,764 (i.e., $2,665,000 - $588,236) remaining in credit under § 42(h)(3)(C)(ii) is available for use in making credit allocations by the Designated Agency. However, for purposes of making any future cash assistance election under section 1602 of the Act from the § 42(h)(3)(C)(ii) portion of State X’s 2009 Ceiling, the $9,061,000 maximum cash assistance amount is reduced by $5 million to $4,061,000.
The Department of the Treasury may not, in view of the taxpayer privacy and disclosure rules under § 6103 of the Code, publish the maximum cash assistance amounts from the other components of a State’s 2009 Ceiling (unlike credits under § 42(h)(3)(C)(ii)). To ensure that credits allocated and the credit equivalent of cash assistance amounts from any of these components of the 2009 Ceiling do not exceed credits available from those components, a Designated Agency should multiply the credit amount used to elect a cash assistance amount by the percentage applicable to that credit amount under section 1602(b)(1) of the Act, and then reduce the 2009 Ceiling accordingly.
For example, in computing the reduction with respect to the § 42(h)(3)(C)(iv) component of the Ceiling, assume that the credit amount of that component from State X’s 2009 Ceiling is $1 million. Assume further that in computing the reduction with respect to the § 42(h)(3)(C)(iii) component, the credit amount of that component from State X’s 2009 Ceiling is $2 million. Of the $1 million in credits under § 42(h)(3)(C)(iv), the Designated Agency of State X elects under section 1602 of the Act to use $800,000 for a cash assistance amount. Of the $2 million in credits under § 42(h)(3)(C)(iii), the Designated Agency elects under section 1602 of the Act to use $1.5 million for a cash assistance amount.
Under section 1602(b)(1)(B) of the Act, the percentage applicable to credit amounts under § 42(h)(3)(C)(iv) is 40 percent. The product of $800,000 and 40 percent is $320,000. As required by § 42(i)(9)(A), the $1 million of credits under § 42(h)(3)(C)(iv) is reduced by $320,000, not $800,000. The remaining $680,000 in credits (i.e., $1 million - $320,000) under § 42(h)(3)(C)(iv) is available for use in making credit allocations by the Designated Agency. However, the $1 million of credit under § 42(h)(3)(C)(iv) is reduced by $800,000 for purposes of making any future elections for cash assistance under section 1602 of the Act.
Under section 1602(b)(1)(A) of the Act, the percentage applicable to credit amounts under § 42(h)(3)(C)(iii) is 100 percent. The product of $1.5 million and 100 percent is $1.5 million. As required by § 42(i)(9)(A), the $2 million of credits under § 42(h)(3)(C)(iii) is reduced by $1.5 million, the actual credit amount elected by the Designated Agency to make a cash assistance election under section 1602 of the Act. The remaining $500,000 in credits (i.e., $2 million - $1.5 million) under § 42(h)(3)(C)(iii) is available for use in making credit allocations by the Designated Agency. Similarly, the $2 million in credits under § 42(h)(3)(C)(iii) is reduced by $1.5 million for purposes of making any future elections for cash assistance under section 1602 of the Act.
Based on the legislative history of the Act, subawards made pursuant to section 1602(c) of the Act are excluded from the gross income of recipients and are exempt from taxation.
Section 42(i)(9)(B) of the Code, as added by section 1404 of the Act, provides that the basis of a qualified building shall not be reduced by the amount of any grant described in § 42(i)(9)(A). The legislative history to the Act provides that grants received under this provision (i.e., cash assistance received under section 1602 of the Act) do not reduce the tax basis of a qualified low-income building. By extension, subawards under section 1602(c) of the Act derived from cash assistance under that section that are used in a qualified low-income building are not federal grants for purposes of § 42(d)(5)(A) and do not otherwise reduce the depreciable or eligible basis of the building.
The principal author of this notice is Christopher J. Wilson, Office of the Associate Chief Counsel (Passthroughs and Special Industries). For further information concerning this notice, contact Mr. Wilson at (202) 622-3040 (not a toll-free call).
This notice pertains to the continuity of interest test generally applicable to reorganizations described in section 368 of the Internal Revenue Code.
Under section 7805(e)(2) of the Internal Revenue Code, temporary regulations expire three years after issuance, if not earlier withdrawn. Section 1.368-1T(e)(2) of the Income Tax Regulations will accordingly expire on March 19, 2010. The purpose of this notice is to provide taxpayers with interim guidance applicable to the period between the expiration of the temporary regulations and the issuance of replacement guidance.
The Internal Revenue Code of 1986 (Code) generally provides nonrecognition treatment for reorganizations described in section 368 of the Code. Besides satisfying the statutory and other requirements, in order to qualify as a reorganization, a transaction generally must satisfy the continuity of interest (COI) requirement. COI requires that, in substance, a substantial part of the value of the proprietary interests in the target corporation be preserved in the reorganization.
On March 20, 2007, the Internal Revenue Service (Service) and the Treasury Department (Treasury) published temporary regulations § 1.368-1T(e)(2) (T.D. 9316, 2007-1 C.B. 962) and proposed regulations (REG-146247-06, 2007-1 C.B. 977) in the Federal Register (72 FR 12974 and 72 FR 13058, respectively). The text of the temporary regulations and the proposed regulations is the same. The Service and the Treasury intend to issue final regulations, but do not expect to issue such regulations prior to the expiration of the temporary regulations. The purpose of this notice is to provide taxpayers with interim guidance applicable to the period between the expiration of the temporary regulations and the issuance of new regulations.
After expiration of the temporary regulations and prior to the issuance of new regulations, taxpayers may apply the rules set forth in the proposed regulations notwithstanding that the temporary regulations have expired. However, the target corporation, the issuing corporation, the controlling corporation of the acquiring corporation if stock thereof is provided as consideration in the transaction, and any direct or indirect transferee of transferred basis property from any of the foregoing, may not apply the provisions of the proposed regulations unless all such taxpayers elect to apply the provisions of such regulations. This requirement will be satisfied if none of the specified parties adopts treatment inconsistent with this election.
The principal author of this notice is Richard Starke of the Office of Associate Chief Counsel (Corporate). For further information regarding this notice, please contact Richard Starke at (202) 622-7790 (not a toll-free call).
This notice designates the Chile earthquake occurring in February 2010 as a qualified disaster for purposes of § 139 of the Internal Revenue Code in the affected areas of Chile.
On February 27, 2010, a magnitude 8.8 earthquake with numerous significant aftershocks and a tsunami affected southern and central Chile (“Chile earthquake”). The earthquake and resulting aftershocks affected approximately 2 million individuals, displaced thousands of individuals from damaged and destroyed houses, and resulted in 795 deaths. The earthquake also caused major damage to buildings and infrastructure near the epicenter, and disrupted communications, electricity, water, and gas services in the affected areas. In addition, a tsunami caused significant damage along parts of coastal Chile. USAID Chile — Earthquake Fact Sheet No. 1 (March 1, 2010) and No. 2 (March 2, 2010).
This notice enables employer-sponsored private foundations to assist certain victims in areas affected by the Chile earthquake and enables recipients to exclude qualified disaster relief payments from gross income.
Section 139(a) provides that gross income shall not include any amount received by an individual as a qualified disaster relief payment.
(2) to reimburse or pay reasonable and necessary expenses (not otherwise compensated for by insurance or otherwise) incurred for the repair or rehabilitation of a personal residence or repair or replacement of its contents to the extent that the need for such repair, rehabilitation, or replacement is attributable to a qualified disaster.
Under § 139(c)(3) the term “qualified disaster” includes a disaster resulting from an event that is determined by the Secretary to be of a catastrophic nature.
The Commissioner of Internal Revenue, pursuant to delegation by the Secretary, has determined that the Chile earthquake occurring in February 2010 is an event of a catastrophic nature under § 139(c)(3). Therefore, the Chile earthquake is designated as a qualified disaster under § 139 in the affected areas of Chile.
Employer-sponsored private foundations may choose to provide disaster relief to employee victims of the Chile earthquake. Like all organizations described in § 501(c)(3), private foundations should exercise due diligence when providing disaster relief as set forth in Publication 3833, Disaster Relief: Providing Assistance Through Charitable Organizations.
The principal author of this notice is Sheldon Iskow of the Office of Associate Chief Counsel (Income Tax & Accounting). For further information regarding this notice, contact Mr. Iskow at (202) 622-4920 (not a toll-free call).
This revenue procedure provides a safe harbor under section 118(a) of the Internal Revenue Code for the treatment of a Smart Grid Investment Grant (SGIG) under 42 U.S.C. 17386 made by the United States Department of Energy (DOE) to a corporation for qualifying investments under the Smart Grid Investment Matching Grant Program as authorized by section 1306 of the Energy Independence and Security Act of 2007 (Pub. L. 110-140), as amended by section 405, Division A of the American Recovery and Reinvestment Act of 2009 (Pub. L. 111-5).
Section 118(a) of the Code provides that in the case of a corporation, gross income does not include a contribution to the capital of the taxpayer.
Section 1.118-1 of the Income Tax Regulations provides that section 118 applies to contributions to capital made by a person other than a shareholder, for example, property contributed to a corporation by a governmental unit for the purpose of enabling the corporation to expand its operating facilities.
Section 362(c)(2) of the Code requires a basis reduction in a corporation’s property when the corporation receives money from a nonshareholder as a contribution to its capital.
42 U.S.C. 17386 provides that DOE shall establish a Smart Grid Investment Matching Grant Program to make grants for qualifying investments. Under 42 U.S.C. 17386, an SGIG may not be used for ongoing or routine operating and maintenance expenditures.
This revenue procedure applies to corporate taxpayers that receive an SGIG under 42 U.S.C. 17386 from DOE. This revenue procedure does not apply to noncorporate taxpayers, or to grants under 42 U.S.C. 17384 (Smart Grid technology research, development, and demonstration).
The Internal Revenue Service will not challenge a corporation’s treatment of an SGIG made by DOE to the corporation as a nonshareholder contribution to the capital of the corporation under section 118(a) of the Code if the corporation properly reduces the basis of its property under section 362(c)(2) and the regulations thereunder.
This revenue procedure is effective March 10, 2010.
The principal author of this revenue procedure is David McDonnell of the Office of Associate Chief Counsel (Passthroughs & Special Industries). For further information regarding this revenue procedure, contact Mr. McDonnell at (202) 622-3040 (not a toll-free call).
This announcement applies to any trust that met the requirements to be classified as a Type III supporting organization through the end of the 2008 taxable year (including by meeting the significant voice responsiveness test for periods after August 16, 2007), but erroneously filed Form 990-PF and paid section 4940 tax for the 2008 taxable year. It provides procedures that such a trust may use to request a ruling that it was and continues to be a Type III supporting organization described in section 509(a)(3) and to obtain a refund of any section 4940 tax paid with respect to its 2008 taxable year.
This announcement also describes procedures for charitable trusts that became private foundations after August 16, 2007, and wish to terminate their private foundation status under section 507(b)(1)(B) by operating as Type III supporting organizations.
Treas. Reg. § 1.509(a)-4(i) sets forth the requirements for an organization to qualify as a section 509(a)(3) supporting organization that is “operated in connection with” one or more publicly supported organizations (i.e., a “Type III supporting organization”). Type III supporting organizations are required to meet a “responsiveness test” and an “integral part test.” See Treas. Reg. § 1.509(a)-4(i)(1)(i), (i)(2).
Prior to passage of the Pension Protection Act of 2006, Pub. L. No. 109-280, 120 Stat. 780 (2006) (“PPA”), there were two alternative ways for a Type III supporting organization to meet the responsiveness test.
The significant voice test. Treas. Reg. § 1.509(a)-4(i)(2)(ii) provides that an organization meets the responsiveness test if, by virtue of certain governance relationships between the supporting organization and the supported organization, or a close and continuous working relationship between the supporting organization and supported organization, the officers, directors, or trustees of the publicly supported organization have a significant voice in the investment policies of the supporting organization, the timing of grants, the manner of making them, and the selection of recipients of such supporting organization, and in otherwise directing the use of the income or assets of the supporting organization.
The charitable trust test. Treas. Reg. § 1.509(a)-4(i)(2)(iii) provides that an organization meets the responsiveness test if it is a charitable trust under state law, each publicly supported organization is a named beneficiary under the trust’s governing instrument, and each beneficiary organization has the power to enforce the trust and compel an accounting under state law.
Section 1241(c) of the PPA eliminated the charitable trust test, effective August 17, 2007. Consequently, as of August 17, 2007, a charitable trust can no longer qualify as a Type III supporting organization unless it meets the significant voice test.
Notice 2008-6, 2008-1 C.B. 275, provided that any charitable trust that became a private foundation because of the PPA’s elimination of the charitable trust test would not be required to file an information return on Form 990-PF or pay excise taxes on investment income under section 4940 until its first taxable year beginning on or after January 1, 2008.
On August 2, 2007, the Treasury Department (“Treasury”) and the Internal Revenue Service (“IRS”) published an advance notice of proposed rulemaking (“ANPRM”) describing the rules Treasury and the IRS anticipated proposing regarding Type III supporting organizations. The ANPRM states that Treasury and the IRS expect that all Type III supporting organizations will be required to meet the significant voice responsiveness test under Treas. Reg. § 1.509(a)-4(i)(2)(ii).
On September 24, 2009, Treasury and the IRS published a notice of proposed rulemaking in the Federal Register (74 Fed. Reg. 48,672) addressing Type III supporting organizations (“proposed regulations”). The proposed regulations require that all Type III supporting organizations meet the significant voice responsiveness test, and provide two new examples illustrating the application of the significant voice test to charitable trusts.
erroneously filed Form 990-PF for the 2008 taxable year and paid section 4940 tax for the 2008 taxable year.
A trust may request a ruling that it qualified and continues to qualify as a Type III supporting organization for taxable years beginning on or after January 1, 2008, by submitting a written request for a ruling pursuant to Revenue Procedure 2010-4, 2010-1 I.R.B. 122.
An explanation of how the trust satisfied the requirements to be classified as a Type III supporting organization through the end of its 2008 taxable year (including by meeting the significant voice responsiveness test for periods after August 16, 2007), and how it expects to continue to satisfy such requirements for subsequent years. For this purpose, the trust may rely on the proposed regulations.
With respect to the significant voice test, documentation that establishes that the trust satisfied the requirements of the test. For example, such documentation may include minutes or other documentation of meetings, telephone calls, conversations, e-mail exchanges, and policies that demonstrate a close and continuous working relationship between the supported organization(s) and the supporting organization based upon which the supported organization(s) has a significant voice.
There is no user fee for this ruling request. No deletions statement is required because determinations regarding foundation status are public pursuant to section 6104. The Checklist in Appendix B of Revenue Procedure 2010-4 is not required.
The Form 843 must be accompanied by a copy of the ruling received from the IRS under the procedures set forth in this announcement.
Charitable trusts that became private foundations after August 16, 2007, may terminate their private foundation status under section 507(b)(1)(B) by operating as Type III supporting organizations. Under existing law and procedures, a private foundation may terminate its private foundation status under section 507(b)(1)(B) by: (1) operating as an organization described in paragraph (1), (2), or (3) of section 509(a) for a continuous period of at least 60 calendar months beginning with the first day of any taxable year that begins after December 31, 1969; (2) notifying the Secretary before the commencement of the 60-month period that it is terminating its private foundation status; and (3) establishing that it in fact operated as an organization described in section 509(a)(1), (2), or (3) to the satisfaction of the Secretary immediately after the expiration of the 60-month period.
For further information regarding this announcement, contact Mike Repass of the Exempt Organizations, Tax Exempt and Government Entities Division at (202) 283-8924 (not a toll-free call).

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 § 6103
 § 42
 § 42
 § 42
 § 42
 § 42
 § 42
 § 42
 § 42
 § 42
 § 42
 § 42
 § 42
 § 42
 § 42
 § 42
 § 42
 § 42
 § 1
 § 139
 § 139
 § 139
 § 139
 § 501
 § 1
 § 1
 § 1
 § 1
 § 1