Tuesday, November 14, 2023
Treasury Issues Proposed Regs re Excise Taxes on DAF Taxable Distributions
Today's Federal Register has proposed regulations implementing IRC 4966, imposing excise taxes on what amounts to private benefit distributions from donor advised funds. Here is the summary:
SUMMARY: This document contains proposed regulations regarding excise taxes on taxable distributions made by a sponsoring organization from a donor advised fund (DAF), and on the agreement of certain fund managers to the making of such distributions. The proposed regulations would provide guidance regarding DAFs and taxable distributions. The proposed regulations generally would apply to certain organizations, including community foundations and other charitable organizations, that maintain one or more DAFs, and to other persons involved with the DAFs, including donors, donor-advisors, related persons, and certain fund managers.
The comment period will end in 60 days. Here is a little more summary of what IRC 4966 does:
3. Excise Tax on Taxable Distributions
Section 4966(a)(1) imposes a 20 percent excise tax on each taxable distribution, payable by the sponsoring organization with respect to the DAF. Section 4966(c)(1) defines a “taxable distribution” as including any distribution from a DAF to any natural person. Section 4966(c)(1) also defines a taxable distribution as including a distribution from a DAF to any other person if (1) the distribution is for any purpose other than a purpose specified in section 170(c)(2)(B), or (2) the sponsoring organization does not exercise expenditure responsibility with respect to the distribution in accordance with section 4945(h).
4. Excise Tax on Agreement of Fund Manager
Section 4966(a)(2) imposes a five percent excise tax on the agreement of a fund manager to the making of a taxable distribution knowing that it is a taxable distribution, payable by any fund manager who agreed to the making of the distribution. Section 4966(d)(3) defines a “fund manager” with respect to any sponsoring organization as (1) an officer, director, or trustee of such sponsoring organization (or an individual having powers or responsibilities similar to those of officers, directors, or trustees of the sponsoring organization), and (2) with respect to any act (or failure to act), the employees of the sponsoring organization having authority or responsibility with respect to each act (or failure to act).
darryll k. jones
https://lawprofessors.typepad.com/nonprofit/2023/11/treasury-issues-proposed-regs-re-excise-taxes-on-daf-taxable-distributions.html