Final PRI Regs Issued

• Published date: 01 July 2016
• DOI: http://doi.org/10.1002/npc.30210
• Date: 01 July 2016

Bruce R. Hopkins’ NONPROFIT COUNSEL

3

July 2016

THE LAW OF TAX-EXEMPT ORGANIZATIONS MONTHLY

Bruce R. Hopkins’ Nonprofit Counsel DOI:10.1002/npc

• Guidance relating to exempt organizations’ report-

ing of contributions (IRC § 6033).

• Promulgation of final regulations and additional

guidance on supporting organizations (IRC § 509(a)

(3)); regulations published in final form (summarized

in the March 2016 issue) and proposed form (sum-

marized in the April 2016 issue).

• Final regulations on reliance standards for making

good-faith determinations (IRC §§ 4942, 4945); final

regulations were published last September (summa-

rized in the December 2015 issue).

• Guidance regarding private foundation’s investment

in partnership in which disqualified persons are also

partners (IRC § 4941).

• Final regulations providing examples of program-

related guidance were published on April 21, 2016

(see below).

• Proposed regulations regarding excise taxes on

donor-advised funds and fund management in

reflection of statutory law enacted in 2006 (IRC §

4966).

• Final regulations concerning church tax inquiries and

examinations (IRC § 7611); proposed regulations

were published in 2009 (summarized in the October

2009 issue).

• Final regulations on qualified ABLE programs (IRC §

529A); final guidance was published last December.

• Regulations explaining computation of unrelated

business taxable income of voluntary employees’

beneficiary associations (IRC §§ 501(c)(9), 512);

proposed regulations were published in February

2014.

• Final regulations concerning IRS authority to disclose

exempt organization information to state officials

(IRC § 6104(c)); proposed regulations were pub-

lished in 2011 (summarized in the May 2011 issue).

• Regulations concerning the fractions rule (IRC §

514(c)(9)).

• Guidance providing criteria for treating entities as

integral parts of state, local, or tribal government

(IRC § 7701).

• Proposed regulations concerning definition of politi-

cal subdivision (for IRC § 103 purposes) published

(summarized in the April 2016 issue).

• Notice on notification requirement imposed on social

welfare organizations published (summarized in the

March 2016 issue).

• Notice on transition relief for qualified tuition pro-

grams concerning filing of Form 1099-Q published

(summarized in the April 2016 issue).

Charitable Giving Law Projects

The charitable giving law projects are the following:

• Final regulations concerning the recordkeeping,

substantiation, and appraisal requirements for cash

and noncash charitable contributions in reflection of

legislative enactments in 2004 and 2006; proposed

regulations were published in 2008 (summarized in

the October 2008 issue).

• Publication of regulations regarding an alternative

method of donee substantiation of charitable con-

tributions (IRC § 170(f)(8)(D)); proposed regulations

were issued last September (summarized in the

November 2015 issue), but these regulations were

withdrawn in January (referenced in the March 2016

issue), and, thus, an alternative method will not be

implemented.

• Guidance regarding contributions of inventory (IRC

§ 170(e)(3)).

• Regulations concerning uniform basis of charitable

remainder trusts (IRC § 1014); final regulations were

issued last August (referenced in the October 2015

issue).

• Guidance on qualified contingencies of charitable

remainder annuity trusts (IRC § 664). ◆

FINAL PRI REGS ISSUED

As noted last month, the Treasury Department and

the IRS, on April 21, published final regulations provid-

ing guidance for private foundations as to program-

related investments, in the form of nine examples

illustrating types of investments that qualify as PRIs (T.D.

9762). The final regulations are essentially the same as

the proposed regulations issued in 2012 (summarized in

the June 2012 issue).

These examples illustrate that (1) an activity con-

ducted in a foreign country furthers an exempt purpose

if the same activity would further an exempt purpose

if conducted in the United States; (2) the exempt

purposes served by a PRI are not limited to situations

involving economically disadvantaged individuals and

deteriorated urban areas; (3) the recipients of PRIs need

not be within a charitable class if they are the instru-

ments by which an exempt purpose is furthered; (4) a

potentially high rate of return does not automatically

prevent an investment from qualifying as a PRI; (5)

PRIs can be achieved through a variety of investments,

including loans to individuals, tax-exempt organiza-

tions, and for-profit entities, and equity investments

in for-profit organizations; (6) a credit enhancement

arrangement may qualify as a PRI; and (7) a private

foundation’s acceptance of an equity position in con-

junction with making a loan does not necessarily pre-

vent the investment from qualifying as a PRI.

The IRS declined to adopt nearly all of the comments

received in response to the proposed regulations, includ-

ing requests for additional examples. (See the first of the

Quotes of the Month.) [12.4(d)] ◆