IRS proposed donor-advised fund regulations


On December 4, 2017, the Internal Revenue Service (IRS) and US Department of the Treasury (Treasury) released Notice 2017-73, Request for Comments on Application of Excise Taxes with Respect to Donor-Advised Funds in Certain Situations (Notice). Among other things, the Notice describes proposed regulations that would clarify that (1) distributions from a donor-advised fund (DAF) to a charity event may not be “bifurcated” without conferring “more than an incidental benefit to the donor, advisor, or related person;” (2) a distribution from a DAF to a charitable organization  will not be considered to result in “more than an incidental benefit to a donor, advisor, or related person” merely because the donor, advisor, or related person has made a charitable pledge to the same charitable organization, regardless of whether that organization treats the distribution as satisfying the pledge; and (3) with respect to determining whether or not a public charity has met its public support test, grants from a DAF would be subject to the 2% public support limitation and not be treated as grants from a public charity.

Although not a part of the proposed regulations, in Section 6 of the Notice, the IRS and Treasury requested comments regarding whether a transfer of funds by a private foundation to a DAF should be treated as a “qualifying distribution” only if the sponsoring organization of the DAF agrees to distribute the funds for Section 170 (c)(2)(B) purposes within a certain time frame.

Read the PROPOSED regulations here.

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