IRS Notice 2017-73 donor advised funds | KPMG | US

Notice 2017-73: Approach of future guidance for donor advised funds

IRS Notice 2017-73

The IRS today released an advance version of Notice 2017-73 that concerns donor advised funds and outlines the approach of future intended guidance.

1000

Related content

Notice 2017-73

According to Notice 2017-73 [PDF 44 KB], the IRS and Treasury Department are considering issuing proposed regulations under section 4967 that would address certain longstanding issues regarding donor advised funds (DAFs) and their sponsoring organizations.

In particular, these proposed regulations would, if finalized, provide the following: 

  • Certain distributions from a DAF that pay for the purchase of tickets that enable a donor or donor advisor (or certain related persons) to attend or participate in a charity-sponsored event would result in a “more than incidental benefit” to the donor or donor advisor and thus in an excise tax under section 4967. This result would apply even if the DAF limited its distribution to cover only the portion of the ticket price that would be eligible for a charitable contribution deduction if made by the donor or donor advisor directly. This result would also apply to distributions to cover a deductible portion of membership fees charged by a charity.
  • Certain distributions from a DAF that the recipient charity treats as fulfilling a pledge made by a donor or donor advisor would not result in a more than incidental benefit under section 4967, provided that the sponsoring organization made no reference to the existence of any individual’s pledge when making the DAF distribution.
  • Changes to the public support computation for publicly supported charities described in sections 170(b)(1)(A)(vi) and 509(a)(2) to treat a distribution from a DAF as an indirect contribution from the donor (or donors) that funded the DAF rather than as a contribution from the DAF’s sponsoring organization. This change would prevent an organization that would be treated as a private foundation based on contributions received from one or more large donors from qualifying as a publicly supported charity solely as a result of the donor(s) making their contribution through a DAF. The new rules would also require a donee organization to treat all anonymous contributions (including a DAF distribution for which the sponsoring organization fails to identify the donor that funded the DAF) as being made by one person. 

Comments requested

Notice 2017-73 requests comments regarding the issues addressed above, including, specifically, any additional considerations the proposed changes raise relating to DAFs with multiple unrelated donors and any suggestions for methods to streamline recordkeeping required by the proposed changes. 

The notice also specifically requests comments regarding whether a transfer of funds by a private foundation to a DAF should be treated as a “qualifying distribution” for purposes of meeting the foundation’s payout under section 4942, only if the DAF sponsoring organization agrees to distribute the funds for charitable purposes. This may indicate that this rule could also appear in future proposed regulations.

The due date for comments is March 5, 2018. 

 

For more information, contact a tax professional with KPMG’s Washington National Tax practice:

Greg Goller | +1 703 286 8391 | greggoller@kpmg.com

Alexandra Mitchell | +1 202 533 6078 | aomitchell@kpmg.com

Preston Quesenberry | +1 202 533 3985 | pquesenberry@kpmg.com

Randall Thomas | +1 202 533 3786 | randallthomas@kpmg.com

© 2017 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

The KPMG logo and name are trademarks of KPMG International. KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever. The information contained in herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 4366, 1801 K Street NW, Washington, DC 20006.

Connect with us

 

Request for proposal

 

Submit