I. Background

Section 19 of the Federal Deposit Insurance Act (section 19)  1 prohibits, without the prior written consent of the FDIC (the FDIC refers to applications for such consent as “consent applications”), the participation in banking by any person who has been convicted of a crime involving dishonesty or breach of trust or money laundering or who has agreed to enter into a pretrial diversion or similar program in connection with the prosecution for such an offense (collectively, covered offenses). Further, this law forbids an insured depository institution (IDI) from permitting such a person to engage in any conduct or to continue any relationship prohibited by section 19. Section 19 also imposes a separate ten-year ban for a person convicted of certain crimes enumerated in Title 18 of the United States Code, which can be removed only upon a motion by the FDIC and approval by the sentencing court.

From 1998 until 2020, the FDIC had a Statement of Policy that was issued related to section 19, occasionally revised, and published in the Federal Register . 2 The purpose of the Statement of Policy, as amended through the years, was “to provide the public with guidance relating to section 19 and the FDIC's application thereof.”  3 In 2020, following notice and comment, the FDIC revised and codified the Statement of Policy into the FDIC's Filing Procedures under 12 CFR part 303, subpart L, and Rules of Practice and Procedure under part 308, subpart M (2020 Final Rule). 4

On December 23, 2022, the President signed into law the Fair Hiring in Banking Act FHBA, 5 which significantly revised section 19 and was effective immediately. The FHBA created several categories of exceptions or exemptions to the prohibition on participating in banking, including the following:

• Certain older offenses: (1) if it has been 7 years or more since the offense occurred; (2) if the individual was incarcerated with respect to the offense and it has been 5 years or more since the individual was released from incarceration; or (3) for individuals who committed an offense when they were 21 years of age or younger, if it has been more than 30 months since the sentencing occurred. 6

• Offenses for which an order of expungement, sealing, or dismissal has been issued in regard to the conviction in connection with such offense and it is intended by the language in the order itself, or in the legislative provisions under which the order was issued, that the conviction shall be destroyed or sealed from the individual's State, Tribal, or Federal record even if exceptions allow the record to be considered for certain character and fitness evaluation purposes.

• “ Designated lesser offenses,” including the use of fake identification, shoplifting, trespass, fare evasion, driving with an expired license or tag (and such other low-risk offenses as the FDIC may designate), if 1 year or more has passed since the applicable conviction or program entry.

• Misdemeanor criminal offenses involving dishonesty, if the offense was committed more than one year before the date on which an individual files a consent application, 7 excluding any period of incarceration.

• A criminal offense involving dishonesty that also “involv[es] the possession of controlled substances. ”

The FHBA clarifies several terms in section 19, including “criminal offense involving dishonesty” and “pretrial diversion or similar program.” It also provides conditions regarding de minimis offenses, to the extent the FDIC provides de minimis exemptions by rule.

The FHBA codifies procedures for consent applications filed with the FDIC. It requires the FDIC to make all forms and instructions related to consent applications available to the public, including on the FDIC's website. It requires the FDIC to primarily rely on the criminal history record of the Federal Bureau of Investigation when evaluating consent applications and to provide such records to the applicant to review for accuracy. Further, it requires the FDIC to assess evidence of an individual's rehabilitation including: the applicant's age at the time of the conviction or program entry; the time that has elapsed since conviction or program entry; and the relationship of an individual's offense to the responsibilities of the applicable position. Other information, including an individual's employment history, letters of recommendation, certificates documenting participation in substance abuse programs, successful participation in job preparation and educational programs, other relevant evidence, and any additional information the FDIC determines necessary for safety and soundness shall also be considered.

The proposed amendments to the FDIC's section 19 regulations are primarily intended to align the regulations with the FHBA's provisions. The proposed amendments address, among other topics, the types of offenses covered by section 19, the effect of the completion of sentencing or pretrial-diversion program requirements in the context of section 19, and the FDIC's procedures for reviewing applications filed under section 19. Furthermore, in developing these proposed amendments, the FDIC has consulted and coordinated with the National Credit Union Administration, the Board of Governors of the Federal Reserve System (FRB), and the Office of the Comptroller of the Currency “to promote consistent implementation [of the FHBA] where appropriate.”  8

Significant proposed revisions  9 include the following:

The FDIC proposes revising paragraph (b) of this section to clarify that IDIs must make a reasonable, documented inquiry to verify an applicant's history to ensure that a person who has a covered offense on the person's record is not hired or permitted to participate in its affairs without the written consent of the FDIC.

The FDIC proposes to revise paragraph (d) of this section to more closely align its restrictions with the analogous FRB regulations under 12 CFR 225.41 and 238.31 and the FDIC's regulations under 12 CFR part 303, subpart E, concerning Change in Bank Control applications. A person will be deemed to exercise “control” if that person: (1) has the ability to direct the management or policies of an IDI; (2) has the power to vote 25 percent or more of the voting shares of an IDI; or (3) has the power to vote 10 percent of the voting shares of an IDI if: (a) no other person owns, controls, or has the power to vote more shares; or (b) the institution has registered securities under section 12 of the Securities Exchange Act of 1934. 10 Under the same standards, a person will be deemed to “own” an IDI if that person owns: (1) 25 percent or more of the institution's voting stock; or (2) 10 percent of the voting shares if: (a) no other person owns more; or (b) the institution has registered securities under section 12 of the Securities Exchange Act of 1934. Paragraph (d) retains language concerning individuals acting in concert with others so as to have such ownership or control.

The proposed revisions to paragraph (a) of this section would reflect the new statutory definition of “criminal offense involving dishonesty.”  11 The FHBA excludes from the scope of such offenses “an offense involving the possession of controlled substances.”  12 The FDIC interprets this phrase concerning controlled substances to exclude, at a minimum, criminal offenses involving the simple possession of controlled substances and possession with intent to distribute a controlled substance. This exclusion may also apply to other drug-related offenses depending on the statutory elements of the offenses or from court determinations that the statutory provisions of the offenses do not involve dishonesty, breach of trust, or money laundering. Potential applicants may contact their appropriate FDIC Regional Office if they have questions about whether their offenses are covered under section 19.

This revised regulatory language would mark a shift from the FDIC's current section 19 regulations, which require an application for all convictions and pretrial diversions concerning the illegal manufacture, sale, distribution of, or trafficking in controlled substances. The FDIC believes that this proposed revision would be consistent with the text and purposes of the FHBA, would align the FDIC's interpretation of section 19 as to offenses involving controlled substances more closely with other Federal banking regulators, and continue to recognize that a drug-related offense could potentially involve dishonesty, breach of trust, or money laundering. The FDIC also notes that this proposed revision to its section 19 regulations would not affect the FDIC's ability to consider drug-related offenses, as they pertain to the suitability of an individual, under other statutory provisions, including the Change in Bank Control Act and section 32 of the FDI Act.

The FHBA also states that the term “criminal offense involving dishonesty” does not include “a misdemeanor criminal offense committed more than one year before the date on which an individual files a consent application, excluding any period of incarceration.”  13 The FDIC interprets the term “offense committed” to mean the “last date of the underlying misconduct,” based on the plain text of the statute. In instances with multiple offenses, “offense committed” means the last date of any of the underlying offenses.

Revised paragraph (c) would include new language reflecting the statute's exception of certain older offenses from the scope of section 19. 14 Among other exceptions, the FHBA states that section 19's restrictions will not apply to an offense if “it has been 7 years or more since the offense occurred.”  15 The FDIC considers the phrases “offense committed”—noted above—and “offense occurred” to be substantially similar. Accordingly, the FDIC interprets the term “offense occurred” to mean the “last date of the underlying misconduct.” In instances with multiple offenses, “offense occurred” means the last date of any of the underlying offenses. Revised paragraph (c) contains another FHBA exception: section 19's restrictions would not apply to an offense if “the individual was incarcerated with respect to the offense and it has been 5 years or more since the individual was released from incarceration.”  16 While the language of the statute is clear, the FDIC notes that there could be situations in which an individual who was incarcerated with respect to an offense would be permitted to work at a bank before a similarly situated individual who was not incarcerated in connection with an offense. Revised paragraph (c) also tracks the FHBA's language concerning offenses committed by individuals 21 years of age or younger. The FHBA states that, for individuals who committed an offense when the individual was 21 years of age or younger, section 19 shall not apply to the offense if it has been more than 30 months since the sentencing occurred. 17 The FDIC interprets “sentencing occurred” to mean the date on which a court imposed the sentence, not the date on which all conditions of sentencing were completed. Moreover, revised paragraph (c) notes that its exclusions—which are derived from the FHBA—do not apply to the enumerated offenses described under 12 U.S.C. 1829(a)(2). 18

Revised paragraph (d) excludes “designated lesser offenses” (for example, using fake identification), as specified in 12 U.S.C. 1829(c)(3)(D), if one year or more has passed since the applicable conviction or program entry.

Revised paragraph (e) adds language to codify the FDIC's long-held position that individuals who are convicted of or enter into a pretrial diversion program for a criminal offense involving dishonesty, breach of trust, or money laundering in foreign jurisdictions are subject to section 19, unless the offense is otherwise excluded by 12 CFR part 303, subpart L. For example, if an IDI has operations outside the United States, the IDI could conduct a reasonable, documented inquiry to verify an applicant's history, in accordance with 12 CFR 303.220, by inquiring about potential covered offenses that may have occurred in that foreign country (or countries) in which the IDI conducts operations, as well as in the United States. As another example of such an inquiry, if an IDI plans to hire someone in the United States who is from a foreign country, the IDI could inquire about potential covered offenses that may have occurred in the United States and in that foreign country.

Paragraph (c) of this section has been revised to reflect statutory language related to the treatment of orders of expungement, sealing, or dismissal of criminal records. 19 The FHBA provides a two-pronged test to determine whether a covered offense should be considered expunged, dismissed, or sealed and therefore excluded from the scope of section 19. First, there must be an “order of expungement, sealing, or dismissal that has been issued in regard to the conviction in connection with such offense”; second, it must be “intended by the language in the order itself, or in the legislative provisions under which the order was issued, that the conviction shall be destroyed or sealed from the individual's State, Tribal, or Federal record, even if exceptions allow the record to be considered for certain character and fitness evaluation purposes.”  20 The statute does not address expungements, sealings, or dismissals by operation of law, and the FDIC has sought to harmonize its current regulations concerning expunged and sealed records with the statutory language to provide a more comprehensive framework as to such records. The FDIC has also added language to the second (intent) prong of the expungement framework to encompass the language in the expungement order itself, the legislative provisions under which the order was issued, and other legislative provisions. This proposed revision also seeks to harmonize the FDIC's current regulations concerning expungements with the FHBA's provisions. The FDIC believes that all of the additional language is consistent with the purposes of the statute.

Revised paragraph (d) clarifies that it encompasses the terms “youthful offender” and “juvenile delinquent” and similar terms, since a court does not have to specifically use these terms in an adjudication in order for paragraph (d)'s provisions to apply.

This section has been revised to reflect the statutory definition of “pretrial diversion or similar program.”  21

This section has been revised to reflect the updated statutory filing procedures. The statute removes the FDIC's former policy that an institution sponsor a consent application or that an individual seek a waiver of the institution filing requirement. Moreover, the statute enables a depository institution holding company to file an application on behalf of an individual (previously, only IDIs could file such sponsored applications). 22 In order to avoid duplication of applications filed with the FRB and the FDIC, revised paragraph (a) states that the FDIC will accept applications from: an individual; an IDI applying on behalf of an individual; a depository institution holding company applying on behalf of an individual with respect to a depository institution subsidiary of the holding company; and a depository institution holding company applying on behalf of an individual who will work at the holding company but also participate in the affairs of the IDI or who would be in a position to influence or control the management or affairs of the IDI, in accordance with 12 CFR 303.221(a).

Revised paragraph (b), consistent with the FHBA, states that an individual or an institution may file applications at separate times. Under either approach, the application(s) must be filed with the appropriate FDIC Regional Office. 23

This revised section notes that, before an application may be filed, “all of the sentencing requirements associated with a conviction, or conditions imposed by the program entry, including but not limited to, imprisonment, fines, condition of rehabilitation, and probation requirements, must be completed, and the case must be considered final by the procedures of the applicable jurisdiction.” The FDIC proposes to include this revised language to accord with several of the FHBA's exclusions from section 19 that are not tied to the completion of sentencing requirements.

Furthermore, the FHBA requires the FDIC to “make all forms and instructions related to consent applications available to the public, including on the website of the Corporation.”  24 These forms and instructions “shall provide a sample cover letter and a comprehensive list of items that may accompany the application, including clear guidance on evidence that may support a finding of rehabilitation.”  25 While the FDIC has not explicitly mentioned these requirements in its regulations, the agency will comply with them.

The FDIC proposes to retitle this section to avoid confusion between “designated lesser offenses” and “ de minimis offenses.” This section's current title is, “When is an application not required for a covered offense or program entry ( De minimis offenses)?” The FHBA includes “designated lesser offenses,” which offenses are excluded from the scope of section 19 (that is, they are not considered de minimis offenses—which offenses are considered covered offenses for which no application is required because the application is deemed automatically granted). The FDIC believes that the current title would cause confusion for a reader and therefore proposes retitling this section.

The FHBA removed the use of fake identification from the scope of section 19, and revised paragraphs (a)(1) and (b)(4) reflect this exclusion. 26 Revised paragraph (a)(2) would reflect the FHBA's confinement criteria as to the FDIC's determination of de minimis offenses. 27

The FDIC proposes to revise the de minimis requirement related to the aggregate total face value of all “bad” or insufficient funds checks in paragraph (b)(2)(i) from $1,000 to $2,000 to conform with the statute. 28

This revised section would eliminate the institution filing requirement and waiver process and indicate that an “institution”—an IDI or a depository institution holding company—could file an application on behalf of an individual, rather than just an IDI. Both of these proposed revisions are due to the updated statutory language. 29 This revised section would also clarify that the appropriate FDIC Regional Office for an institution-sponsored application would be the office covering the state where the institution's home office is located and that the appropriate FDIC Regional Office for an individual application would be the office covering the state where the person resides.

Revised paragraph (a) would reflect new statutory requirements related to the FDIC's review process, including the requirement that the FDIC primarily rely on the criminal history record of the Federal Bureau of Investigation in the FDIC's review and provide such record to the applicant to review for accuracy. 30 The FDIC interprets the term “criminal history record” to mean “identity history summary checks,” which are commonly known as “rap sheets.” Under revised paragraph (a)—and in accordance with the FHBA—the FDIC, in reviewing a consent application, would provide a copy of the rap sheet to an applicant to review for accuracy. 31

Revised paragraph (b) would state that the FDIC will not require an applicant to provide certified copies of criminal history records unless the FDIC determines that there is a clear and compelling justification to require additional information to verify the accuracy of the criminal history record of the Federal Bureau of Investigation (that is, the rap sheet). 32

Revised paragraph (d) would clarify how the FDIC will evaluate evidence of rehabilitation and other evidence, as required by the FHBA. 33

Revised paragraph (g) would eliminate references to the former application-waiver requirement.

Finally, revised paragraph (h) would incorporate statutory language explaining when a new institution-sponsored application would be necessary due to changes in the scope of an applicant's employment. 34

This section, as currently written and among other provisions, requires a one-year waiting period to file a consent application, following the issuance of a decision denying such an application. The proposed rule would retain the existing regulatory text as paragraph (a) and create a new paragraph (b)—which would note that an institution-sponsored application is not subject to the one-year waiting period if the application (1) follows the denial of an individual application, or (2) follows the denial of an institution-sponsored application and the subsequent application is sponsored by a different institution or is for a different position.

The proposed rule would make several technical amendments to §§ 308.156 and 308.158 to encompass applications that are sponsored by depository institution holding companies, clarify two sentences concerning hearing procedures, and use more consistent terminology.

As previously discussed, the proposed rule would align the FDIC's regulations with the FHBA's provisions, make additional changes to further clarify the FDIC's regulations related to section 19, more closely align the FDIC's section 19 regulations with those of other Federal financial regulators, and make a number of non-substantive, technical edits. As of the quarter ending June 30, 2023, there were 4,654 FDIC-insured depository institutions, all of which are covered by the rule and therefore could be affected. 35 Additionally, the rule will apply to persons covered by the provisions of section 19, including those who are or wish to become employees, officers, directors, or controlling shareholders of an IDI or who otherwise are or wish to become an institution-affiliated party (IAP) of an IDI.

To estimate the number of institutions and individuals affected by the rule, the FDIC counted the number of section 19 applications it has received between 2020 and 2022. Over this period, the FDIC received 27 bank-sponsored section 19 applications, an average of 9 per year. Additionally, the FDIC received 202 individual section 19 applications during the same period, an average of approximately 67 per year. 36 Therefore, the FDIC estimates that the proposed rule could affect at least 9 FDIC-insured depository institutions and 67 individuals per year. Assuming that each application involves a different institution, approximately 2 percent of insured institutions, or 76, could be affected per year on average. 37

As previously described, the proposed rule would align the FDIC's regulations with the FHBA's provisions. In particular, the FHBA created several categories of exceptions or exemptions to the prohibition on participating in banking. The proposed rule would incorporate these categories of exemptions and exceptions. The FDIC believes that the additional categories for exceptions or exemptions to the prohibition on participating in banking established by the FHBA could benefit certain individuals and IDIs by reducing the number of applications they would otherwise be required to file under section 19. Additionally, the categories of exceptions or exemptions to the prohibition on participating in banking established by the FHBA could benefit IDIs by marginally expanding the supply of labor available. However, these changes were created by the FHBA and were effective immediately upon passage, and the proposed rule aligns the FDIC's regulations with these elements of the FHBA; therefore, the associated changes in the proposed rule will have no direct effect on individuals or IDIs.

The proposed rule would amend the FDIC's existing section 19 application-procedure regulations to incorporate the FHBA's provisions. The FDIC's current section 19 regulations contain references to existing application procedures that are similar in substance to those established by FHBA. However, the FHBA, among other requirements, compels the FDIC to primarily rely on the criminal history record of the Federal Bureau of Investigation when reviewing consent applications. It is the current practice of the FDIC to consider all relevant information when evaluating a section 19 application. However, the establishment of a common source of criminal history, together with only requiring certified copies of criminal history records if there exists clear and compelling justification for doing so, could benefit certain individuals and IDIs by marginally reducing the volume of information they need to supply to the FDIC. The FDIC believes that, while these proposed changes to the application procedures will directly affect certain individuals and institutions that file section 19 applications, they may not have a substantial effect on potential applicants. Finally, these changes were created by the FHBA and were effective immediately upon passage, and the proposed rule aligns the FDIC's regulations with these elements of the FHBA; therefore, the associated changes in the proposed rule will have no direct effect on individuals or IDIs.

Finally, in seeking to align its section 19 regulations with the provisions of the FHBA, the FDIC used its discretion to marginally increase the scope of certain terms so as to better reflect the purposes of the FHBA. In particular, the FDIC has provided broader language as to the scope of expunged, sealed, or dismissed offenses. This aspect of the proposed rule could potentially benefit persons covered by the provisions of section 19, including individuals who are or wish to become employees, officers, directors, or controlling shareholders of an IDI, or who otherwise are or wish to become an IAP of an IDI. However, given that most of the proposed amendments are focused on aligning the FDIC's regulations with the FHBA, the marginal effect of this aspect of the proposed rule is likely to be small.

The FDIC invites comments on all aspects of this analysis. In particular, would the proposed rule have any costs or benefits that the FDIC has not identified?

As discussed above, almost all of the proposed substantive changes stem from the FHBA's revisions to section 19. The FDIC does not have discretion in considering alternatives to those statutory revisions. The FDIC has, however, proposed several clarifications and interpretations to its section 19 regulations. For example, the FDIC has provided broader language as to the scope of expunged, sealed, or dismissed offenses. The FDIC considered whether to simply provide the statutory definition for such offenses. The FDIC chose to propose the inclusion of more expansive language, in the interest of harmonizing the FDIC's existing regulations with the revisions to section 19, and under the belief that this language would be consistent with the purposes of the FHBA. The FDIC invites comments on its consideration of alternatives. In particular, are there other alternatives that the FDIC should consider?

1. The FDIC seeks comments on all aspects of its approach to section 19 and more specifically on the questions that follow.

2. Offense date. As revised, section 19 provides for an exception for an offense if “it has been 7 years or more since the offense occurred.”  38 There is a similar provision that removes from the definition of “criminal offense involving dishonesty” “a misdemeanor criminal offense committed more than one year before the date on which an individual files a consent application, excluding any period of incarceration[.]”  39 Historically, the FDIC's position has been that actions do not amount to a covered “offense,” for section 19 purposes, until there has been either a conviction via a guilty plea, finding of guilt, or an entry into a pretrial-diversion program. This is because culpability and responsibility for the actions do not attach until one of those events occurs. 40 However, for purposes of evaluating whether the seven-year or one-year exception applies, the FDIC must evaluate if it has been seven years or more since the “offense occurred” or whether the “offense [was] committed more than one year before the date on which an individual files a consent application, excluding any period of incarceration.” The FDIC proposes to interpret the phrases “offense occurred” and “offenses committed” as the “last date of the underlying misconduct” given the text of the statute. (In instances with multiple offenses, “offense occurred” or “offense committed” would mean the last date of any of the underlying offenses.) However, the FDIC acknowledges that there may be other, supportable interpretations of this phrase. For example, the FDIC is aware of legislative history indicating that the timeframes established by the FHBA were chosen because of their relation to an individual's likelihood of rehabilitation and that an individual's rehabilitation likely only begins with conviction or program entry, rather than the date of their misconduct. As such, the FDIC seeks public comment on the following topic: Is the FDIC's interpretation of the phrases “offense occurred” and “offense committed” as the “last date of underlying misconduct” appropriate or are there other interpretations the FDIC should consider? What support do commenters have for other interpretations given the language of the statute?

3. “ Sentencing occurred. ” The FHBA exempts offenses committed by individuals 21 years of age or younger if it has been more than 30 months since the sentencing occurred. 41 However, the statute does not define the phrase “sentencing occurred.” The FDIC proposes to interpret “sentencing occurred” to mean the date on which a court imposed the sentence, not the date on which all conditions of sentencing were completed. The FDIC seeks public comment on the following topic: Is the FDIC's proposed interpretation of the phrase “sentencing occurred” appropriate?

4. Foreign convictions and pretrial diversions. Section 19 applies to “any person who has been convicted of any criminal offense involving dishonesty or a breach of trust or money laundering, or has agreed to enter into a pretrial diversion or similar program in connection with a prosecution for such offense.”  42 The phrase “criminal offense involving dishonesty” is defined in the statute but is silent as to whether it includes convictions and pretrial diversions for criminal offenses prosecuted by foreign authorities (foreign convictions). 43 The statute does not define “offense involving . . . breach of trust or money laundering.” The FDIC's position has been that foreign convictions and pretrial diversions are included within the scope of section 19. There are strong public policy rationales for prohibiting persons who have been convicted of certain foreign criminal offenses (or entered into a pre-trial diversion program in connection with such an offense) from becoming or continuing as an IAP or owning, controlling, or otherwise participating in the affairs of an insured depository institution. However, the FDIC acknowledges that there may be caselaw, statutory construction, and other arguments that support a reading of section 19 that would exclude foreign convictions and pretrial diversions from the scope of section 19. As such, the FDIC seeks public comment on the following topic: Does section 19 encompass foreign convictions and pretrial diversions? What support do commenters have for their position?

5. Expungements, sealings, and dismissals. The FHBA established a new statutory exemption for expunged, sealed, and dismissed convictions (collectively, “expungements”). 44 The FDIC's current regulations contain more expansive language concerning expungements than the statutory text. Notably, the FDIC's expungement provisions encompass all convictions that had been expunged—whether by court order or otherwise by operation of law. The statutory language does not mention expungements “by operation of law”—as opposed to through a court order. The proposed rule incorporates the new statutory language but also maintains the FDIC's broad interpretation of “expungement” to encompass covered offenses that have been expunged by operation of law. The FDIC seeks public comment on the following topic: Given the new statutory exemption for expunged offenses, is the FDIC's more expansive proposed interpretation of expungement—which term includes records that have been expunged by application of law—appropriate?

6. Offenses involving controlled substances. The FHBA states that “offenses involving the possession of controlled substances” are not included within the definition of “criminal offense involving dishonesty” and, therefore, are not subject to section 19's prohibition. 45 The proposed rule includes this definitional exclusion and notes that the FDIC interprets the phrase “offenses involving the possession of controlled substances” to include, at a minimum, the offenses of simple possession of controlled substances and possession with intent to distribute controlled substances. This interpretation would mark an expansion from the FDIC's current section 19 regulations, which only provide an exclusion for the simple possession of controlled substances. At the same time, this interpretation would track the statutory language of “offenses involving the possession of controlled substances” by encompassing the offense of possession with intent to distribute controlled substances. The FDIC seeks public comment on the following topic: Is the FDIC's interpretation of “offense[s] involving the possession of controlled substances” as applying, at a minimum, to simple possession and possession with intent to distribute appropriate?

7. De minimis offenses. The FHBA states that the FDIC may exempt by rule certain de minimis offenses from section 19's prohibition. The FDIC considers de minimis offenses to be covered offenses for which an application is not required because the FDIC deems the application automatically granted. The FDIC has previously promulgated rules that specified de minimis offenses under section 19. 46 However, given this new statutory language, the FDIC is reevaluating its current approach to de minimis offenses. Accordingly, the FDIC seeks public comment on the following topic: Is the FDIC's current approach to de minimis offenses appropriate? Are there additional offenses that the FDIC should consider de minimis under section 19? Please provide support for such a designation.

8. Written comments must be received by the FDIC no later than January 16, 2024.

In accordance with the requirements of the Paperwork Reduction Act (PRA), 47 the FDIC may not conduct or sponsor, and the respondent is not required to respond to, an information collection unless it displays a currently valid Office of Management and Budget (OMB) control number.

The FDIC is revising its section 19 application form to conform with the changes to section 19 under the FHBA. These changes will amend the FDIC's existing information collection associated with this proposed rule, entitled “Application Pursuant to Section 19 of the Federal Deposit Insurance Act” (3064-0018). For this reason, the information-collection requirements contained in this proposed rule will be submitted by the FDIC to OMB for review and approval under section 3507(d) of the PRA (44 U.S.C. 3507(d)) and § 1320.11 of the OMB's implementing regulations (5 CFR part 1320). Based on available data, the number of respondents and the estimated annual burden associated with the information collection will decrease. Comments are invited on:

(a) Whether the collection of information is necessary for the proper performance of the FDIC's functions, including whether the information has practical utility;

(b) The accuracy of the estimate of the burden of the information collection, including the validity of the methodology and assumptions used;

(c) Ways to enhance the quality, utility, and clarity of the information to be collected;

(d) Ways to minimize the burden of the information collection on respondents, including through the use of automated collection techniques or other forms of information technology; and

(e) Estimates of capital or start-up costs and costs of operation, maintenance, and purchase of services to provide information.

All comments will become a matter of public record. Comments on the collection of information should be sent to the address listed in the ADDRESSES section of this document. A copy of the comments may also be submitted to the OMB desk officer: By mail to U.S. Office of Management and Budget, 725 17th Street NW, #10235, Washington, DC 20503, or by facsimile to 202-395-6974; or email to oira_submission@omb.eop.gov, Attention, Federal Banking Agency Desk Officer.

Title: “Application Pursuant to Section 19 of the Federal Deposit Insurance Act”.

OMB Number: 3064-0018.

Affected Public: Insured depository institutions and individuals.

The Regulatory Flexibility Act (RFA) generally requires an agency, in connection with a proposed rule, to prepare and make available for public comment an initial regulatory flexibility analysis that describes the impact of the proposed rule on small entities. 48 However, an initial regulatory flexibility analysis is not required if the agency certifies that the proposed rule will not, if promulgated, have a significant economic impact on a substantial number of small entities. The Small Business Administration (SBA) has defined “small entities” to include banking organizations with total assets of less than or equal to $850 million. 49 Generally, the FDIC considers a significant economic impact to be a quantified effect in excess of 5 percent of total annual salaries and benefits or 2.5 percent of total noninterest expenses. The FDIC believes that effects in excess of one or more of these thresholds typically represent significant economic impacts for FDIC-supervised institutions.

As discussed further below, the FDIC certifies that the proposed rule, if adopted, will not have a significant economic impact on a substantial number of FDIC-supervised small entities.

As of the quarter ending June 30, 2023, the FDIC insured 4,654 depository institutions, of which 3,373 are defined as small banking organizations for the purposes of the RFA. 50 In the period from 2020 through 2022, the FDIC received 9 bank-sponsored section 19 applications from small, FDIC-insured institutions, an average of 3 per year. Additionally, the FDIC received 202 section 19 applications from individuals during the same period, an average of about 67 per year. 51 To determine the maximum number of small, FDIC-insured institutions that could be affected by the proposed rule, this analysis assumes that each applicant is seeking employment at a different bank and that each bank is a small, FDIC-insured institution. Based on these assumptions, 70 (2.1 percent of) small, FDIC-insured institutions, on average, annually, could be affected by the proposed rule. 52 Section 19 applications from individuals are compelled by the applicant's intent to seek employment at FDIC-insured institutions, many of which are not small. Therefore, the FDIC believes that the number of small, FDIC-insured institutions affected by the proposed rule is likely to be less than 70.

As discussed in the SUPPLEMENTARY INFORMATION section, the proposed rule would align the FDIC's regulations with the FHBA's provisions, make additional changes to further clarify the FDIC's regulations related to section 19, more closely align the FDIC's section 19 regulations with those of other Federal financial regulators, and make a number of non-substantive, technical edits. Most of the proposed changes were precipitated by the FHBA—which was effective immediately upon passage—and the proposed rule aligns the FDIC's regulations with these elements of the FHBA; therefore, most of the associated changes in the proposed rule will have no direct effect on individuals or IDIs. Further, since the FDIC estimates that a maximum of 70 small, FDIC-insured institutions could be affected by the proposed rule, on average, annually, any direct affects realized as a result of the proposed rule are likely to be small and affect a relatively small number of entities.

In light of the foregoing, the FDIC certifies that the proposed rule would not have a significant economic impact on a substantial number of small entities. The FDIC invites comments on all aspects of the supporting information provided in this RFA section. In particular, would this proposed rule have any significant effects on small entities that the FDIC has not identified?

Section 722 of the Gramm-Leach-Bliley Act  53 requires each Federal banking agency (FBA) to use plain language in its proposed and final rules published after January 1, 2000. The FDIC has sought to present the proposed rule in a simple and straightforward manner. The FDIC invites comments on whether the proposal is clearly stated and effectively organized, and how the FDIC might make the proposal easier to understand. For example:

• Has the FDIC organized the material to suit your needs? If not, how could it present the rule more clearly?

• Have we clearly stated the requirements of the rule? If not, how could the rule be more clearly stated?

• Does the rule contain technical jargon that is not clear? If so, which language requires clarification?

• Would a different format (grouping and order of sections, use of headings, paragraphing) make the regulation easier to understand? If so, what changes would make the regulation easier to understand?

• What else could we do to make the regulation easier to understand?

Under section 302(a) of the Riegle Community Development and Regulatory Improvement Act (RCDRIA), 54 in determining the effective date and administrative compliance requirements for new regulations that impose additional reporting, disclosure, or other requirements on IDIs, each FBA must consider, consistent with principles of safety and soundness and the public interest, any administrative burdens that such regulations would place on depository institutions, including small depository institutions, and customers of depository institutions, as well as the benefits of such regulations. In addition, section 302(b) of the RCDRIA requires new regulations and amendments to regulations that impose additional reporting, disclosures, or other new requirements on IDIs generally to take effect on the first day of a calendar quarter that begins on or after the date on which the regulations are published in final form. 55 The FDIC invites comments that further will inform its consideration of RCDRIA.

For the reasons stated in the preamble and under the authority of 12 U.S.C. 1819 (Seventh and Tenth), the FDIC proposes to amend 12 CFR parts 303 and 308 as follows:

Comments Invited

The FAA invites you to send any written relevant data, views, or arguments about this proposal. Send your comments to an address listed under ADDRESSES . Include “Docket No. FAA-2023-2149; Project Identifier MCAI-2023-00136-E” at the beginning of your comments. The most helpful comments reference a specific portion of the proposal, explain the reason for any recommended change, and include supporting data. The FAA will consider all comments received by the closing date and may amend the proposal because of those comments.

Except for Confidential Business Information (CBI) as described in the following paragraph, and other information as described in 14 CFR 11.35, the FAA will post all comments received, without change, to regulations.gov , including any personal information you provide. The agency will also post a report summarizing each substantive verbal contact received about this NPRM.

CBI is commercial or financial information that is both customarily and actually treated as private by its owner. Under the Freedom of Information Act (FOIA) (5 U.S.C. 552), CBI is exempt from public disclosure. If your comments responsive to this NPRM contain commercial or financial information that is customarily treated as private, that you actually treat as private, and that is relevant or responsive to this NPRM, it is important that you clearly designate the submitted comments as CBI. Please mark each page of your submission containing CBI as “PROPIN.” The FAA will treat such marked submissions as confidential under the FOIA, and they will not be placed in the public docket of this NPRM. Submissions containing CBI should be sent to Barbara Caufield, Aviation Safety Engineer, FAA, 1600 Stewart Avenue, Suite 410, Westbury, NY 11590. Any commentary that the FAA receives which is not specifically designated as CBI will be placed in the public docket for this rulemaking.

The FAA issued AD 2021-13-07, Amendment 39-21612 (86 FR 31601, June 15, 2021) (AD 2021-13-07) for all GEAC Model M601D-11, M601E-11, M601E-11A, M601E-11AS, M601E-11S, and M601F engines. AD 2021-13-07 was prompted by an MCAI originated by EASA. EASA issued EASA Emergency AD 2021-0125-E, dated May 7, 2021 (EASA Emergency AD 2021-0125-E) to correct an unsafe condition identified as the manufacturer finding errors in the ALS of the existing EMM, including errors in the formula to determine the consumed equivalent flight cycles of critical parts and errors with certain part numbers. The manufacturer also determined that the life limit of a certain compressor case installed on Model M601E engines was not listed in the ALS of the applicable EMM.

AD 2021-13-07 requires recalculating the life of critical parts and replacing critical parts, if necessary. AD 2021-13- 07 also requires replacing a certain compressor case. The FAA issued AD 2021-13-07 to prevent failure of the engine.

The FAA issued AD 2022-13-16, Amendment 39-22102 (87 FR 37986, June 27, 2022) (AD 2022-13-16), for all GEAC Model M601D-11 engines. AD 2022-13-16 was prompted by an MCAI originated by EASA, which is the Technical Agent for the Member States of the European Union. EASA issued AD 2021-0060, dated March 3, 2021 (EASA AD 2021-0060) to correct an unsafe condition identified as the manufacturer revising the ALS to introduce a visual inspection of the centrifugal compressor case for cracks.

AD 2022-13-16 requires revising the ALS of the existing EMM to incorporate a visual inspection of the centrifugal compressor case for cracks. The FAA issued AD 2022-13-16 to prevent failure of the centrifugal compressor case.

The FAA issued AD 2022-14-12, Amendment 39-22117 (87 FR 42066, July 14, 2022) (AD 2022-14-12), for certain GEAC Model M601D-11, M601E-11, M601E-11A, M601E-11AS, M601E-11S, and M601F engines. AD 2022-14-12 was prompted by an MCAI originated by EASA. EASA issued AD 2021-0154, dated July 1, 2021 (EASA AD 2021-0154) to correct an unsafe condition identified as the absence of life limits for the propeller shaft part number M601-6081.6 in the ALS of the applicable EMM, as well as a lack of data necessary for operators to determine the accumulated life of certain propeller shafts, resulting in a propeller shaft life limit that may not have been implemented correctly.

AD 2022-14-12 requires replacing the propeller shaft for Model M601F engines. AD 2022-14-12 also requires calculating the accumulated life of the propeller shaft and replacing the propeller shaft, if necessary, for model M601D-11, M601E-11, M601E-11A, M601E-11AS, and M601E-11S engines. The FAA issued AD 2022-14-12 to prevent failure of the propeller shaft.

The FAA issued AD 2023-01-10, Amendment 39-22304 (88 FR 7578, February 6, 2023) (AD 2023-01-10) for certain GEAC Model M601E-11, M601E-11A, M601E-11AS, M601E-11S, and M601F engines. AD 2023-01-10 was prompted by an MCAI originated by EASA. EASA issued EASA AD 2021-0264, dated November 22, 2021 (EASA AD 2021-0264) to correct an unsafe condition identified as the exclusion of life limits for certain compressor cases and compressor drums from the ALS of the EMM and certain compressor cases that, following rework, were improperly re-identified and had incomplete engine logbook entries.

AD 2023-01-10 requires recalculating the consumed life for certain compressor cases and compressor drums and replacing certain compressor cases and compressor drums, if necessary. The FAA issued AD 2023-01-10 to prevent failure of the compressor case and compressor drum.

Since the FAA issued AD 2021-13-07, AD 2022-13-16, AD 2022-14-12, and AD 2023-01-10, EASA superseded EASA AD 2021-0060 and EASA AD 2021-0154 and issued EASA AD 2023-0020, dated January 23, 2023 (EASA AD 2023-0020) (also referred to as the MCAI). The MCAI states that the manufacturer revised the ALS to incorporate new and more restrictive tasks and limitations, expand the applicability to all model M601 series engines, and include certain requirements that were previously addressed by EASA Emergency AD 2021-0125-E and EASA AD 2021-0264. The MCAI also states that the manufacturer published service information that specifies instructions to determine the accumulated life of certain propeller shafts.

You may examine the MCAI in the AD docket at regulations.gov under Docket No. FAA-2023-2149.

The FAA reviewed EASA AD 2023-0020, which specifies procedures for accomplishment of the actions specified in the ALS, including performing maintenance tasks, replacing life-limited parts, and revising the existing approved maintenance or inspection program, as applicable, by incorporating the instructions and associated thresholds and intervals described in the ALS, as applicable to engine model and depending on engine configuration.

This service information is reasonably available because the interested parties have access to it through their normal course of business or by the means identified in ADDRESSES .

These products have been approved by the aviation authority of another country and are approved for operation in the United States. Pursuant to the FAA's bilateral agreement with this State of Design Authority, it has notified the FAA of the unsafe condition described in the MCAI referenced above. The FAA is issuing this NPRM after determining that the unsafe condition described previously is likely to exist or develop on other products of the same type design.

This proposed AD would require accomplishing the actions specified in the MCAI described previously, except for any differences identified as exceptions in the regulatory text of this proposed AD and as discussed under “Differences Between this Proposed AD and the MCAI.”

This proposed AD would terminate the requirements of paragraphs (g)(1) through (3) of AD 2021-13-07 for model M601D-11, M601E-11, M601E-11A, M601E-11AS, M601E-11S, and M601F engines only.

This proposed AD would terminate the requirements of paragraphs (g)(1) through (3) of AD 2023-01-10 for model M601E-11, M601E-11A, M601E-11AS, M601E-11S, and M601F engines only.

The owner/operator (pilot) holding at least a private pilot certificate may revise the ALS of the existing EMM and must enter compliance with the applicable paragraph of this proposed AD into the engine maintenance records in accordance with 14 CFR 43.9(a) and 91.417(a)(2)(v). The pilot may perform this action because it only involves revising the pilot's manual. This action could be performed equally well by a pilot or a mechanic. This is an exception to the FAA's standard maintenance regulations.

In the FAA's ongoing efforts to improve the efficiency of the AD process, the FAA developed a process to use some civil aviation authority (CAA) ADs as the primary source of information for compliance with requirements for corresponding FAA ADs. The FAA has since coordinated with other manufacturers and CAAs to use this process. As a result, the FAA proposes to incorporate by reference EASA AD 2023-0020 in the FAA final rule. This proposed AD would, therefore, require compliance with EASA AD 2023-0020 in its entirety through that incorporation, except for any differences identified as exceptions in the regulatory text of this proposed AD. Using common terms that are the same as the heading of a particular section in the EASA AD does not mean that operators need comply only with that section. For example, where the AD requirement refers to “all required actions within the compliance times,” compliance with this AD requirement is not limited to the section titled “Required Action(s) and Compliance Time(s)” in EASA AD 2023-0020. Service information required by the EASA AD for compliance will be available at regulations.gov under Docket No. FAA-2023-2149 after the FAA final rule is published.

Where the MCAI applies to Model M601D, M601D-1, M601D-2, M601D-11NZ, M601E, M601E-21, M601FS, and M601Z engines, this proposed AD does not, as these engine models are not type certificated in the United States.

Where the MCAI defines the AMP as the approved Aircraft Maintenance Programme containing the tasks on the basis of which the scheduled maintenance is conducted to ensure the continuing airworthiness of each operated engine, this proposed AD defines the AMP as the aircraft maintenance program containing the tasks on the basis of which the scheduled maintenance is conducted to ensure the continuing airworthiness of each operated airplane.

Where the MCAI specifies the ALS of GEAC EMM No. 0982309, Revision 21, dated November 18, 2022, this proposed AD specifies the ALS of GEAC EMM No. 0982309, Revision 22, dated March 10, 2023. The ALS in Revision 22 of GEAC EMM No. 0982309 is unchanged from Revision 21.

Where paragraph (3) of the MCAI specifies revising the approved Aircraft Maintenance Programme within 12 months after the effective date of EASA AD 2023-0020, this proposed AD would require revising the ALS of the existing approved engine maintenance or inspection program, as applicable, within 90 days after the effective date of this AD.

This proposed AD would not require compliance with paragraphs (1), (2), (4), and (5) of the MCAI.

The FAA estimates that this AD, if adopted as proposed, would affect 42 engines installed on airplanes of U.S. registry.

The FAA estimates the following costs to comply with this proposed AD:

Title 49 of the United States Code specifies the FAA's authority to issue rules on aviation safety. Subtitle I, section 106, describes the authority of the FAA Administrator. Subtitle VII, Aviation Programs, describes in more detail the scope of the Agency's authority.

The FAA is issuing this rulemaking under the authority described in Subtitle VII, Part A, Subpart III, Section 44701: General requirements. Under that section, Congress charges the FAA with promoting safe flight of civil aircraft in air commerce by prescribing regulations for practices, methods, and procedures the Administrator finds necessary for safety in air commerce. This regulation is within the scope of that authority because it addresses an unsafe condition that is likely to exist or develop on products identified in this rulemaking action.

The FAA determined that this proposed AD would not have federalism implications under Executive Order 13132. This proposed AD would not have a substantial direct effect on the States, on the relationship between the national Government and the States, or on the distribution of power and responsibilities among the various levels of government.

For the reasons discussed above, I certify that the proposed regulation:

(1) Is not a “significant regulatory action” under Executive Order 12866,

(2) Would not affect intrastate aviation in Alaska, and

(3) Would not have a significant economic impact, positive or negative, on a substantial number of small entities under the criteria of the Regulatory Flexibility Act.

Accordingly, under the authority delegated to me by the Administrator, the FAA proposes to amend 14 CFR part 39 as follows:

On December 8, 2016, the Treasury Department and the IRS published a notice of proposed rulemaking (REG-128276-12, 81 FR 88882, December 8, 2016) (the “2016 proposed regulations”) in the Federal Register . The 2016 proposed regulations cross-reference temporary regulations in Treasury Decision 9795 (81 FR 88854, December 8, 2016) (the “temporary regulations”), which provided rules under section 987 of the Internal Revenue Code relating to the determination and recognition of taxable income or loss and foreign currency gain or loss with respect to a qualified business unit. On May 13, 2019, the Treasury Department and the IRS published Treasury Decision 9857 (84 FR 20790, May 13, 2019), which finalized parts of the 2016 proposed regulations and withdrew one section of the temporary regulations. The temporary regulations that were not finalized or withdrawn expired on December 6, 2019. A notice of proposed rulemaking published in this issue of the Federal Register contains new proposed regulations under section 987 and withdraws parts of the 2016 proposed regulations. The parts of the 2016 proposed regulations that remain outstanding include: (1) rules regarding the treatment of section 988 transactions of a section 987 QBU ( see §§ 1.987-1, 1.987-3, and 1.988-1 of the 2016 proposed regulations); (2) rules regarding QBUs with the U.S. dollar as their functional currency ( see §§ 1.987-1 and 1.987-6 of the 2016 proposed regulations); (3) rules regarding the translation of income used to pay creditable foreign income taxes ( see § 1.987-3 of the 2016 proposed regulations); and (4) rules requiring the deferral of certain section 988 loss that arises with respect to related-party loans ( see § 1.988-2 of the 2016 proposed regulations).

The Treasury Department and the IRS are considering finalizing these parts of the 2016 proposed regulations and, therefore, are reopening the comment period for 90 days. Comments that were previously submitted in accordance with the 2016 proposed regulations will be considered and do not need to be resubmitted.

Comments and Requests for a Public Hearing: Before the parts of the 2016 proposed regulations that remain outstanding are adopted as final regulations, consideration will be given to comments that are submitted timely to the IRS as prescribed in this Notice in the “Addresses” section. Any comments submitted will be made available at https://www.regulations.gov or upon request.

A public hearing will be scheduled if requested in writing by any person who timely submits written comments. Requests for a public hearing are also encouraged to be made electronically. If a public hearing is scheduled, notice of the date and time for the public hearing will be published in the Federal Register .

Background I. Overview

Some charitable organizations (including community foundations) establish accounts to which donors may contribute and thereafter provide nonbinding advice or recommendations with regard to distributions from the account or the investment of assets in the account. Such accounts are commonly referred to as “donor advised funds” or “DAFs.” Sections 1231-1235 of the Pension Protection Act of 2006 (PPA), Public Law 109-280, 120 Stat. 780, 1094-1102 (August 17, 2006), enacted various amendments to the Internal Revenue Code (Code) regarding DAFs. Among these, section 1232 of the PPA amended section 4958 of the Code to add special rules relating to excess benefit transactions with DAFs; section 1231(b) of the PPA added section 4967 to the Code, which imposes an excise tax on prohibited benefits resulting from distributions from DAFs; and section 1231(a) of the PPA added section 4966 of the Code, which imposes excise taxes on taxable distributions made by sponsoring organizations from a DAF, and on the agreement of certain fund managers to the making of such distributions. This notice of proposed rulemaking contains proposed amendments to 26 CFR part 53 (Foundation and Similar Excise Taxes) under section 4966 (proposed regulations).

Section 4958 imposes an excise tax on any “excess benefit transaction,” which is defined generally under section 4958(c)(1) as any transaction in which an economic benefit is provided, the value of which exceeds the value of any consideration received, by an applicable tax-exempt organization (including a section 501(c)(3) sponsoring organization of a DAF) directly or indirectly to or for the use of a disqualified person with respect to a transaction. 1 This excise tax under section 4958 is paid by the disqualified person with respect to the transaction. A separate excise tax, paid by organization managers, is imposed on the participation of any organization manager in the transaction, knowing that it is an excess benefit transaction, unless such participation is not willful and is due to reasonable cause.

Section 1232 of the PPA amended section 4958 to provide that, with respect to any transaction that involves a DAF, a disqualified person includes (1) any donor with respect to the DAF, (2) any donor-advisor with respect to the DAF, and (3) any member of the family, or any 35-percent controlled entity of a donor or donor-advisor or member of their families with respect to the DAF, each, a “related person,” and to provide that any grant, loan, compensation, or other similar payment from the DAF to such disqualified person is an excess benefit transaction. For purposes of this special rule for transactions involving DAFs, the excess benefit includes the entire amount of the grant, loan, compensation, or other similar payment. The PPA also amended section 4958 to treat as a disqualified person with respect to a transaction involving a sponsoring organization an investment advisor (or a family member or a 35-percent controlled entity of such person).

Section 4966(d)(2)(A) defines a “DAF” generally as a fund or account (1) that is separately identified by reference to contributions of a donor or donors, (2) that is owned and controlled by a sponsoring organization, and (3) with respect to which a donor (or any person appointed or designated by the donor, namely, a donor-advisor) has, or reasonably expects to have, advisory privileges with respect to the distribution or investment of amounts held in the fund or account by reason of the donor's status as a donor.

Section 4966(d)(2)(B)(i) states that a DAF does not include a fund or account that makes distributions only to a single identified organization or governmental entity. Section 4966(d)(2)(B)(ii) states that a DAF does not include a fund or account with respect to which a donor or a donor-advisor provides advice regarding grants to individuals for travel, study, or similar purposes if (1) the donor's, or the donor-advisor's, advisory privileges are exercised exclusively in the donor's or donor-advisor's capacity as a member of a committee all the members of which are appointed by the sponsoring organization, (2) no combination of donor(s), donor-advisor(s), or persons related to such persons directly or indirectly control the committee, and (3) all grants are awarded on an objective and nondiscriminatory basis pursuant to a procedure approved in advance by the sponsoring organization's board of directors, and the procedure is designed to ensure that the grants meet the requirements of section 4945(g)(1), (2), or (3).

Section 4966(d)(2)(C) authorizes the Secretary of the Treasury or her delegate (Secretary) to exempt a fund or account from treatment as a DAF if it (1) is advised by a committee not directly or indirectly controlled by the donor or any donor-advisor (and any related parties), or (2) benefits a single identified charitable purpose.

Section 4966(d)(1) defines a “sponsoring organization” as an organization described in section 170(c) (including a foreign organization that otherwise would be described in section 170(c)(2)), other than a private foundation (as defined in section 509(a)) or a governmental entity (as defined in section 170(c)(1)), that maintains one or more DAFs.

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), 2 or (2) the sponsoring organization does not exercise expenditure responsibility with respect to the distribution in accordance with section 4945(h).

Section 4966(c)(2) provides that a taxable distribution, however, does not include a distribution from a DAF to (1) any organization described in section 170(b)(1)(A) (other than a disqualified supporting organization), (2) the sponsoring organization of such DAF, or (3) any other DAF. Section 4966(d)(4) defines a “disqualified supporting organization” as (1) a Type III supporting organization that is not functionally integrated and (2) any other supporting organization if the donor or any donor-advisor (and any related parties) with respect to a DAF directly or indirectly controls a supported organization of the supporting organization.

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).

Section 4966(b) provides that, if more than one fund manager is liable under section 4966(a)(2), then all such persons are jointly and severally liable with respect to the distribution; however, the maximum amount of tax imposed by section 4966(a)(2) with respect to any one taxable distribution is $10,000.

The PPA also added section 4967, which imposes an excise tax on the advice that a donor, donor-advisor, or related person provides regarding a distribution from a DAF that results in such person or any other donor, donor-advisor, or related person receiving, directly or indirectly, a more than incidental benefit. This excise tax is paid by any donor, donor-advisor, or related person who advises the sponsoring organization as to the distribution or who receives the prohibited benefit. A separate excise tax, paid by the fund manager, is imposed on the agreement of any fund manager of the sponsoring organization to the making of the distribution, knowing that it would confer a prohibited benefit. Section 4967(b) provides that, with respect to any distribution, no tax can be imposed under section 4967 if a tax has been imposed under section 4958.

In December 2006, the Treasury Department and the IRS issued Notice 2006-109, 2006-2 C.B. 1121, to provide interim guidance on certain requirements enacted by the PPA, including those that affect DAFs. 3 Notice 2006-109 also requested comments regarding the notice and suggestions for future guidance.

In February 2007, the Treasury Department and the IRS issued Notice 2007-21, 2007-1 C.B. 611, requesting comments in connection with a study conducted by the Treasury Department and the IRS on the organization and operation of DAFs and supporting organizations, as required by section 1226 of the PPA.

In December 2017, the Treasury Department and the IRS issued Notice 2017-73, 2017-51 I.R.B. 562, describing approaches being considered to address certain issues regarding DAFs and requesting comments on those approaches. In particular, Notice 2017-73 stated, among other things, that the Treasury Department and the IRS are considering developing proposed regulations under section 4967 that would, if finalized, provide that (1) certain distributions from a DAF that pay for the purchase of tickets that enable a donor, donor-advisor, or related person under section 4958(f)(7) to attend or participate in a charity-sponsored event result in a more than incidental benefit to such person under section 4967, and (2) certain distributions from a DAF that the distributee charity treats as fulfilling a pledge made by a donor, donor-advisor, or related person, do not result in a more than incidental benefit under section 4967 if certain requirements are met.

In response to these three notices, the Treasury Department and the IRS received 118 comments, 74 of which concerned DAFs and taxable distributions. 4 After consideration of the comments received, the Treasury Department and the IRS are proposing these regulations regarding the excise taxes payable by sponsoring organizations of DAFs and fund managers on taxable distributions under section 4966. The major areas of comment relating to section 4966 are discussed in the Explanation of Provisions.

In accordance with section 4966(d)(2)(A), the proposed regulations would define a DAF generally as a fund or account (1) that is separately identified by reference to contributions of a donor or donors, (2) that is owned and controlled by a sponsoring organization, and (3) with respect to which at least one donor or donor-advisor has, or reasonably expects to have, advisory privileges with respect to the distribution or investment of amounts held in such fund or account by reason of the donor's status as a donor. Unless otherwise excepted, a fund or account that meets all three prongs of the definition would be a DAF.

A sponsoring organization is proposed to be defined in accordance with section 4966(d)(1) as any organization that (1) is described in section 170(c) (other than a governmental unit described in section 170(c)(1)), without the requirement under section 170(c)(2)(A) that it be created or organized in the United States or in any possession thereof, or under the law of the United States, any State, the District of Columbia, or any possession of the United States; (2) is not a private foundation; and (3) maintains one or more DAFs.

Section 4966(d)(2)(A)(i) states that a DAF must be separately identified by reference to contributions of a donor or donors. In general, the proposed regulations would provide that a fund or account is separately identified by reference to contributions of a donor or donors if the sponsoring organization maintains a formal record of contributions to the fund or account relating to a donor or donors. A formal record exists regardless of whether the sponsoring organization commingles the assets attributed to the fund or account with other assets of the sponsoring organization, as long as the sponsoring organization tracks contributions of a donor or donors to the fund or account. A contribution would be defined as any gift, bequest, or similar payment or transfer, whether in cash or in-kind, to or for the use of a sponsoring organization.

If the sponsoring organization does not maintain a formal record of contributions to a fund or account, then whether a fund or account is separately identified would be based on all the facts and circumstances.

The proposed regulations would provide that facts and circumstances that are relevant in determining that a fund or account is separately identified by reference to contributions of a donor or donors include: (1) the fund or account balance reflects items such as contributions, dividends, interest, distributions, administrative expenses, and gains and losses (realized or unrealized); (2) the fund or account is named after one or more donors, donor-advisors, or related persons (as defined by proposed § 53.4966-1(j));  5 (3) the sponsoring organization refers to the fund or account as a DAF; (4) the sponsoring organization has an agreement or understanding with one or more donors or donor-advisors that such fund or account is a DAF; (5) one or more donors or donor-advisors regularly receive a fund or account statement from the sponsoring organization; and (6) the sponsoring organization generally solicits advice from the donor(s) or donor-advisor(s) before making distributions from the fund or account. The Treasury Department and the IRS request comments on these and any additional factors that would be relevant in determining whether a fund or account is separately identified by reference to contributions of a donor or donors.

Several commenters asked that funds or accounts funded by certain types of organizations, such as public charities, private foundations, or governmental entities, be excluded from the definition of a DAF. The proposed regulations define a donor generally as any person described in section 7701(a)(1) that contributes to a fund or account of a sponsoring organization. However, the proposed regulations would explicitly exclude from the definition of donor (1) any public charity described in section 509(a)(1), (2), or (3) (other than a disqualified supporting organization) and (2) any governmental unit described in section 170(c)(1). A fund or account that is separately identified by reference to contributions solely from either of these types of entities would not be treated as separately identified by reference to contributions from a donor and thus would not be a DAF. 6 Because private foundations and disqualified supporting organizations could use a DAF to circumvent the payout and other requirements that are applicable to those organizations, the proposed regulations would not exclude private foundations or disqualified supporting organizations from the definition of donor.

Under section 4966(d)(2)(A)(iii), for a fund or account to constitute a DAF, (1) at least one donor or donor-advisor must have, or reasonably expect to have, advisory privileges with respect to the distribution or investment of amounts held in such fund or account, and (2) such advisory privileges must arise by reason of (in other words, because of) the donor's status as a donor. The proposed regulations generally would provide that the existence of such advisory privileges depends on the facts and circumstances, including the conduct (and any agreement or understanding) of both the donor(s) or donor-advisor(s) and the sponsoring organization. A donor (or donor-advisor) may have, or reasonably expect to have, advisory privileges even in the absence of the actual provision of advice. Advisory privileges would include those arising from service on an advisory committee. The proposed regulations also would presume that advisory privileges of a donor or donor-advisor arise by reason of the donor's status as a donor, except where specifically provided otherwise.

Commenters recommended that, for advisory privileges to exist, advice must include a specified amount and a named recipient. Commenters also suggested that, in the absence of written evidence, advisory privileges should not be inferred unless there are at least three separate successive occasions where the sponsoring organization accepts the donor's advice. Commenters further requested that a sponsoring organization's proposal to distribute a certain amount to a certain distributee, subject to the donor's approval, be viewed as the donor's exercise of the advisory privilege only if the donor approves the proposal.

The Treasury Department and the IRS believe that the commenters' recommendations would define advisory privileges too narrowly. Instead, the proposed regulations would provide that the presence of any of the following four facts is sufficient to establish that a donor or donor-advisor has advisory privileges by reason of the donor's status as a donor, regardless of whether they are exercised: (1) the sponsoring organization allows a donor or donor-advisor to provide nonbinding recommendations regarding distributions from, or regarding the investment of assets held in, a fund or account; (2) a written agreement states that a donor or donor-advisor has advisory privileges; (3) a written document or any marketing material of the sponsoring organization made available to a donor or donor-advisor indicates that a donor or donor-advisor may provide advice to the sponsoring organization regarding the distribution or investment of amounts held by a sponsoring organization (for example, a pre-approved list of investment options or distributees that the sponsoring organization provides to a donor or donor-advisor); or (4) the sponsoring organization generally solicits advice from a donor or donor-advisor regarding the distribution or investment of amounts held in a fund or account.

However, the proposed regulations would also provide four special rules relating to advisory privileges. First, if at least one donor or donor-advisor has, or reasonably expects to have, advisory privileges with respect to a fund or account or any portion of a fund or account, then advisory privileges by reason of the donor's status as a donor exist with respect to that fund or account even if there are multiple donors to the fund or account.

Second, there would be special rules for advisory privileges arising from service on an advisory committee, as discussed in section 1.D of this Explanation of Provisions of this preamble.

Third, advice provided solely in a person's capacity as an officer, director, employee (or in a similar capacity) of a sponsoring organization would not by itself give rise to advisory privileges by reason of a donor's status as a donor. However, if, by reason of the person's contribution to a fund or account, an officer, director, or employee of the sponsoring organization is allowed to advise on how to distribute or invest amounts in the fund or account, the person would be considered to have advisory privileges by reason of the donor's status as a donor with respect to that fund or account.

Lastly, unless the special rule for officers, directors, and employees of a sponsoring organization applies, if a donor to a fund or account is the sole person with advisory privileges with respect to a fund or account, the advisory privileges would be deemed to be by reason of the donor's status as a donor. This bright-line rule would provide clarity and enhance administrability. The Treasury Department and the IRS request comments regarding whether there are additional circumstances in which application of the bright-line rule is not warranted.

Commenters asked that guidance clarify that advisory privileges do not include certain legally enforceable rights of the donor with respect to a contribution. If a restriction is placed on a gift at the time the gift is made and there is no provision for subsequent discretion regarding the restriction, then the restriction should not give rise to advisory privileges. For example, a donor's mere earmarking of a donation (at the time of donation) for a particular fund or program of the recipient charity, without more, does not create an advisory privilege. Whether the terms of a gift agreement create a DAF depends on the restrictions set forth in the agreement. The Treasury Department and the IRS request comments on the circumstances in which a gift agreement or advisory rights retained by a donor could create a DAF.

Consistent with section 4966(d)(2)(A)(iii), the proposed regulations would define donor-advisor as a person appointed or designated by a donor to have advisory privileges regarding the distribution or investment of assets held in a fund or account of a sponsoring organization. If a donor-advisor delegates any of the donor-advisor's advisory privileges to another person, that person also would be a donor-advisor. No particular form of appointment or designation would be necessary under the proposed regulations.

A donor-advisor generally would include a person suggested or recommended by a donor to have advisory privileges if the sponsoring organization provides such privileges. However, this rule would not apply if (1) the donor recommends an investment advisor who is properly viewed as providing services to the sponsoring organization as a whole, rather than providing services to the DAF, as described in this section 1.C of this Explanation of Provisions of this preamble, or (2) the donor recommends a person to serve on a committee of the sponsoring organization that advises as to distributions or investments of amounts in a fund or account if the recommendation is based on objective criteria related to the expertise of the member in the particular field of interest or purpose of the fund or account, the committee consists of three or more individuals and a majority of the committee is not recommended by the donor or donor-advisor, and the recommended person is not a related person with respect to the recommending donor or donor-advisor, as discussed in section 1.D of this Explanation of Provisions of this preamble.

The proposed regulations include three special rules with respect to donor-advisors. First, a person (other than a person or governmental unit excepted from status as a donor) who establishes a fund or account and advises as to the distribution or investment of amounts in that fund or account would be treated as a donor-advisor with respect to that fund or account, regardless of whether the person contributes to the fund or account. For example, if a person establishes a memorial or fundraising fund to which the person does not contribute, but does provide advice regarding distributions from the fund, the person would be considered a donor-advisor. The donors to the fund have implicitly designated the advisor to have advisory privileges.

Second, an investment advisor described in section 4958(f)(8)(B)  7 that manages the investment of, or provides investment advice with respect to, both assets maintained in a DAF and the personal assets of a donor to that DAF (personal investment advisor) would be a donor-advisor with respect to the DAF while serving in that dual capacity, regardless of whether the donor appointed, designated, or recommended the personal investment advisor. However, recognizing that a personal investment advisor may more generally advise the sponsoring organization, the proposed regulations would provide that a personal investment advisor will not be considered a donor-advisor if the personal investment advisor is properly viewed as providing services to the sponsoring organization as a whole, rather than providing services to the DAF. For example, if an investment advisor contracts with a sponsoring organization to provide services to all of its 1,000 DAFs, and the sponsoring organization reasonably charges the investment advisor's fees uniformly to all of those DAFs, the investment advisor would properly be viewed as providing services to the sponsoring organization as a whole.

The Treasury Department and the IRS request comments on additional circumstances that would indicate that a personal investment advisor is properly viewed as providing services to the sponsoring organization as a whole, rather than providing services to the DAF, as well as additional circumstances in which a personal investment advisor should not be considered a donor-advisor.

One commenter suggested that an investment advisor recommended by a donor to the sponsoring organization should not be treated as a donor-advisor if the investment advisor is regulated by State and Federal agencies, because agency oversight makes it unlikely that the investment advisor would manipulate the assets of the DAF for personal gain. The commenter stated that an investment advisor that was considered a donor-advisor could not receive compensation from a DAF because that would be an excess benefit transaction under section 4958(c)(2).

While the commenter believes that it is unlikely that a regulated investment advisor would manipulate the assets of the DAF for personal gain, the Treasury Department and the IRS view the close relationship between a donor and his or her personal investment advisor as giving the donor influence over investment decisions with respect to assets held in the DAF comparable to that of a donor-advisor. Moreover, the Treasury Department and the IRS are concerned about potential conflicts of interest. Specifically, sponsoring organizations may allow the appointment of a donor's personal investment advisor as an advisor regarding the investment of DAF funds in order to encourage investment advisors to promote their clients' giving through a DAF, rather than directly to a public charity (other than the sponsoring organization). In fact, a counterincentive may be created for both donors and their personal investment advisors to not advise distributions out of their DAFs to operating charities. Another significant concern is that a more than incidental benefit may occur if the investment advisor charges the donor a reduced fee for managing the donor's personal assets because the investment advisor also manages the assets the donor contributed to the DAF.

The Treasury Department and the IRS agree that a personal investment advisor that is considered a donor-advisor would be subject to the excess benefit transaction rules of section 4958(c)(2) if he or she received a grant, loan, compensation, or similar payment from the DAF.

Third, advisory committee members recommended by a donor and appointed by the sponsoring organization would be donor-advisors, except as discussed in section 1.D of this Explanation of Provisions of this preamble.

The Treasury Department and the IRS generally would regard service on a committee of a sponsoring organization that advises as to distributions from or investments of assets of a fund or account as a form of advisory privilege with respect to that fund or account in determining whether the fund is a DAF, even though the sponsoring organization controls the selection of committee members consistent with its ownership and control of the fund or account in accordance with section 4966(d)(2)(A)(ii). Recognizing that a fund or account, including a multiple-donor fund, as discussed in section 1.E of this Explanation of Provisions of this preamble, may sometimes be advised by an advisory committee that includes one or more donors, donor-advisors, related persons, or persons recommended by donors or donor-advisors to serve on the advisory committee, the proposed regulations would provide two special rules relating to advisory privileges arising from service on an advisory committee. Under these two special rules, a fund or account could be advised by a committee that may include one or more donors, donor-advisors, related persons, or persons recommended by donors or donor-advisors, without being a DAF.

First, when a sponsoring organization appoints a donor, donor-advisor, or related person to serve on an advisory committee, the donor, donor-advisor, or related person generally would have advisory privileges by reason of the donor's status as a donor. However, the proposed regulations would provide that a sponsoring organization's appointment of a donor, donor-advisor, or related person to be on a committee that advises as to distributions or investments of amounts in the fund or account will not be deemed to result in advisory privileges by reason of the donor's status as a donor if (1) the appointment is based on objective criteria related to the expertise of the appointee in the particular field of interest or purpose of the fund or account; (2) the committee consists of three or more individuals, not more than one-third of whom are related persons with respect to any of the others; and (3) the appointee is not a significant contributor to the fund or account, taking into account contributions by related persons with respect to the appointee, 8 at the time of appointment. If an appointee or related person is not a significant contributor to a fund or account at the time of appointment but becomes one shortly afterwards, the IRS may find that the person has advisory privileges based on the facts and circumstances. The Treasury Department and the IRS request comments on what constitutes a significant contributor for purposes of this exception.

Second, when a donor (or donor-advisor) recommends someone to serve on an advisory committee advising as to the distribution or investment of funds in the fund or account, that person would be considered a donor-advisor if the sponsoring organization appoints the recommended person to serve on the advisory committee. However, the proposed regulations would allow a donor (or donor-advisor) to recommend a person to serve as a member of an advisory committee of the sponsoring organization for the fund or account and not be considered to be a donor-advisor if (1) the recommendation is based on objective criteria related to the expertise of the member in the particular field of interest or purpose of the fund or account; (2) the committee consists of three or more individuals, and a majority of the committee is not recommended by the donor or donor-advisor; and (3) the recommended person is not a related person with respect to the recommending donor or donor-advisor.

The Treasury Department and the IRS request comments on the proposed advisory committee exceptions, including additional circumstances in which advisory privileges arising from advisory committees should not result in the creation of a DAF.

Several commenters suggested excepting a fund or account to which multiple unrelated donors contributed from the definition of DAF. Commenters expressed concern that failing to provide an exception would affect charitable giving practices encouraged by alumni organizations or professional associations, as well as discourage the use of funds or accounts to incubate potential public charities. One commenter suggested that imposing various conditions, including that the fund or account have at least three unrelated donors; that the donations be aggregated into a single consolidated account balance; that no written or oral understanding exists that donors have advisory privileges corresponding to the amounts they donated to the fund or account; and that no single donor or group of related donors gave more than 35 percent of all donations, would prevent the vast majority of potential abuses of multiple-donor fund status while allowing most giving circles and giving pools maintained at public charities to avoid DAF status. Other commenters suggested that, without various safeguards, an exception for multiple-donor funds or accounts may permit abuses.

The Treasury Department and the IRS anticipate that, in most circumstances, a multiple-donor fund or account would be separately identified by reference to contributions of a specific donor or donors. However, even if separately identified, a multiple-donor fund or account would not be a DAF if no donor or donor-advisor has, or reasonably expects to have, advisory privileges with respect to the distribution or investment of amounts held in the fund or account by reason of the donor's status as a donor. Furthermore, section 4966(d)(2)(B) and the proposed regulations include several special rules that may permit a multiple-donor fund or account to be excepted from definition as a DAF even if it doesn't meet one of the exceptions discussed in section 2 of this Explanation of Provisions of this preamble (such as funds or accounts making distributions only to a single identified organization or funds or accounts making certain grants to individuals for travel, study, or other similar purposes).

First, as indicated in section 1.A. of this Explanation of Provisions of this preamble, the proposed regulations would exclude certain entities from the definition of “donor.” Specifically, the proposed regulations would define donor to exclude any public charity described in section 509(a)(1), (2), or (3) (other than a disqualified supporting organization) and (2) any governmental unit described in section 170(c)(1). If a fund or account has multiple donors but only a public charity or governmental unit has the right to exercise advisory privileges, then no donor, as defined by the proposed regulations, would have advisory privileges with respect to the distribution or investment of amounts held in the fund or account by reason of the donor's status as a donor. Thus, the fund or account would not be a DAF.

Second, as discussed in section 1.D of this Explanation of Provisions of this preamble, the proposed regulations would provide two special rules relating to advisory privileges arising from service on an advisory committee. These two rules would allow certain multiple-donor funds or accounts to be advised by a committee that may include one or more donors, donor-advisors, related persons, or persons recommended by donors or donor-advisors, without being a DAF.

The Treasury Department and the IRS request comments on whether and in what circumstances additional types of exceptions are warranted to allow multiple-donor funds or accounts to be excluded from the definition of DAF. The Treasury Department and the IRS are particularly interested in comments addressing how any exception for multiple-donor funds or accounts can be crafted to prevent circumvention of the provisions of section 4966 while still being administrable for both sponsoring organizations and the IRS.

Consistent with section 4966(d)(2)(B), the proposed regulations generally would provide that a DAF does not include any fund or account that makes (1) distributions only to a single identified organization, or (2) certain grants to individuals for travel, study, or other similar purposes. These exceptions are discussed in sections 2.A. and 2.B. of this Explanation of Provisions of this preamble.

In addition, under section 4966(d)(2)(C), the Secretary has discretionary authority to exempt a fund or account from the definition of DAF if the fund or account is advised by a committee not directly or indirectly controlled by the donor or donor-advisor (and any related parties  9 ) or if the fund or account benefits a single identified charitable purpose. The proposed regulations would provide two exceptions to the definition of DAF under this discretionary authority: (1) an exception for disaster relief funds consistent with the exception originally set forth in Notice 2006-109, with some modifications, and (2) an exception for certain scholarship funds whose committee is nominated by a section 501(c)(4) organization with a broad-based membership.

The Treasury Department and the IRS request comments on whether other funds should be excepted from the definition of DAF using the authority under section 4966(d)(2)(C) and what, if any, restrictions should apply to ensure that the intent of section 4966 is achieved.

Section 4966(d)(2)(B)(i) states that a fund or account that makes distributions only to a single identified organization or governmental entity is not a DAF. Several commenters suggested that a single identified organization should include an organization that is not described in section 501(c)(3), including a for-profit business and an organization described in section 501(c)(4), so long as the distributions to the organization or business are made for a charitable purpose described in section 170(c)(2)(B). The proposed regulations would provide that a fund or account will not be considered a DAF if, along with meeting the other requirements discussed in this section 2.A, it is established to make (and actually does make) distributions solely to a single identified organization that is either: (1) an organization described in sections 170(c)(2) and 509(a)(1), (2), or (3) (other than a disqualified supporting organization), or (2) a governmental entity described in section 170(c)(1) if the distribution is made exclusively for public purposes. The Treasury Department and the IRS are concerned that expanding the exception to include other types of organizations may allow circumvention of other tax provisions, such as the private foundation and charitable contribution deduction rules. Thus, the exception would not apply if the single identified organization is a private foundation, disqualified supporting organization, foreign organization, or non-charitable organization.

If the single identified organization loses its exempt status or ceases operating, the proposed regulations would provide rules similar to the rules found in § 1.509(a)-4(d)(4)(i)( a ) (allowing a supporting organization to substitute a new supported organization). A sponsoring organization would be permitted to substitute another single identified organization if the substitution is conditioned upon the occurrence of a loss of exemption, substantial failure or abandonment of operations, or a dissolution or reorganization that results in the named single identified organization ceasing to exist, and the event is beyond the direct or indirect control of donor(s), donor-advisor(s), or related persons.

Commenters suggested that the exception for a fund or account that makes distributions to a single identified organization should encompass distributions made to support that organization's activities and that a fund restricted to a specific charitable project should be considered a fund or account that makes distributions to a single identified organization. Commenters suggested that a fund should therefore be able to support the programs or activities of a single identified organization by making distributions to individuals directly (as long as the distributions are limited to those within the charitable class served by that single identified organization), or by receiving, holding and disbursing funds for a specific project or program conducted by the single identified organization, including making distributions to third parties for goods, services, and incidental grant-making limited to a particular project or program. For example, commenters suggested that the exception should apply to a scholarship fund that a donor establishes at a university and that provides scholarships and other grants solely to students at that university whom the donor has a role in selecting.

Under the proposed regulations, the sponsoring organization would be permitted to make distributions to the single identified organization for the single identified organization's activities (and only activities other than administering DAFs or grant-making) and, thus, to make distributions to fund a specific charitable project (other than administering DAFs or grant making) of the single identified organization. However, the sponsoring organization could not make distributions directly to third parties on behalf of the single identified organization, such as by making distributions to third parties for goods, services, or incidental grant-making for a particular project or program, because the statute requires that the fund or account make distributions only to the single identified organization.

Because a fund or account that falls within the single identified organization exception is not subject to the rules applicable to DAFs, the proposed regulations would provide that distributions to the single identified organization may not be used to administer DAFs or to make grants. In addition, the proposed regulations would provide that a fund or account will not be treated as making distributions only to a single identified organization if (1) a donor, donor-advisor, or related person has or reasonably expects to have, the ability to advise regarding distributions from the single identified organization to other individuals or entities, or (2) a distribution from the fund or account will provide, directly or indirectly, a more than incidental benefit (within the meaning of section 4967) to a donor, donor-advisor, or related person with respect to the fund or account. Thus, for example, if a donor establishes a fund to make distributions only to a single public charity, and the donor is on the Board of the public charity, then the fund would not be able to meet this exception because the donor has the ability to advise some or all of the distributions from the public charity to other entities.

Recognizing that a sponsoring organization may lack direct knowledge regarding the activities of the donor, donor-advisor, or related person with regard to the single identified organization, however, the proposed regulations would allow a sponsoring organization to rely on a certification from the donor that (1) no donor, donor-advisor, or related person has or reasonably expects to have, the ability to advise regarding distributions from the single identified organization to other individuals or entities, and (2) no distribution from the fund or account will provide, directly or indirectly, a more than incidental benefit (within the meaning of section 4967) to a donor, donor-advisor, or related person with respect to the fund or account, as long as the sponsoring organization lacks knowledge to the contrary.

The Treasury Department and the IRS request comments on whether additional guidance is needed on situations in which a fund or account is established at a public charity and the written agreement establishing the fund or account provides that the contributed amounts can only be used to support programs within that public charity, but the donor retains advisory privileges with respect to the public charity's use or investment of some or all of the funds. Section 4966(c)(2)(B) excepts from the definition of “taxable distribution” any distribution from a DAF to the sponsoring organization of the DAF; accordingly, any fund or account established at a public charity that is used to support operating programs of the public charity (rather than to make distributions to third parties) would not have any taxable distributions, if the fund or account were a DAF. For example, a donor who established a fund or account at a university could advise that contributions previously made to the fund or account be distributed to the university's scholarship program. However, if the donor were to want to have a role in advising on the selection of scholarship recipients then, to avoid a taxable distribution, the donor's involvement would need to meet the exception provided in section 4966(d)(2)(B)(ii) (discussed in section 2.B. of this Explanation of Provisions of this preamble).

Under section 4966(d)(2)(B)(ii) the term “donor advised fund” does not include a fund or account that exclusively makes grants for travel, study, or other similar purposes, provided certain requirements are met. Consistent with section 4966(d)(2)(B)(ii), the proposed regulations would provide that, under this exception from the definition of a DAF, a donor or donor-advisor may provide advice as to which individuals receive grants for travel, study, or other similar purposes from a fund or account if (1) the person provides the advice exclusively in the person's capacity as a member of the selection committee; (2) all the members of the selection committee are appointed by the sponsoring organization; (3) no combination of donor(s), donor-advisor(s), or related persons controls, directly or indirectly, the committee; and (4) all grants from the fund or account are awarded on an objective and nondiscriminatory basis pursuant to a written procedure approved in advance by the board of directors of the sponsoring organization and the procedure is designed to ensure that all grants meet the requirements of paragraph (1), (2), or (3) of section 4945(g) and the regulations thereunder. The requirements in the regulations under section 4945(g) include the requirements that the group from which grantees are selected will ordinarily be sufficiently large to constitute a charitable class; that the members of the selection committee will not be in a position to derive a private benefit if certain potential grantees are selected over others; and that the sponsoring organization will maintain adequate records regarding the identification and selection of individual grantees. If a fund or account satisfies the requirements of the exception, a sponsoring organization may award a scholarship from the fund or account to an individual without subjecting the sponsoring organization or its fund managers to excise taxes under section 4966.

The proposed regulations would provide that whether a combination of donor(s), donor-advisor(s), or related persons controls, directly or indirectly, the selection committee is determined by looking to the substance, rather than the form, of any arrangement. Direct control would exist if donor(s), donor-advisor(s), or related persons, either alone or together, (1) can require the committee to take or refrain from taking any action; (2) control 50 percent or more of the total voting power of the committee; or (3) have the right to exercise veto power over the committee's decisions. Whether indirect control exists is determined by the facts and circumstances, including the nature of any relationships among members of the selection committee and with any donor, donor-advisor, or related person. For example, a committee would be “indirectly controlled” by a combination of donor(s), donor-advisor(s), or related persons if a majority of the selection committee is currently engaged by the donor, donor-advisor, or any related person in any employment or fiduciary capacity, whether as an employee or independent contractor, or recommended by a donor or donor-advisor and appointed to the selection committee based on other than objective criteria regarding the person's expertise, or a combination thereof.

One commenter recommended that a sponsoring organization be permitted to set reasonable uniform procedures for appointing members to selection committees, taking into account the size of the sponsoring organization, the number of grants from the scholarship fund, and other relevant facts and circumstances, rather than requiring action by the entire board. The proposed regulations would provide that, in appointing the members of the selection committee, a sponsoring organization may act through its board of directors, trustees, or other governing body, a committee appointed by its governing body, or an appropriate officer of the sponsoring organization.

The Treasury Department and the IRS are concerned that some employers may seek to use this statutory scholarship exception to grant employer-related scholarships in a manner that would otherwise not be considered a scholarship or fellowship grant subject to the provisions of section 117(a), or that would otherwise be a taxable expenditure under section 4945, by having a sponsoring organization administer their scholarship programs. See, e.g., Rev. Proc. 76-47, 1976-2 C.B. 670, and Rev. Proc. 80-39, 1980-2 C.B. 772. The Treasury Department and the IRS request comments on whether additional guidance is needed to prevent avoidance of the employer-related scholarship rules or to address any potential private benefit arising from employer-related scholarship programs.

Several commenters asked for guidance relating to a scholarship fund of a sponsoring organization that receives contributions from a tax-exempt membership organization, such as a section 501(c)(4) social welfare organization. The commenters stated that, for example, Rotary Club scholarship funds are often established at community foundations and that these scholarship funds do not fit within the statutory scholarship committee exception provided by section 4966(d)(2)(B)(ii) because members of the section 501(c)(4) organization who may be donors to the fund comprise a majority of the scholarship selection committee. These commenters asked that the proposed regulations provide an additional exception allowing members of a section 501(c)(4) organization who are otherwise unrelated to one another to control the scholarship selection committee, particularly since it is difficult to find non-members willing to serve on the committee. The commenters noted that requiring Rotary Clubs to form a section 501(c)(3) organization to make distributions for Rotary scholarships would be an inefficient use of charitable resources and that sponsoring organizations can provide expertise on objective and charitable standards for selecting scholarship recipients.

The proposed regulations would provide an exception to the definition of DAF for a fund or account established by a broad-based membership organization described in section 501(c)(4) if six conditions are met. The conditions would substantially mirror the conditions in the statutory scholarship exception, except that donors may control the committee.

First, the fund or account's single identified charitable purpose must be to make grants to individuals for scholarships described in section 4945(g)(1).

Second, the selection of recipients of scholarships from the fund or account must be made by a selection committee the members of which are nominated by the section 501(c)(4) organization and approved in writing by the sponsoring organization. This requirement would allow the section 501(c)(4) organization to have input on the members of the selection committee, but would leave the final decision to the sponsoring organization that owns and controls the assets of the fund or account.

Third, the fund or account must serve a charitable class.

Fourth, like the statutory scholarship exception, recipients of grants from the fund or account must be selected on an objective and nondiscriminatory basis, pursuant to a written procedure, approved in advance by the sponsoring organization's board of directors, that is designed to ensure that all the grants meet the requirements of section 4945(g)(1) and the regulations under section 4945 (other than advance approval by the IRS).

Fifth, no distribution may be made from the fund or account to (1) any director, officer, or trustee of the sponsoring organization of the fund, (2) any member of the fund's selection committee, (3) any member, honorary member, or employee of the section 501(c)(4) organization, or (4) any person related to anyone described in (1), (2), or (3).

Finally, the fund or account must maintain adequate records that demonstrate the recipients were selected on an objective and nondiscriminatory basis.

The Treasury Department and the IRS are concerned that not requiring the section 501(c)(4) organization to have a broad-based membership could allow a small group of persons to set up a section 501(c)(4) organization and use a fund or account at a sponsoring organization to grant scholarships to their selected recipients with tax-deductible contributions, circumventing the DAF rules. Given this concern, the Treasury Department and the IRS request comments on how to identify a broad-based membership organization described in section 501(c)(4), including factors such as the organization's number of members, criteria for selecting members, membership rights, and geographic coverage.

The Treasury Department and the IRS also request comments on whether and under what circumstances other organizations, such as section 501(c)(5) and 501(c)(6) organizations, use similar types of committee-advised scholarship funds and whether the exception should be extended to those organizations, recognizing that section 501(c)(4) organizations are formed to promote social welfare whereas section 501(c)(5) and section 501(c)(6) organizations are formed to further different purposes.

Several commenters asked that the proposed regulations provide, consistent with Notice 2006-109, that an employer-sponsored disaster relief fund is not a DAF. Commenters also recommended that the exception be extended to disaster relief funds outside of the employment context and that the exception be extended to emergency hardship situations outside of the disaster relief context.

Since the determination of the existence of a qualified disaster under section 139 is not controlled by the sponsoring organization or the fund or account's advisory committee, the proposed regulations would exempt a non-employment based disaster relief fund. Thus, the proposed regulations would provide that both an employer-sponsored disaster relief fund and a disaster relief fund outside of the employment context are not DAFs, as long as the requirements of section 139 are met. In contrast, since the determination of the existence of an emergency hardship is controlled by the sponsoring organization or the fund or account's advisory committee, the proposed regulations would not extend the exception to emergency hardship funds.

To meet the disaster relief exception in the proposed regulations, six conditions must be met. The conditions substantially mirror the provisions in Notice 2006-109 (and the special rules generally for charitable assistance in qualified disasters) and the provisions of the statutory scholarship exception and the exception for certain scholarship funds established by section 501(c)(4) organizations.

First, the fund or account's single identified charitable purpose must be to provide relief from one or more qualified disasters within the meaning of section 139(c)(1), (2), or (3).

Second, the fund or account must serve a charitable class.

Third, recipients of grants from the fund or account must be made by a selection committee not controlled by donors, donor-advisors, or related persons and for which all the members are appointed by the sponsoring organization. Alternatively, if the fund or account gives preference or priority to employees (or their family members) of an employer to receive grants, the majority of the selection committee must consist of persons who are not in a position to exercise substantial influence over the affairs of the employer (or adequate substitute procedures exist to ensure that any benefit to the employer is incidental and tenuous).

Fourth, the selection committee must select grant recipients based on objective and nondiscriminatory determinations of need pursuant to a written procedure approved in advance by the board of directors of the sponsoring organization.

Fifth, no distribution from the fund or account may result in more than an incidental benefit to (1) any director, officer, or trustee of the sponsoring organization of the fund or account; (2) any member of the fund or account's selection committee; or (3) any person related to a director, officer, or trustee of the sponsoring organization or a member of the selection committee.

Lastly, the sponsoring organization must maintain records that (1) demonstrate the need of the recipients for the disaster relief assistance provided, and (2) satisfy the requirements of section 6033(b)(14). 10

Section 4966(c)(1) defines a taxable distribution as any distribution from a DAF to (1) any natural person, or (2) any other person unless the distribution is for a purpose specified in section 170(c)(2)(B) and the sponsoring organization exercises expenditure responsibility with respect to the distribution in accordance with section 4945(h).

Section 4966(c)(2) excepts from the term “taxable distribution” any distribution from a DAF to (1) any organization described in section 170(b)(1)(A) (other than a disqualified supporting organization), (2) the sponsoring organization of the DAF, or (3) any other DAF. The Treasury Department and the IRS expect that most distributions from DAFs are to organizations described in section 170(b)(1)(A) (but not to disqualified supporting organizations) and thus are not taxable distributions.

The proposed regulations incorporate the statutory definition of taxable distribution. In addition, the proposed regulations would set forth an anti-abuse rule providing that, if a series of distributions through intermediary distributees undertaken pursuant to a plan achieves a result that is inconsistent with the purposes of section 4966, the distributions are treated as a single distribution for purposes of section 4966. For example, if a donor advises a distribution, that the sponsoring organization subsequently makes, from a DAF to Charity X and the donor or the sponsoring organization arranges for Charity X to use the funds to make distributions to an individual recommended by the donor, the distribution would be a taxable distribution from the sponsoring organization to an individual.

Several commenters recommended that the term “distribution” be narrowly defined to include only a gratuitous transfer. These commenters requested that a purchase of goods or services by a sponsoring organization using funds from a DAF for charitable activity or fundraising would not be considered a distribution. One commenter asked that the term “distribution” be defined the same as the term “grant” in section 4945 and that it not include payments from a sponsoring organization using funds from a DAF to vendors for goods or services or employee compensation.

The proposed regulations do not adopt these suggestions and would construe the term “distribution” broadly. In particular, the proposed regulations would provide that the term “distribution” generally means any grant, payment, disbursement, or transfer, whether in cash or in kind, from a DAF. In addition, the proposed regulations would provide that any use of DAF assets that results in a more than incidental benefit to a donor, donor-advisor, or related person is a deemed distribution and thus generally would be a taxable distribution. The Treasury Department and the IRS note that distributions resulting in a more than incidental benefit to a donor, donor-advisor, or related person may also result in tax under section 4967. See Notice 2017-73, 2017-51 I.R.B. 562.

However, the proposed regulations would provide that (1) investments and (2) reasonable investment and grant-related fees generally are not distributions under this definition (unless they result in a more than incidental benefit as noted above).

Investments generally would not be treated as distributions under the proposed regulations because they typically merely reflect a change from one form of property to another. The Treasury Department and the IRS would consider investments for this purpose as including both debt and equity instruments held for the purpose of obtaining income or funds, including investments made partly for charitable purposes as described in Notice 2015-62, 2015-39 I.R.B. 411. However, an investment would not, for example, include a zero-interest loan, as there is no purpose of, or provision for, obtaining income or funds from the zero-interest loan. The Treasury Department and the IRS anticipate that a zero-interest loan would be a distribution under the proposed regulations and, unless made to a section 170(b)(1)(A) organization other than a disqualified supporting organization, would require expenditure responsibility by the sponsoring organization in order not to be a taxable distribution. The Treasury Department and the IRS request comments on how to further distinguish distributions from investments.

Reasonable investment and grant-related fees paid from DAF assets generally would not be considered distributions; however, an unreasonable grant-related or investment fee would be a deemed distribution and, thus, would be a taxable distribution. The Treasury Department and the IRS expect that whether a fee is reasonable would be determined by all the facts and circumstances. For example, an expense charged uniformly or ratably across all DAFs generally would be considered a reasonable fee and not a distribution. In addition, an expense charged solely to a particular DAF (such as an expense arising from an expenditure responsibility grant from the fund) may be reasonable, depending on the facts and circumstances. However, the proposed regulations would provide that an expense charged solely to a particular DAF that is paid, directly or indirectly, to a donor, donor-advisor, or related person with respect to the DAF, is a deemed distribution subject to sections 4966, 4958, and/or 4967.

Section 4966(c)(2)(A) provides that a distribution to any organization described in section 170(b)(1)(A) (other than a disqualified supporting organization) is not a taxable distribution. Similar to existing guidance under § 53.4945-5(a)(4), the proposed regulations would provide several categories of organizations treated as described in section 170(b)(1)(A) for purposes of section 4966(c)(2)(A).

First, an organization would be considered an organization described in section 170(b)(1)(A) if it is described in both sections 170(b)(1)(A) and 170(c)(2) (other than a disqualified supporting organization), without the requirement under section 170(c)(2)(A) that it be created or organized in the United States or in any possession thereof, or under the law of the United States, any State, the District of Columbia, or any possession of the United States. Thus, for example, a taxable organization that operates a for-profit school would not be treated as described in section 170(b)(1)(A) because the organization would not be described in section 170(c)(2).

Second, an organization that is a governmental unit described in section 170(b)(1)(A)(v) and 170(c)(1) (or an agency or instrumentality thereof, including an organization described in section 511(a)(2)(B)) would be considered an organization described in section 170(b)(1)(A), as long as the distribution to it is made for exclusively public purposes.

Third, a foreign government (or an agency or instrumentality thereof), or an international organization designated as such by Executive Order under 22 U.S.C. 288 would be treated as an organization described in section 170(b)(1)(A), as long as the distribution to it is made exclusively for purposes described in section 170(c)(2)(B).

One commenter asked that guidance expressly provide that DAFs may make grants to foreign organizations based on the same equivalency determinations that private foundations use for purposes of determining whether a foreign organization is the equivalent of a domestic public charity. The proposed regulations would adopt this suggestion. Consistent with Rev. Proc. 2017-53, 2017-40 I.R.B. 263 (providing guidelines for equivalency determinations by, among others, sponsoring organizations of DAFs), the proposed regulations would provide that, prior to the distribution, a sponsoring organization may make a good faith determination that a foreign organization is described in sections 501(c)(3) and 170(b)(1)(A) (other than a disqualified supporting organization) using procedures similar to those procedures permitted for private foundation grantors under § 53.4945-5(a)(5). Those procedures provide that a determination will ordinarily be a good faith determination if it is based on current written advice from a qualified practitioner and the organization reasonably relied in good faith on the written advice. If a sponsoring organization makes a good faith determination that a foreign organization is described in sections 501(c)(3) and 170(b)(1)(A) (other than a disqualified supporting organization), the sponsoring organization would not need to exercise expenditure responsibility with respect to a distribution to that organization.

Section 4966(d)(4)(A)(i) defines any Type III non-functionally integrated supporting organization as a disqualified supporting organization with respect to any distribution. 11 Section 4966(d)(4)(A)(ii)(I) disqualifies any other type of supporting organization if the donor or any donor-advisor (and any related parties)  12 directly or indirectly controls a supported organization (as defined in section 509(f)(3)) of the supporting organization. The Treasury Department and the IRS request comments on whether other entities should be included in the definition of disqualified supporting organization, using the authority under section 4966(d)(4)(A)(ii)(II) to designate other supporting organizations as disqualified, because a distribution to such organization is inappropriate if expenditure responsibility is not exercised to ensure the distribution is for a purpose specified in section 170(c)(2)(B).

Under section 4966(c)(1)(B), a distribution to any entity not described in section 170(b)(1)(A), or to a disqualified supporting organization, will be a taxable distribution unless (1) the distribution is for a purpose specified in section 170(c)(2)(B) (generally, is for a charitable purpose), and (2) the sponsoring organization exercises expenditure responsibility with respect to the distribution in accordance with section 4945(h).

The proposed regulations would provide that purposes described in section 170(c)(2)(B) are treated as such whether or not carried out by an organization described in section 170(c). However, a distribution to be used for an activity prohibited under section 501(c)(3), or for an activity that would cause loss of tax exemption if it were a substantial part of a section 501(c)(3) organization's total activities, is not for a purpose specified in section 170(c)(2)(B). Thus, a distribution used for political campaign intervention activity or attempts to influence legislation would be considered to be for a purpose not specified in section 170(c)(2)(B)  13 and, thus, if made directly or to an entity not described in section 170(b)(1)(A), or to a disqualified supporting organization, would be a taxable distribution.

The proposed regulations would also include a requirement, similar to the requirement in § 53.4945-6(c)(2), that a grant to an organization (other than one that is described in section 501(c)(3) and not in section 509(a)(4)) will not be considered to be for a purpose specified in section 170(c)(2)(B) unless the grantee agrees to separately account for grant funds (either by separately accounting for grant funds on its books or by segregating the grant funds). (Such grant funds must also be used for charitable purposes, consistent with the expenditure responsibility rules discussed in section 3.C.ii of this Explanation of Provisions of this preamble.)

Section 4966(c)(1)(B)(ii) requires sponsoring organizations to exercise expenditure responsibility in accordance with section 4945(h) for certain distributions. Thus, the proposed regulations cross-reference the section 4945(h) expenditure responsibility regulations applicable to private foundations, with one modification. In lieu of the requirements found in § 53.4945-5(b)(3)(iv)(c) and (b)(4)(iv)(c) (pertaining to the recipient's permitted use of the funds), the distributee would be required to agree not to: (1) make a grant to an organization that does not comply with the expenditure responsibility requirements, (2) make a grant to a natural person, or (3) make a grant, loan, compensation, or other similar payment (as described in section 4958(c)(2)) to a donor, donor-advisor, or related person with respect to the DAF from which the distribution that is the subject of the agreement is made. For purposes of these rules pertaining to the secondary use of distributions, the definition of “grant” set forth in § 53.4945-4(a)(2) would apply, rather than the broader definition of “distribution” found in proposed § 53.4966-1(e). If the definition of “distribution” found in proposed § 53.4966-1(e) applied, distributees would be required to exercise expenditure responsibility in the purchase of goods and services, which is not intended under the proposed rule.

The Treasury Department and the IRS request comments on this modification to the expenditure responsibility rules and whether additional guidance is needed.

Consistent with section 4966(a)(1), the proposed regulations would provide that an excise tax equal to 20 percent of the amount of the taxable distribution is imposed on each taxable distribution from a DAF. This excise tax is paid by the sponsoring organization of the DAF. The provisions of proposed § 53.4966-2 are generally similar to those of § 53.4958-1 and other chapter 42 excise tax regulations relating to the calculation of the tax on the organization and its managers.

In addition, consistent with section 4966(a)(2), the proposed regulations would provide that each fund manager who knowingly agrees to the making of a taxable distribution is liable for an excise tax equal to five percent of the amount of the taxable distribution, up to a maximum of $10,000 for any one taxable distribution. If more than one fund manager is liable for the excise tax, all such persons would be jointly and severally liable for that tax. The proposed regulations, consistent with section 4966(d)(3), would define a fund manager as (1) an officer, director, or trustee of the sponsoring organization, or any individual with authority or responsibility similar to that exercised by an officer, director, or trustee of an organization, regardless of title, and (2) with respect to any act (or failure to act), the employee having authority or responsibility (either individually or as a member of a collective body) for such act (or failure to act). An example of a failure to act by a fund manager resulting in a taxable distribution would be a failure to exercise expenditure responsibility if required.

The proposed regulations would provide that the agreement of any fund manager to the making of a taxable distribution consists of any manifestation of approval of the distribution that is sufficient to constitute an exercise of the fund manager's authority to approve, or authority to exercise discretion in recommending approval of, the making of the distribution by the sponsoring organization, whether or not it is the final or decisive act on behalf of the sponsoring organization.

A fund manager generally would be considered to have agreed to the making of a distribution with knowledge that it is a taxable distribution only if the manager (1) is in fact aware that it is a taxable distribution; or (2) has knowledge of facts sufficient to determine that, based on those facts, the distribution would be a taxable distribution and negligently fails to make reasonable attempts to ascertain whether the distribution is a taxable distribution. A fund manager generally would not be considered to have negligently failed to make reasonable attempts to ascertain whether a distribution is a taxable distribution if the distribution is made to an organization listed as an organization described in section 170(b)(1)(A) (other than a supporting organization) on the IRS's search tool, Tax Exempt Organization Search (Pub 78 data) (or if, with respect to a supporting organization, it gathers information to determine that the organization is not a disqualified supporting organization).

The Treasury Department and the IRS request comments on whether guidance is needed regarding a fund manager's reliance on professional advice.

These regulations are proposed to be applicable to taxable years ending after the date of publication of the Treasury decision adopting these rules as final regulations in the Federal Register . A taxpayer may rely on these proposed regulations for taxable years ending before the date the Treasury decision adopting these regulations as final regulations is published in the Federal Register .

The guidance these proposed regulations would provide with respect to disaster relief funds generally would be consistent with the guidance provided in section 5.01 of Notice 2006-109. However, in certain instances these proposed regulations would modify the guidance provided in Section 5.01 of Notice 2006-109. For taxable years ending before the date the Treasury decision adopting these regulations as final regulations is published in the Federal Register , taxpayers may rely on the guidance provided in section 5.01 of Notice 2006-109 or, alternatively, on these proposed regulations, including for periods prior to November 14, 2023.

Pursuant to the Memorandum of Agreement, Review of Treasury Regulations under Executive Order 12866 (June 9, 2023), tax regulatory actions issued by the IRS are not subject to the requirements of section 6 of Executive Order 12866, as amended. Therefore, a regulatory impact assessment is not required.

The collections of information contained in this notice of proposed rulemaking have been submitted to the Office of Management and Budget for review in accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. 3507(d)). Comments on the collections of information should be sent to the Office of Management and Budget, Attn: Desk Officer for the Department of Treasury, Office of Information and Regulatory Affairs, Washington, DC 20503, with copies to the Internal Revenue Service, Attn: IRS Reports Clearance Officer, SE:W:CAR:MP:T:T:SP, Washington, DC 20224. Comments on the collection of information should be received by January 16, 2024. Comments are specifically requested concerning:

Whether the proposed collections of information are necessary for the proper performance of the functions of the Internal Revenue Service, including whether the information will have practical utility;

The accuracy of the estimated burden associated with the proposed collections of information (see below);

How the quality, utility, and clarity of the information to be collected may be enhanced;

How the burden of complying with the proposed collections of information may be minimized, including through the application of automated collection techniques or other forms of information technology; and

Estimates of capital or start-up costs and costs of operation, maintenance, and purchase of service to provide information.

The collections of information in these proposed regulations are as follows. Section 53.4966-4(a)(4)(ii) allows a sponsoring organization to rely on a certification from the donor that all distributions satisfy the special rules relating to the single identified organization exception. Section 53.4966-4(b), (c), and (d) require an organization with a fund excepted from the definition of a DAF to maintain records regarding recipients and the selection process for recipients. Section 53.4966-4(c) also requires the organization to approve in writing the selection committee whose members are nominated by a section 501(c)(4) organization. Section 53.4966-5(c) allows a sponsoring organization to avoid a taxable distribution to certain foreign organization distributees if it makes a good faith determination regarding their tax-exempt status. Section 53.4966-5(a)(1)(ii)(B) requires a sponsoring organization to exercise expenditure responsibility with respect to certain distributions.

The expected recordkeepers are sponsoring organizations of DAFs described in section 4966(d)(1), other organizations described in section 4966(d)(1)(A) and (B) that maintain funds excepted from the definition of a DAF under section 4966(d)(2)(B) or (C) (and certain donors to funds described in section 4966(d)(2)(B)(i)), foreign organization distributees that are the subject of equivalency determinations by sponsoring organizations, and recipients of expenditure responsibility distributions.

Estimated number of recordkeepers: 13,961.

Estimated average annual burden per recordkeeper: 3 hours, 47 minutes.

Estimated total annual recordkeeping burden: 52,874 hours.

Estimated annual frequency of responses: occasional.

An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it displays a valid control number assigned by the Office of Management and Budget.

Books or records relating to a collection of information must be retained as long as their contents may become material in the administration of any internal revenue law. Generally, tax returns and tax return information are confidential, as required by 26 U.S.C. 6103.

Pursuant to the Regulatory Flexibility Act (5 U.S.C. chapter 6), it is hereby certified that these proposed regulations will not have a significant economic impact on a substantial number of small entities. This certification is based on the fact that the proposed regulations will not impact a substantial number of small entities. Based on IRS Statistics of Income data for 2019, there are 1,365,744 active nonprofit charitable organizations, of which 1,624 self-identified as sponsoring organizations of donor advised funds (DAFs). Another 82 organizations reported no DAFs but one or more funds similar to DAFs, for a total of 1,706 organizations reporting DAFs or funds similar to DAFs. Any economic impact stems from the collection of information under §§ 53.4966-4(a)(4)(ii); 53.4966-4(c)(2), (4), and (6); 53.4966-4(d)(4) and (6); and 53.4966-5(a)(1)(ii)(B) and (c)(2). The universe of sponsoring organizations that would be affected by the collection of information under §§ 53.4966-4(a)(4)(ii); 53.4966-4(c)(2), (4), and (6); 53.4966-4(d)(4) and (6); and 53.4966-5(a)(1)(ii)(B) and (c)(2) is a small subset of all sponsoring organizations, since those provisions apply to limited exceptions to DAF status, to foreign organizations determined to be the equivalent of a U.S. public charity, or to organizations receiving distributions for which expenditure responsibility is exercised. Thus, the number of organizations that will be affected by the collection of information under §§ 53.4966-4(a)(4)(ii); 53.4966-4(c)(2), (4), and (6); 53.4966-4(d)(4) and (6); and 53.4966-5(a)(1)(ii)(B) and (c)(2) will not be substantial. In 2019, of the 1,365,744 active nonprofit charitable organizations, 1,706 organizations reported 988,718 DAFs and 72,144 non-DAF funds similar to DAFs. We estimate that of the 72,144 non-DAF funds reported for 2019, 1.5 percent or 1082 will be section 501(c)(4) scholarship funds subject to the collection of information in § 53.4966-4(c)(2), (4), and (6), and that these funds will be maintained by a significantly small subset of the 1,706 total organizations reporting DAFs or funds similar to DAFs. In 2019, 0.3 percent of the 1,365,744 active nonprofit charitable organizations reported disaster relief preparedness as their primary mission. Thus, we estimate that 0.3 percent or five of the 1,706 organizations may sponsor disaster relief funds subject to the collection of information in § 53.4966-4(d)(4) and (6). Any costs incurred in meeting the collections of information applicable to section 501(c)(4) scholarship funds and disaster relief funds would be considerably less than the costs incurred in establishing and running a separate section 501(c)(3) organization, which would be the alternative means of providing the same benefits through a nonprofit charitable organization. In addition, based on IRS Statistics of Income data for 2019, of the 1,624 self-identified sponsoring organizations, an estimated 446 organizations made grants to foreign organizations pursuant to equivalency determinations subject to the collection in § 53.4966-5(c)(2). An indeterminate number of foreign organizations receiving grants from the 446 grant-making organizations also would be subject to the collection of information in § 53.4966-5(c)(2). The provisions of § 53.4966-5(c)(2) relieve both sponsoring organizations and foreign organizations of the statutory expenditure responsibility requirements under section 4966(c)(1)(B)(ii) that would otherwise apply to grants to foreign organizations and that most organizations prefer to avoid. Based on the 2019 annual returns of private foundations, we estimate that very few sponsoring organizations make grants requiring expenditure responsibility. For these reasons, pursuant to the Regulatory Flexibility Act (5 U.S.C. Chapter 6), the Secretary hereby certifies that this rule will not have significant economic impact on a substantial number of small entities. Notwithstanding this certification, the Treasury Department and the IRS invite comments on the impact this rule may have on small entities.

Pursuant to section 7805(f) of the Code, this proposed rule has been submitted to the Chief Counsel for the Office of Advocacy of the Small Business Administration for comment on its impact on small entities.

Section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA) requires that agencies assess anticipated costs and benefits and take certain other actions before issuing a final rule that includes any Federal mandate that may result in expenditures in any one year by a State, local, or tribal government, in the aggregate, or by the private sector, of $100 million in 1995 dollars, updated annually for inflation. In 2022, that threshold is approximately $190 million. The proposed regulations do not propose any rule that would include any Federal mandate that may result in expenditures by State, local, or tribal governments, or by the private sector in excess of that threshold.

Executive Order 13132 (Federalism) prohibits an agency from publishing any rule that has federalism implications if the rule either imposes substantial, direct compliance costs on State and local governments, and is not required by statute, or preempts State law, unless the agency meets the consultation and funding requirements of section 6 of the Executive Order. The proposed regulations do not propose rules that would have federalism implications, impose substantial direct compliance costs on State and local governments, or preempt State law within the meaning of the Executive Order.

Consideration will be given to any comments that are submitted timely to the IRS as prescribed in this preamble under the ADDRESSES heading. The Treasury Department and the IRS request comments on all aspects of the proposed regulations, and specifically request comments on the clarity of the proposed rules and how they can be made easier to understand, as well as on the proposed transition relief, including whether and in what circumstances additional transition guidance or relief may be necessary. All comments submitted will be made available at https://www.regulations.gov or upon request.

A public hearing will be scheduled if requested in writing by any person that timely submits electronic or written comments. Requests for a public hearing are encouraged to be made electronically. If a public hearing is scheduled, notice of the date, time, and place of the hearing will be published in the Federal Register . Announcement 2023-16, 2023-20 I.R.B. 854 (May 15, 2023), provides that public hearings will be conducted in person, although the IRS will continue to provide a telephonic option for individuals who wish to attend or testify at a hearing by telephone. Any telephonic hearing will be made accessible to people with disabilities.

Announcement 2023-16, Notices 2006-109, 2007-21, 2015-62, and 2017-73, and Revenue Procedures 76-47, 80-39, and 2017-53 are published in the Internal Revenue Bulletin (or Cumulative Bulletin) and are available from the Superintendent of Documents, U.S. Government Printing Office, Washington, DC 20402, or by visiting the IRS website at http://www.irs.gov.

The principal author of these regulations is Ward L. Thomas, Office of Associate Chief Counsel (Employee Benefits, Exempt Organizations, and Employment Taxes). However, other personnel from the IRS and the Treasury Department participated in their development.

Accordingly, the Treasury Department and the IRS propose to amend 26 CFR part 53 as follows:

I. Public Participation A. Docket

EPA has established a docket for this action under Docket ID No. EPA-HQ-OLEM-2020-0107. All documents in the docket are listed in the https://www.regulations.gov index. Publicly available docket materials are available either electronically at https://www.regulations.gov or in hard copy at the EPA Docket Center. The Public Reading Room is open from 8:30 a.m. to 4:30 p.m., Monday through Friday, excluding holidays. The telephone number for the Public Reading Room is (202) 566-1744, and the telephone number for the EPA Docket Center is (202) 566-1742.

Submit your comments, identified by Docket ID No. EPA-HQ-OLEM-2020-0107, at https://www.regulations.gov (our preferred method), or the other methods identified in the ADDRESSES section. Once submitted, comments cannot be edited or removed from the docket. EPA may publish any comment received to its public docket. Do not submit electronically any information you consider to be Confidential Business Information (CBI) or other information whose disclosure is restricted by statute. Multimedia submissions (audio, video, etc.) must be accompanied by a written comment. The written comment is considered the official comment and should include discussion of all points you wish to make. EPA will generally not consider comments or comment contents located outside of the primary submission ( i.e., on the web, cloud, or other file sharing system). Please visit https://www.epa.gov/dockets/commenting-epa-dockets for additional submission methods; the full EPA public comment policy; information about DBI, PBI, or multimedia submissions; and general guidance on making effective comments.

This document applies to and may affect all CCR generated by electric utilities and independent power producers that fall within the North American Industry Classification System (NAICS) code 221112. The reference to NAICS code 221112 is not intended to be exhaustive, but rather provides a guide for readers regarding entities likely to be regulated by this action. This discussion lists the types of entities that EPA is now aware could potentially be regulated by this action. Other types of entities not described here could also be regulated. To determine whether your entity is regulated by this action, you should carefully examine the applicability criteria found in 40 CFR 257.50 of title 40 of the Code of Federal Regulations. If you have questions regarding the applicability of this action to a particular entity, consult the person listed in the FOR FURTHER INFORMATION CONTACT section.

With this document, EPA is reopening the comment period on the proposed rule: Hazardous and Solid Waste Management System: Disposal of Coal Combustion Residuals From Electric Utilities; Legacy CCR Surface Impoundments (88 FR 31982, May 18, 2023), herein referred to as the “2023 proposed rule,” for the limited purpose of obtaining public comment on additional information that may be relevant to the development of a final rule. Some of the information includes data or analyses that were received during the comment period for the 2023 proposed rule and that could have the potential to play a role in support of decisions in the final rule. It also includes information obtained based on further EPA research conducted both during and after the close of the comment period, and which was therefore not available for public comment during the prior comment period on the 2023 proposed rule. This document describes some new information and data that EPA has received and new analyses that have been conducted. All the information subject to this document can be accessed as described in Unit II.C of this document.

EPA is still in the process of evaluating this information and deliberating the provisions of a final rule. Therefore, EPA cannot definitively state whether this information will provide support for any provision of the final rule, or that the Agency has determined that it is appropriate to rely on this information in developing the final rule. In addition, it should not be assumed that the specific information identified in this document is the full sum of information received in comments that will be considered or that will influence the Agency's decisions in this rulemaking. However, in the interests of ensuring that the public has had a full and complete opportunity to comment on the information that EPA has so far identified as having the potential to weigh in EPA's decisions on the final rule, EPA is reopening the comment period for the limited purpose of allowing the public to comment on the validity and propriety of using this information, data, and potential analyses in developing the final rule. EPA is not reopening the comment period on any other aspect of the proposed rule. This is not an opportunity for the public to supplement their comments on the proposed rule, or to raise issues that could have been raised during the original comment period. The only issues on which the Agency is soliciting comment relate to the information in the docket supporting this document. Comments submitted on any issues other than those specifically identified in this document will be considered “late comments” on the proposed rule. EPA will not respond to such comments, and they will not be considered part of the rulemaking record.

Most documents are available from the docket for viewing and downloading through http://www.regulations.gov; however, copyrighted documents are only available for viewing by visiting EPA's Docket Center.

EPA is publishing this document under the authority of sections 1008(a), 2002(a), 4004, and 4005(a) and (d) of the Solid Waste Disposal Act of 1970, as amended by the Resource Conservation and Recovery Act of 1976 (RCRA), as amended by the Hazardous and Solid Waste Amendments of 1984 (HSWA) and the Water Infrastructure Improvements for the Nation (WIIN) Act of 2016, 42 U.S.C. 6907(a), 6912(a), 6944, and 6945(a) and (d).

On April 17, 2015, EPA finalized national minimum criteria for the disposal of CCR as solid waste under Subtitle D of the Resource Conservation and Recovery Act (RCRA) in a rule titled, “Hazardous and Solid Waste Management System; Disposal of Coal Combustion Residuals from Electric Utilities,” (80 FR 21302) (2015 CCR rule or CCR regulations). The 2015 CCR rule, codified in subpart D of part 257 of Title 40 of the Code of Federal Regulations, established regulations for existing and new CCR landfills and existing and new CCR surface impoundments and all lateral expansions of CCR units. The criteria consist of location restrictions, design and operating criteria, groundwater monitoring and corrective action requirements, closure and post-closure care requirements, recordkeeping, notification and internet posting requirements.

The 2015 CCR rule imposed requirements on inactive surface impoundments  1 at active facilities, 2 but did not impose requirements on inactive surface impoundments at inactive facilities. The preamble to the 2015 CCR rule (80 FR 21344, April 17, 2015) explained that inactive units at inactive facilities were not covered by the rule in part due to possible complications that were specific to inactive or closed facilities: the concern that the present owner of the land on which an inactive site was located might have no connection (other than present ownership of the land) with the prior disposal activities. For that reason, EPA exempted those units at § 257.50(e). On August 21, 2018, the U.S. Court of Appeals for the District of Columbia Circuit issued its opinion in the case of Utility Solid Waste Activities Group, et al. v. EPA (“ USWAG ”), which vacated and remanded the provision that exempted inactive impoundments at inactive facilities from the CCR regulations.

On May 18, 2023, EPA proposed revisions to the CCR regulations (88 FR 31982). These revisions included establishing regulations specifying that inactive surface impoundments at inactive facilities (“legacy CCR surface impoundments”) are subject to 40 CFR part 257, subpart D and requiring owners and operators of legacy CCR surface impoundments to comply with all the appropriate requirements applicable to inactive CCR surface impoundments at active facilities. In addition, EPA proposed to establish requirements to address the risks from currently exempt solid waste management that involves the direct placement of CCR on the land. EPA proposed to extend a subset of the existing requirements in 40 CFR part 257, subpart D to CCR surface impoundments and landfills that closed prior to the effective date of the 2015 CCR Rule, inactive CCR landfills, and other areas where CCR is managed directly on the land. In the proposal, EPA referred to these as CCR management units, or CCRMU. This proposal would apply to all existing CCR facilities and all inactive facilities with legacy CCR surface impoundments. Lastly, EPA proposed to make several technical corrections to the CCR regulations. These are (1) to clarify the definitions of “feasible” and “technically feasible”; (2) to correct the CFR reference in the definition of wetlands at § 257.61(a); (3) to correct a reference in the groundwater monitoring scope section; (4) to standardize the references to CCR websites throughout the CCR regulations; and (5) EPA requested comment on extending the period for document retention and posting.

The Agency received over 33,500 comments on the proposed rule, with over 600 unique comments. Commenters included individual electric utilities and independent power producers, national trade associations, state agencies, public interest and environmental groups, and entities involved with the beneficial use of CCR. All public comments submitted in response to the proposal can be found in the docket for the proposed rule.

In response to public comments and additional information made available since publication of the 2023 proposed rule, EPA has prepared a supplemental risk assessment in support of the 2023 proposed rule. This risk assessment builds on the findings of the previous 2014 Risk Assessment  3 and better quantifies the specific risks that may result from placement of CCR in legacy CCR surface impoundments and CCRMU. To accomplish this task, EPA used mathematical models to estimate the rate at which constituents may escape into surrounding media, the fate and transport of these constituents through the environment, and the potential risk of adverse effects to individual receptors that may occur in the absence of regulation. This supplemental risk assessment incorporates much of the same groundwater data and model framework as the 2014 Risk Assessment, updated where necessary to best reflect the relevant exposure scenarios. Additionally, this supplemental risk assessment considers additional exposure scenarios that may result from radionuclides present within CCR. EPA is requesting comment on all aspects of the assessment including the validity and propriety of relying on the new information, data, and analyses contained in the updated risk assessment to inform the final rule.

EPA is also seeking information that would further document the universe of legacy CCR surface impoundments and CCRMU. In response to the USWAG decision, EPA issued an ANPRM on October 14, 2020 (85 FR 65015) to solicit comment and data on legacy CCR surface impoundment at inactive facilities to assist in the development of future regulations for legacy CCR surface impoundments. EPA received 156 comments on the ANPRM regarding the presence, condition, and history of potential legacy CCR surface impoundments of which, 127 cited the sources of the information. EPA placed the data on these potential legacy CCR surface impoundments in the docket of the 2023 proposed rule for legacy CCR surface impoundments (88 FR 31982, May 18, 2023) and requested further comments and data on these units as well as any CCRMU. In response to the 2023 proposed rule, EPA received additional comments regarding the location, presence, condition, and history of additional potential legacy CCR surface impoundments and of CCRMU at both active and inactive facilities. EPA is placing the data received in response to the proposed rule in the docket for the present NODA and is soliciting public comment on these data in connection with this rulemaking.

EPA is specifically soliciting supplementary comments, data, or sources of information on the location, presence, condition, history, and risk associated with any of the potential legacy CCR surface impoundments or any of the potential CCRMU within the docket, including any information regarding the presence of water, distance to surface water bodies, proximity to floodplains, unit size, CCR volume, depth to groundwater, date of CCR placement, closure status, any corrective action associated with the unit, and any groundwater monitoring data. In addition to information regarding the docket items for this NODA, EPA also requests comment on the accuracy of the information that was submitted regarding potential legacy CCR surface impoundments or potential CCRMU. Furthermore, EPA is seeking similar information on any other potential legacy CCR surface impoundments or potential CCRMU of which EPA may not be aware or for which we may have incomplete information. In all instances, it is important that commenters on this NODA provide verifiable sourcing information for data that is provided, as EPA may not consider information without a verifiable source in developing a final rule.

The information included in the docket for this NODA is in PDFs and Microsoft Excel spreadsheets. While some of the information in the PDFs and the Microsoft Excel spreadsheets is duplicative, the docket items contain distinct data.

EPA is seeking comment on all questions and topics described in this NODA, including the issues identified in Unit IV of this document, and requests that you submit any information, that you believe is important for EPA to consider in connection with these questions and topics. At the same time, EPA will not consider comments that are beyond the scope of the questions and topics described in this NODA.

Instructions for providing written comments are provided under ADDRESSES , including how to submit any comments that contain CBI.

I. Background

On October 30, 2023, FTA published in the Federal Register (Docket No. FTA-2023-0018, 88 FR 74107) an Advance Notice of Proposed Rulemaking (ANPRM) seeking public input in two areas: (1) hours of service; and (2) fatigue risk management programs. At present, there are no Federal minimum standards for hours of service and fatigue risk management programs in the transit industry. FTA held an in-person listening session on October 8, 2023, in Orlando, Florida. The virtual listening session will allow additional interested persons to present comments, views, and relevant research on those topics. FTA seeks information to better understand current industry practices, priorities, requirements, and the costs and benefits of Federal requirements.

The listening session is open to the public.

The session will be held virtually. Interested parties should register in advance at https://usdot.zoomgov.com/j/1608968545?pwd=c0tVNlJ3OTRPUmxYTHN4STFZczNYQT09.

Background

The golden tilefish and blueline tilefish fisheries north of the North Carolina/Virginia border are managed by the Mid-Atlantic Fishery Management Council (the Council) under the Tilefish Fishery Management Plan (FMP), which outlines the Council's process for establishing annual specifications. The Tilefish FMP requires the Council to recommend acceptable biological catch (ABC), annual catch limit (ACL), annual catch target (ACT), total allowable landings (TAL), and other management measures for the commercial and recreational sectors of the fisheries. The Council's Scientific and Statistical Committee (SSC) provides ABC recommendations for both species to the Council to derive these catch limits. The Council makes recommendations to NMFS that cannot exceed the recommendation of its SSC. The Council's recommendations must include supporting documentation concerning the environmental, economic, and social impacts of the recommendations. We are responsible for reviewing these recommendations to ensure that they achieve the FMP objectives and are consistent with all applicable laws. Following review, NMFS publishes the final specifications in the Federal Register .

The proposed 2024 specifications for blueline and golden tilefish are detailed in Tables 1 and 2. These values are status quo from 2023 and are unchanged from the projected 2024 specifications we previously announced in the final rule for the 2022-2024 Blueline Tilefish Specifications (87 FR 66245, November 3, 2022) and the final rule for Framework Adjustment 7 to the Tilefish FMP (87 FR 67830, November 10, 2022).

This action would not change the landing limits for the commercial fisheries. A vessel fishing under a Federal commercial tilefish vessel permit would continue to be prohibited from possessing more than 500 pounds (lb) (227 kilograms (kg)) of gutted golden tilefish at any time, or 50 percent, by weight, of the total of all species, including golden tilefish, being landed (whichever is less). This landing limit does not apply to a vessel authorized to land golden tilefish under a Tilefish IFQ permit. A vessel fishing under a commercial tilefish permit would also continue to be prohibited from possessing more than 500 lb (227 kg) of gutted blueline tilefish per trip. If 70 percent of the blueline tilefish commercial TAL is landed, the Regional Administrator may reduce the blueline tilefish possession limit to 300 lb (136 kg).

This action would not change the recreational management measures for golden or blueline tilefish, other than the season change discussed below. Any vessel used to fish recreationally for golden or blueline tilefish must have the appropriate Federal vessel permit. Boats used to take anglers for hire must have the Charter/Party Tilefish Permit while private recreational vessels need to have the Private Recreational Tilefish Permit. Both permit types require the submission of vessel trip reports. Additional information about permitting and reporting requirements is available from the Greater Atlantic Regional Fisheries Office's Permits Office at (978) 282-8438 or NMFS.GAR.Permits@noaa.gov.

The golden tilefish recreational possession limit for charter/party and private recreational anglers is 8 golden tilefish per angler per trip. Anglers may not retain golden tilefish unless exclusively using rod and reel fishing gear with a maximum limit of 5 hooks per rod. The blueline tilefish recreational possession limit depends on the type of fishing vessel. Anglers fishing from a private vessel that has been issued a valid Federal Tilefish Private Recreational Permit are allowed to keep up to 3 blueline tilefish per person per trip. Anglers fishing from a for-hire vessel that has been issued a valid Federal Tilefish Party/Charter Permit but does not have a current U.S. Coast Guard safety inspection sticker can retain up to 5 blueline tilefish per person per trip. Finally, anglers on for-hire vessels that have both a valid Federal Tilefish Party/Charter Permit and a current U.S. Coast Guard safety inspection sticker can retain up to 7 blueline tilefish per person per trip.

The 2024 fishing year for golden tilefish and blueline tilefish will begin on January 1, 2024. The regulations include rollover provisions for both species that would allow the fisheries to operate under status quo specifications if this action is not finalized before then.

At its June 2023 meeting, the MAFMC voted to recommend changing the recreational season for blueline tilefish from May 1 through October 31 to May 15 through November 14. The Council had received feedback from participants in this fishery suggesting the recreational blueline tilefish season be shifted forward by about 2 weeks to better match the recreational black sea bass season in most states. In some areas, anglers report it is common to catch black sea bass when targeting blueline tilefish or to stop and target black sea bass on their way out to blueline tilefish fishing grounds. Therefore, the recommendation was intended to better align the blueline tilefish season with the black sea bass season in most states in an effort to minimize regulatory black sea bass discards as well as to help control temporal efforts on both fisheries. A review of both angler feedback as well as vessel trip report data from for-hire vessels suggests shifting the recreational blueline tilefish season to May 15 to November 14 would help reduce black sea bass discards with minimal impact on the blueline tilefish recreational fishery and would result in no change to the number of days of the current blueline tilefish recreational season.

The final rule to implement Framework Adjustment 7 to the Tilefish FMP (87 FR 67830, November 10, 2022) moved the start of the fishing year for golden tilefish from November 1 to January 1. However, the rule did not change the following ancillary dates in the regulations that derive from the start of the fishing year, including: the date by which an Individual Fishing Quota (IFQ) permit application must be submitted to ensure the IFQ permit is issued before the start of the fishing year; the date when an IFQ permit ceases to be valid ( i.e., the last day of the fishing year); and the cut-off date for submitting an IFQ transfer application for the current fishing year. This rule proposes to adjust those dates in the regulations based on January 1 being the start of the fishing year.

Pursuant to section 304(b)(1)(A) of the Magnuson Stevens Fishery Conservation and Management Act (Magnuson-Stevens Act), the NMFS Assistant Administrator has determined that this proposed rule is consistent with the Tilefish FMP, other provisions of the Magnuson-Stevens Act, and other applicable law, subject to further consideration after public comment.

This proposed rule has been determined to be not significant for purposes of Executive Order 12866.

The Chief Counsel for Regulation of the Department of Commerce certified to the Chief Counsel for Advocacy of the Small Business Administration (SBA) that this proposed rule, if adopted, would not have a significant economic impact on a substantial number of small entities.

The 2024 harvest quotas in this rule are status quo and were previously certified not to have a significant economic impact on a substantial number of small entities under the Regulatory Flexibility Act during the rulemaking for the 2022-2024 Specifications for the Blueline Tilefish Fishery (87 FR 66245, November 3, 2022) and Framework Adjustment 7 to the Tilefish Fishery Management Plan (87 FR 67830, November 10, 2022). No comments were received that would change those previous certifications.

The new management measures proposed by this action apply to vessel owners participating in the recreational blueline tilefish fishery. A total of 535 affiliates had a federal party/charter permit for tilefish during 2020-2022.

For Regulatory Flexibility Act purposes, NOAA's National Marine Fisheries Service has established a size standard for small businesses, including their affiliated operations, whose primary industry is commercial fishing ( see 50 CFR 200.2). A business primarily engaged in commercial fishing (NAICS code 11411) is classified as small if it is independently owned and operated, is not dominant in its field of operation (including its affiliates), and has combined annual receipts not in excess of $11.0 million for all its affiliated operations worldwide. The Small Business Administration has established size standards for all other major industry sectors in the U.S., including defining for-hire fishing firms (NAICS code 487210) as small when their receipts are less than or equal to $8 million. All of the 535 affiliates with Federal party/charter permits were categorized as small businesses based on their average 2018-2022 revenues. Of these, 249 affiliates reported that the majority of their revenues in 2022 came from for-hire fishing.

The proposed recreational season for blueline tilefish would not result in a change to the number of fishing days and is unlikely to significantly affect the timing of when anglers can fish for this species. The proposed change would not likely result in a change in the number of for-hire trips, for-hire revenues, or overall impacts to recreational for-hire businesses, assuming all other factors which affect revenues remain unchanged, and, as a result, this action will not have a significant economic impact on a substantial number of small entities. As a result, an initial regulatory flexibility analysis is not required and none has been prepared.

For the reasons set out in the preamble, NMFS proposes to amend 50 CFR part 648 as follows: