[Federal Register Volume 64, Number 153 (Tuesday, August 10, 1999)]
[Proposed Rules]
[Pages 43324-43327]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-20093]
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DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 301
[REG-121946-98]
RIN 1545-AW96
Private Foundation Disclosure Rules
AGENCY: Internal Revenue Service (IRS), Treasury.
ACTION: Notice of proposed rulemaking.
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SUMMARY: This document contains proposed amendments to the regulations
relating to the public disclosure requirements described in section
6104(d) of the Internal Revenue Code. The proposed regulations
implement changes made by the Tax and Trade Relief Extension Act of
1998, which extended fully to private foundations the same rules
regarding public disclosure of annual information returns that apply to
other tax-exempt organizations. The proposed regulations provide
guidance for private foundations required to make copies of
applications for tax exemption and annual information returns available
for public inspection and to comply with requests for copies of those
documents. Final regulations relating to the public disclosure
requirements applicable to tax-exempt organizations other than private
foundations were issued on April 9, 1999.
DATES: Written or electronic comments and requests for a public hearing
must be received by October 12, 1999.
ADDRESSES: Send submissions to: CC:DOM:CORP:R (REG-121946-98), room
5226, Internal Revenue Service, POB 7604, Ben Franklin Station,
Washington, DC 20044. Submissions may be hand delivered Monday through
Friday between the hours of 8 a.m. and 5 p.m. to: CC:DOM:CORP:R (REG-
121946-98), Courier's Desk, Internal Revenue Service, 1111 Constitution
Avenue, NW., Washington, DC. Alternatively, taxpayers may submit
comments electronically via the Internet by selecting the ``Tax Regs''
option on the IRS Home Page, or by submitting comments directly to the
IRS Internet site at http://www.irs.ustreas.gov/tax regs/reglist.html.
FOR FURTHER INFORMATION CONTACT: Concerning the proposed regulations,
Michael B. Blumenfeld, (202) 622-6070 (not a toll-free number);
concerning submissions of comments, LaNita Van Dyke (202) 622-7190 (not
a toll-free number).
SUPPLEMENTARY INFORMATION:
Paperwork Reduction Act
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 the Treasury, Office of Information and Regulatory
Affairs, Washington, DC 20503, with copies to the Internal Revenue
Service, Attn: IRS Reports Clearance Officer, OP:FS:FP, Washington, DC
20224. Comments on the collections of information should be received by
October 12, 1999. Comments are specifically requested concerning:
Whether the proposed collections of information are necessary for
the proper performance of the functions of the IRS, 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 services to provide information.
The collections of information in these proposed regulations are in
Secs. 301.6104(d)-1, 301.6104(d)-2, and 301.6104(d)-3. This information
is required to enable a private foundation to comply with section
6104(d) of the Internal Revenue Code (Code). Under section 6104(d), a
private foundation is required to make its application for tax
exemption and its annual information returns available for public
inspection. In addition, a private foundation is required to comply
with requests made in person or in writing from individuals who seek a
copy of those documents or, in the alternative, to make its documents
widely available. The requirement that a private foundation make its
application for tax exemption and annual information returns available
for public inspection and comply with requests made in person or in
writing from individuals who seek a copy of those documents or, in the
alternative, make the documents widely available, will enable the
public to obtain information about the private foundation. Under
section 6104(d), a private foundation is permitted to file an
application for relief from the requirement to provide copies if the
private foundation reasonably believes it is the subject of a
harassment campaign. The information a private foundation provides when
filing an application for a determination that it is subject to a
harassment campaign will be used by the IRS to make such determination.
The collection of information is required to obtain relief from the
requirement to comply with requests for copies if such requests are
part of the harassment campaign. The likely respondents and/or
recordkeepers are private foundations. The burden for recordkeeping and
for reporting is reflected below.
Estimated total annual recordkeeping burden: 32,565 hours.
Estimated average annual burden per recordkeeper: 30 minutes.
Estimated number of recordkeepers: 65,065.
Estimated total annual reporting burden: 31 hours.
Estimated average annual reporting burden per respondent: 27
minutes.
Estimated number of respondents: 68.
Estimated annual frequency of responses: On occasion.
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.
Background
This document proposes to amend Secs. 301.6104(d)-1 through
301.6104(d)-5 of the Procedure and Administration Regulations (26 CFR
Part 301) relating to the section 6104(d) public disclosure
requirements applicable to tax-exempt organizations (organizations
described in section 501(c) or (d) and exempt from
[[Page 43325]]
taxation under section 501(a)). The proposed amendments would remove
existing Sec. 301.6104(d)-1 (relating to public inspection of private
foundation annual information returns). The proposed amendments also
would revise Secs. 301.6104(d)-2 through 301.6104(d)-5 to apply the
provisions to all tax-exempt organizations, including private
foundations, and redesignate existing Secs. 301.6104(d)-2 through
301.6104(d)-5 as Secs. 301.6104(d)-0 through 301.6104(d)-3,
respectively. This regulation is not subject to the Unfunded Mandates
Reform Act of 1995 because the regulation is an interpretive
regulation.
Description of Current Law Disclosure Requirements Applicable to
Private Foundations
Section 6104(d), as in effect prior to the effective date of the
Tax and Trade Relief Extension Act of 1998 (Division J of H.R. 4328,
the Omnibus Consolidated and Emergency Supplemental Appropriations Act,
1999) (Public Law 105-277, 112 Stat 2681) (with respect to private
foundations), requires a private foundation to make its annual
information returns available for public inspection at its principal
office during regular business hours for a period of 180 days after the
foundation publishes notice of the availability of its return. A
private foundation must publish such notice not later than the due date
of the return (determined with regard to any extension of time for
filing) in a newspaper having general circulation in the county in
which the principal office of the foundation is located. Section
6104(e), as in effect prior to the effective date of the Tax and Trade
Relief Extension Act of 1998 (with respect to private foundations),
requires a private foundation to allow public inspection of the
foundation's application for recognition of exemption at the
foundation's principal office (and certain regional or district
offices). Section 6104(e) also requires a private foundation to provide
copies of its exemption application upon request. However, the
requirement to provide copies of an exemption application upon request
becomes effective only after the Secretary of the Treasury issues
regulations applicable to private foundations describing how a private
foundation may be relieved of the obligation to provide copies in
response to requests by making its exemption application widely
available or by obtaining an IRS determination that a particular
request is part of a harassment campaign.
Amendments Made by the Tax and Trade Relief Extension Act of 1998
The Tax and Trade Relief Extension Act of 1998, which was enacted
on October 21, 1998, amended section 6104(e) of the Code to subject the
annual information returns filed by private foundations to the same
rules regarding public disclosure that apply to other tax-exempt
organizations. In addition, the Tax and Trade Relief Extension Act of
1998 repealed existing section 6104(d), and redesignated section
6104(e), as amended, as new section 6104(d). Section 6104(d), as
amended by the Tax and Trade Relief Extension Act of 1998, requires
each tax-exempt organization, including one that is a private
foundation, to allow public inspection at its principal office (and at
certain regional or district offices) and to comply with requests, made
either in person or in writing, for copies of the organization's
application for recognition of exemption and the organization's three
most recent annual information returns. Congress appears to have
intended that nonexempt charitable trusts described in section
4947(a)(1) and nonexempt private foundations comply with the expanded
public disclosure requirements, just as such entities are subject to
the information reporting requirements of section 6033 pursuant to
section 6033(d). See Joint Committee on Taxation, General Explanation
of Tax Legislation Enacted in 1998 (JCS-6-98), November 24, 1998, at
242, fn. 102.
The Tax and Trade Relief Extension Act of 1998 amendments apply to
requests made after the later of December 31, 1998, or the 60th day
after the Secretary of the Treasury issues regulations referred to in
section 6104(d)(4) (relating to when documents are made widely
available and when a particular request is considered part of a
harassment campaign). On April 9, 1999, the IRS published in the
Federal Register (64 FR 17279) final regulations under section 6104(d)
applicable to tax-exempt organizations other than private foundations.
Accordingly, section 6104(d), as amended by the Tax and Trade Relief
Extension Act of 1998, became effective with respect to tax-exempt
organizations other than private foundations on June 8, 1999.
Explanation of Provisions
The proposed amendments extend the recently-published final
regulations under section 6104(d) to apply to private foundations. The
proposed amendments also modify those regulations in several respects.
The proposed amendments state that the term annual information return
includes any return that is required to be filed under section 6033.
For a private foundation, such returns include Form 990-PF and Form
4720. Consistent with the statute, the proposed amendments provide
that, unlike other tax-exempt organizations, a private foundation is
required to disclose to the general public the names and addresses of
its contributors. The proposed amendments also clarify that, for
purposes of section 6104(d), the terms tax-exempt organization and
private foundation include nonexempt private foundations and nonexempt
charitable trusts described in section 4947(a)(1) that are subject to
the information reporting requirements of section 6033. Finally, the
proposed amendments remove existing Sec. 301.6104(d)-1 and redesignate
existing Secs. 301.6104-2 through 301.6104(d)-5, as Secs. 301.6104(d)-0
through 301.6104(d)-3, respectively.
Until 60 days after these proposed amendments are published as
final regulations in the Federal Register, private foundations continue
to be subject to section 6104(d) and section 6104(e), as in effect
prior to the Tax and Trade Relief Extension Act of 1998, and existing
Sec. 301.6104(d)-1. Thereafter, private foundations will continue to be
subject to the public inspection requirements of section 6104(d), as in
effect prior to the Tax and Trade Relief Extension Act of 1998, and
existing Sec. 301.6104(d)-1 with respect to any annual information
return the due date (determined with regard to any extension of time
for filing) for which is prior to the effective date of the final
regulations.
Proposed Effective Date
The amendments made by these regulations are proposed to be
effective 60 days after the date these regulations are published as
final regulations in the Federal Register.
Special Analyses
It has been determined that this notice of proposed rulemaking is
not a significant regulatory action as defined in Executive Order
12866. Therefore, a regulatory assessment is not required. Pursuant to
sections 603(a) and 605(b) of the Regulatory Flexibility Act, it is
certified that the collection of information referenced in this notice
of proposed rulemaking will not have a significant economic impact on a
substantial number of small entities. Although a substantial number of
small entities will be subject to the collection of information
requirements in these regulations, the requirements will not
[[Page 43326]]
have a significant economic impact on these entities. The average time
required to maintain and disclose the information required under these
regulations is estimated to be 30 minutes for each private foundation.
This estimate is based on the assumption that, on average, a private
foundation will receive one request per year to inspect or provide
copies of its application for tax exemption and its annual information
returns. Approximately 0.1 percent of the private foundations affected
by these regulations will be subject to the reporting requirements
contained in the regulations. It is estimated that annually,
approximately 65 private foundations will make its documents widely
available by posting them on the Internet. In addition, it is estimated
that annually, approximately 3 private foundations will file an
application for a determination that they are the subject of a
harassment campaign such that a waiver of the obligation to provide
copies of their applications for tax exemption and their annual
information returns is in the public interest. The average time
required to complete, assemble and file an application describing a
harassment campaign is expected to be 5 hours. Because applications for
a harassment campaign determination will be filed so infrequently, they
will have no effect on the average time needed to comply with the
requirements in these regulations. In addition, a private foundation is
allowed in these regulations to charge a reasonable fee for providing
copies to requesters. Therefore, it is estimated that it will cost a
private foundation less than $10 per year to comply with these
regulations, which is not a significant economic impact.
Pursuant to section 7805(f) of the Internal Revenue Code, this
notice of proposed rulemaking will be submitted to the Chief Counsel
for Advocacy of the Small Business Administration for comment on its
impact on small business.
Comments and Requests for a Public Hearing
Before these proposed regulations are adopted as final regulations,
consideration will be given to any written comments (a signed original
and eight (8) copies) and electronic comments that are submitted timely
to the IRS. The IRS and the Treasury Department specifically request
comments on the clarity of the proposed regulations and how they may be
made easier to understand. All comments will be available for public
inspection and copying.
A public hearing may be scheduled if requested in writing by a
person that timely submits written or electronic comments. If a public
hearing is scheduled, notice of the date, time, and place for the
hearing will be published in the Federal Register.
Drafting information. The principal author of these regulations is
Michael B. Blumenfeld, Office of Associate Chief Counsel (Employee
Benefits and Exempt Organizations), IRS. Other personnel from the IRS
and Treasury Department also participated in their development.
List of Subjects in 26 CFR Part 301
Employment taxes, Estate taxes, Excise taxes, Gift taxes, Income
taxes, Penalties, Reporting and recordkeeping requirements.
Proposed Amendments to the Regulations
Accordingly, 26 CFR part 301 is proposed to be amended as follows:
PART 301--PROCEDURE AND ADMINISTRATION
Paragraph 1. The authority citation for part 301 is amended by
adding entries in numerical order to read in part as follows:
Authority: 26 U.S.C. 7805 * * *
Section 301.6104(d)-2 also issued under 26 U.S.C. 6104(d)(3);
Section 301.6104(d)-3 also issued under 26 U.S.C. 6104(d)(3); *
* *
Sec. 301.6104(d)-1 [Removed]
Par. 2. Section 301.6104(d)-1 is removed.
Sec. 301.6104(d)-2 [Redesignated as Sec. 301.6104(d)-0]
Par. 3. Section 301.6104(d)-2 is redesignated as Sec. 301.6104(d)-
0.
Par. 4. Newly designated Sec. 301.6104(d)-0 is revised to read as
follows:
Sec. 301.6104(d)-0 Table of contents.
This section lists the major captions contained in
Secs. 301.6104(d)-1 through 301.6104(d)-3 as follows:
Sec. 301.6104(d)-1 Public inspection and distribution of
applications for tax exemption and annual information returns of
tax-exempt organizations.
(a) In general.
(b) Definitions.
(1) Tax-exempt organization.
(2) Private foundation.
(3) Application for tax exemption.
(i) In general.
(ii) No prescribed application form.
(iii) Exceptions.
(iv) Local or subordinate organizations.
(4) Annual information return.
(i) In general.
(ii) Exceptions.
(iii) Returns more than 3 years old.
(iv) Local or subordinate organizations.
(5) Regional or district offices.
(i) In general.
(ii) Site not considered a regional or district office.
(c) Special rules relating to public inspection.
(1) Permissible conditions on public inspection.
(2) Organizations that do not maintain permanent offices.
(d) Special rules relating to copies.
(1) Time and place for providing copies in response to requests
made in person.
(i) In general.
(ii) Unusual circumstances.
(iii) Agents for providing copies.
(2) Request for copies in writing.
(i) In general.
(ii) Time and manner of fulfilling written requests.
(A) In general.
(B) Request for a copy of parts of document.
(C) Agents for providing copies.
(3) Fees for copies.
(i) In general.
(ii) Form of payment.
(A) Request made in person.
(B) Request made in writing.
(iii) Avoidance of unexpected fees.
(iv) Responding to inquiries of fees charged.
(e) Documents to be provided by regional and district offices.
(f) Documents to be provided by local and subordinate
organizations.
(1) Applications for tax exemption.
(2) Annual information returns.
(3) Failure to comply.
(g) Failure to comply with public inspection or copying
requirements.
(h) Effective date.
(1) In general.
(2) Private foundation annual information returns.
Sec. 301.6104(d)-2 Making applications and returns widely
available.
(a) In general.
(b) Widely available.
(1) In general.
(2) Internet posting.
(i) In general.
(ii) Transition rule.
(iii) Reliability and accuracy.
(c) Discretion to prescribe other methods for making documents
widely available.
(d) Notice requirement.
(e) Effective date.
Sec. 301.6104(d)-3 Tax-exempt organization subject to harassment
campaign.
(a) In general.
(b) Harassment.
(c) Special rule for multiple requests from a single individual
or address.
(d) Harassment determination procedure.
(e) Effect of a harassment determination.
(f) Examples.
(g) Effective date.
Sec. 301.6104(d)-3 [Redesignated as Sec. 301.6104(d)-1]
Par. 5. Section 301.6104(d)-3 is redesignated as Sec. 301.6104(d)-
1.
Par. 6. Newly designated Sec. 301.6104(d)-1 is amended as follows:
[[Page 43327]]
1. Revise the section heading.
1a. Paragraph (a) is amended as follows:
a. Remove the language ``, other than a private foundation (as
defined in paragraph (b)(2) of this section),'' from the first
sentence.
b. Remove the language ``, other than a private foundation,'' from
the second sentence.
c. Remove the language ``Secs. 301.6104(d)-4 and 301.6104(d)-5''
from the fourth sentence and add ``Secs. 301.6104(d)-2 and 301.6104(d)-
3'' in its place.
2. In paragraph (b) introductory text, remove the language
``Secs. 301.6104(d)-4 and 301.6104(d)-5'' and add ``Secs. 301.6104(d)-2
and 301.6104(d)-3'' in its place.
3. In paragraph (b)(1), add a sentence at the end of the paragraph.
4. In paragraph (b)(2), add the language ``or a nonexempt
charitable trust described in section 4947(a)(1) or a nonexempt private
foundation subject to the information reporting requirements of section
6033 pursuant to section 6033(d)'' at the end of the sentence.
5. In paragraph (b)(3)(iii)(B), remove the word ``or'' at the end
of the paragraph.
6. Redesignate paragraph (b)(3)(iii)(C) as paragraph (b)(3)(iii)(D)
and add a new paragraph (b)(3)(iii)(C).
7. In paragraph (b)(4)(i), remove the last two sentences and add
three sentences in their place.
8. Paragraph (b)(4)(ii) is amended as follows:
a. Remove the language ``, and the return of a private foundation''
from the first sentence.
b. Revise the last sentence.
9. Revise paragraph (h).
The revisions and additions read as follows:
Sec. 301.6104(d)-1 Public inspection and distribution of applications
for tax exemption and annual information returns of tax-exempt
organizations.
* * * * *
(b) * * *
(1) * * * The term tax-exempt organization also includes any
nonexempt charitable trust described in section 4947(a)(1) or nonexempt
private foundation that is subject to the reporting requirements of
section 6033 pursuant to section 6033(d).
* * * * *
(3) * * *
(iii) * * *
(C) In the case of a tax-exempt organization other than a private
foundation, the name and address of any contributor to the
organization; or
* * * * *
(4) * * * (i) * * * Returns filed pursuant to section 6033 include
Form 990, Return of Organization Exempt From Income Tax, Form 990-PF,
Return of Private Foundation, or any other version of Form 990 (such as
Forms 990-EZ or 990-BL, except Form 990-T) and Form 1065. Each copy of
a return must include all information furnished to the Internal Revenue
Service on the return, as well as all schedules, attachments and
supporting documents. For example, in the case of a Form 990, the copy
must include Schedule A of Form 990 (containing supplementary
information on section 501(c)(3) organizations), and those parts of the
return that show compensation paid to specific persons (currently, Part
V of Form 990 and Parts I and II of Schedule A of Form 990).
(ii) * * * In the case of a tax-exempt organization other than a
private foundation, the term annual information return does not include
the name and address of any contributor to the organization.
* * * * *
(h) Effective date--(1) In general. For a tax-exempt organization,
other than a private foundation, this section is applicable June 8,
1999. Except as provided in paragraph (h)(2) of this section, for a
private foundation, this section is applicable beginning 60 days after
these regulations are published as final regulations in the Federal
Register.
(2) Private foundation annual information returns. This section
applies to any private foundation return the due date for which
(determined with regard to any extension of time for filing) is after
the applicable date for private foundations specified in paragraph
(h)(1) of this section.
Sec. 301.6104(d)-4 [Redesignated as Sec. 301.6104(d)-2]
Par. 7. Section 301.6104(d)-4 is redesignated as Sec. 301.6104(d)-
2.
Par. 8. Newly designated Sec. 301.6104(d)-2 is amended as follows:
1. In paragraph (a), remove the language ``Sec. 301.6104(d)-3(a)''
from each place it appears and add ``Sec. 301.6104(d)-1(a)'' in each
place, respectively.
2. Revise paragraph (e).
The revision reads as follows:
Sec. 301.6104(d)-2 Making applications and returns widely available.
* * * * *
(e) Effective date. For a tax-exempt organization, other than a
private foundation, this section is applicable June 8, 1999. For a
private foundation, this section is applicable beginning 60 days after
these regulations are published as final regulations in the Federal
Register.
Sec. 301.6104(d)-5 [Redesignated as Sec. 301.6104(d)-3]
Par. 9. Section 301.6104(d)-5 is redesignated as Sec. 301.6104(d)-
3.
Par. 10. Newly designated Sec. 301.6104(d)-3 is amended as follows:
1. In paragraph (a), remove the language ``Sec. 301.6104(d)-3(a)''
and add ``Sec. 301.6104(d)-1(a)'' in its place.
2. Revise paragraph (g).
The revision reads as follows:
Sec. 301.6104(d)-3 Tax-exempt organization subject to harassment
campaign.
* * * * *
(g) Effective date. For a tax-exempt organization, other than a
private foundation, this section is applicable June 8, 1999. For a
private foundation, this section is applicable beginning 60 days after
these regulations are published as final regulations in the Federal
Register.
Robert E. Wenzel,
Deputy Commissioner of Internal Revenue.
[FR Doc. 99-20093 Filed 8-9-99; 8:45 am]
BILLING CODE 4830-01-P