[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