[Federal Register Volume 83, Number 216 (Wednesday, November 7, 2018)]
[Proposed Rules]
[Pages 55653-55656]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-24285]


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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 53

[REG-107163-18]
RIN 1545-BO80


Regulations To Prescribe Return and Time for Filing for Payment 
of Section 4960, 4966, 4967, and 4968 Taxes and To Update the Abatement 
Rules for Section 4966 and 4967 Taxes

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Notice of proposed rulemaking.

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SUMMARY: This document contains proposed regulations specifying which 
return to use to pay certain excise taxes and the time for filing the 
return. The regulations also implement the statutory addition of two 
excise taxes to the first-tier taxes subject to abatement. These 
regulations affect applicable tax-exempt

[[Page 55654]]

organizations and their related organizations, applicable educational 
institutions, sponsoring organizations that maintain certain donor 
advised funds, fund managers of such sponsoring organizations, and 
certain donors, donor advisors and persons related to a donor or donor 
advisor of a donor advised fund.

DATES: Written or electronic comments and requests for a public hearing 
must be received by December 7, 2018.

ADDRESSES: Send submissions to: CC:PA:LPD:PR (REG-107163-18), Room 
5203, Internal Revenue Service, P.O. Box 7604, Ben Franklin Station, 
Washington, DC 20044. Submissions may be hand-delivered Monday through 
Friday between the hours of 8 a.m. and 4 p.m. to CC:PA:LPD:PR (REG-
107163-18), Courier's Desk, Internal Revenue Service, 1111 Constitution 
Avenue NW, Washington, DC 20224 or sent electronically via the Federal 
eRulemaking Portal at http://www.regulations.gov (indicate IRS REG-
107163-18).

FOR FURTHER INFORMATION CONTACT: Concerning the proposed regulations, 
Amber L. MacKenzie at (202) 317-4086 or Ward L. Thomas at (202) 317-
6173; concerning submission of comments and request for hearing, Regina 
Johnson at (202) 317-6901 (not toll-free numbers).

SUPPLEMENTARY INFORMATION: 

Background

    This document contains proposed regulations amending regulations 
under section 6011 of the Internal Revenue Code (Code) to specify the 
return to accompany payment of excise taxes under sections 4960, 4966, 
4967, and 4968; amending regulations under section 6071 to specify the 
time for filing that return; and amending regulations under section 
4963 that define the first-tier taxes subject to abatement under 
section 4962.
    These regulations affect applicable tax-exempt organizations 
described in section 4960(c)(1) and their related organizations 
described in section 4960(c)(4)(B); applicable educational institutions 
described in section 4968(b)(1); sponsoring organizations described in 
section 4966(d)(1) that maintain donor advised funds described in 
section 4966(d)(2); fund managers of such sponsoring organizations 
described in sections 4966(d)(3); and donors, donor advisors and 
persons related to a donor or donor advisor of a donor advised fund 
described in section 4967(d).
    These regulations implement section 1231 of the Pension Protection 
Act of 2006, Public Law 109-280, 120 Stat. 780, 1094 (``PPA''), as 
amended by section 3(h) of the Tax Technical Corrections Act of 2007, 
Public Law 110-172, 121 Stat. 2473, 2475, and sections 13602 and 13701 
of the Tax Cuts and Jobs Act, Public Law 115-97, 131 Stat. 2054, 2157, 
2167 (2017) (``TCJA'').
    The PPA added sections 4966 and 4967 to the Code. These sections 
impose excise taxes related to certain distributions from donor advised 
funds (defined in section 4966(d)(2)) maintained by organizations that 
are defined as sponsoring organizations in section 4966(d)(1).
    Section 4966(a)(1) imposes a 20 percent excise tax on each 
``taxable distribution'' from a donor advised fund, payable by the 
sponsoring organization of the donor advised fund. Section 4966(a)(2) 
imposes a separate 5 percent excise tax on the agreement of any fund 
manager (as defined in section 4966(d)(3)) to the making of the 
distribution, knowing that it is a taxable distribution. Section 
4966(b)(1) states that if more than one fund manager is liable for the 
tax, all such managers are jointly and severally liable with respect to 
the taxable distribution. Section 4966(b)(2) provides that the maximum 
amount of tax that may be imposed on all fund managers for any one 
taxable distribution is $10,000.
    Section 4966(c)(1) defines the term ``taxable distribution'' as any 
distribution from a donor advised fund: (A) To any natural person; or 
(B) to any other person if (i) the distribution is for any purpose 
other than one specified in section 170(c)(2)(B), or (ii) the 
sponsoring organization does not exercise expenditure responsibility in 
accordance with section 4945(h) with respect to such distribution. 
Section 4966(c)(2) excepts from the definition of taxable distribution: 
(A) Distributions to any organization described in section 
170(b)(1)(A), other than a disqualified supporting organization (as 
defined in section 4966(d)(4)); (B) distributions to the sponsoring 
organization of such donor advised fund; and (C) distributions to any 
other donor advised fund.
    Section 4967(a)(1) imposes a tax on the advice of a donor, donor 
advisor, or related person, described in subsection (d), if a 
distribution from a donor advised fund results in such person (or any 
other person described in subsection (d)) receiving, directly or 
indirectly, a more than incidental benefit (a ``prohibited benefit''). 
The tax, which is equal to 125 percent of the amount of the prohibited 
benefit, is paid by any person described in subsection (d) who advises 
as to a distribution or who receives a prohibited benefit as a result 
of the distribution. Section 4967(c)(1) provides that if more than one 
person is liable for the tax under section 4967(a)(1), then all such 
persons are jointly and severally liable for the tax.
    Section 4967(a)(2) imposes a tax on a fund manager (defined in 
section 4966(d)(3)) who agrees to the making of a distribution 
described in section 4967(a)(1), knowing that it would confer a more 
than incidental benefit on a donor, donor advisor, or related person. 
Section 4967(a)(2) states that the tax is equal to 10 percent of the 
amount of the prohibited benefit. Section 4967(c)(1) provides that if 
more than one fund manager is liable for the tax, all such fund 
managers are jointly and severally liable. Section 4967(c)(2) provides 
that the maximum amount of tax under section 4967(a)(2) on all fund 
managers for any one prohibited benefit transaction is $10,000. Section 
4967(b) provides that no tax is imposed under section 4967 if a tax has 
been imposed with respect to the distribution under section 4958 
(taxing excess benefit transactions).
    In 2006, the PPA added section 4966 and section 4967 taxes to the 
definitions of ``first tier tax'' in section 4963(a) and ``taxable 
event'' in section 4963(c). In 2007, section 4962(b) was amended by the 
Tax Technical Corrections Act of 2007, Public Law 110-172, sec. 3(h), 
121 Stat. 2473, 2475, to add subchapter G of chapter 42 (i.e., section 
4966 and section 4967 taxes) to the definition of ``qualified first 
tier tax'' for purposes of tax abatement. Thus under the Code, section 
4966 and section 4967 taxes are subject to abatement under the 
generally applicable rules. Treas. Reg. Sec.  53.4963-1 sets forth 
definitions with respect to abatement of taxes.
    The TCJA added sections 4960 and 4968 to the Code. Section 4960 
imposes an excise tax equal to the product of the rate of tax under 
section 11 and the sum of (1) so much of the remuneration paid (other 
than any excess parachute payment) by an applicable tax-exempt 
organization for the taxable year with respect to employment of any 
covered employee in excess of $1,000,000, plus (2) any excess parachute 
payment paid by such an organization to any covered employee. Section 
4960(c)(4)(A) provides that remuneration of a covered employee by an 
applicable tax-exempt organization includes any remuneration paid with 
respect to employment of such employee by any related person or 
governmental entity. Section 4960(c)(4)(C) provides that when 
remuneration from more than one

[[Page 55655]]

employer is taken into account in determining the tax imposed by 
subsection (a), each such employer is liable for a pro rata share of 
the tax imposed by subsection (a) based on the ratio of the amount of 
remuneration paid by such employer with respect to such employee to the 
amount of remuneration paid by all such employers to such employee. 
Separately, section 4968 imposes an excise tax on each applicable 
educational institution based on the net investment income of such 
institution (including certain income of related organizations) for the 
taxable year.
    Section 6011(a) generally provides that when required by 
regulations prescribed by the Secretary, any person liable for any tax 
imposed by the Code shall make a return or statement according to the 
forms and regulations prescribed by the Secretary. Section 6071 
generally provides that when not otherwise provided for under the Code, 
return filing dates are prescribed by regulation. Treas. Reg. 
Sec. Sec.  53.6011-1 and 53.6071-1 require persons subject to certain 
enumerated excise taxes under Chapter 42 of the Code to file a Form 
4720 to accompany payment of those excise taxes and provide the time 
for filing the return. (Form 4720 is denominated ``Return of Certain 
Excise Taxes Under Chapters 41 and 42 of the Internal Revenue Code.'') 
Sections 4960, 4966, 4967, and 4968 were added to Chapter 42 of the 
Code, but are not enumerated in Treas. Reg. Sec. Sec.  53.6011-1 and 
53.6071-1.

Explanation of Provisions

1. Section 4962 Abatement

    These proposed regulations add section 4966 and section 4967 taxes 
to the definitions of ``first tier tax'' and ``taxable event'' in 
Treas. Reg. Sec.  53.4963-1. Qualified first tier taxes are subject to 
abatement under section 4962.

2. Requirement To File a Form 4720

    These proposed regulations amend Treas. Reg. Sec.  53.6011-1(b) to 
provide that persons (including governmental entities) that are liable 
for section 4960, 4966, 4967, or 4968 excise taxes are required to file 
a return on Form 4720.

3. Deadline for Filing a Form 4720

    Under Sec.  53.6071-1(i) of these proposed regulations, a person 
required to file a Form 4720 to report an excise tax under section 
4960, 4966, 4967, or 4968 must file a Form 4720 by the 15th day of the 
fifth month after the end of the person's taxable year during which the 
excise tax liability was incurred. Thus, for example, an organization 
reporting on a calendar-year basis that incurred excise tax during the 
calendar year ending December 31, 2018, would be required to file a 
Form 4720 and pay the tax due by May 15, 2019.

4. Effective/Applicability Date

    These regulations are proposed to apply as of the date of 
publication of the final rule in the Federal Register.

Special Analyses

    This regulation is not subject to review under section 6(b) of 
Executive Order 12866 pursuant to the Memorandum of Agreement (April 
11, 2018) between the Department of the Treasury and the Office of 
Management and Budget regarding review of tax regulations. It is hereby 
certified that the collection of information in these regulations will 
not have a significant economic impact on a substantial number of small 
entities. This rule merely provides guidance as to the timing and 
filing of Form 4720 for persons liable for the specified excise taxes 
and who have a statutory filing obligation. Completing the applicable 
portion of the Form 4720 imposes little incremental burden in time or 
expense as compared to any other filing method. In addition, a person 
may already be required to file the Form 4720 under the existing final 
regulations in Sec. Sec.  53.6011-1 and 53.6071-1 if it is liable for 
another excise tax for which filing of the Form is required. Therefore, 
a regulatory flexibility analysis under the Regulatory Flexibility Act 
(5 U.S.C. chapter 6) is not required. Pursuant to section 7805(f) of 
the Code, this regulation will be submitted to the Chief Counsel for 
Advocacy of the Small Business Administration for comment on its impact 
on small entities.

Comments and Requests for Public Hearing

    Before these proposed regulations are adopted as final regulations, 
consideration will be given to any comments that are timely submitted 
to the IRS as prescribed in the preamble under the ADDRESSES section. 
All comments submitted will be made available at www.regulations.gov or 
upon request.
    A public hearing will be scheduled if requested in writing by any 
person that timely submits written 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 authors of these regulations are Amber L. MacKenzie 
and Ward L. Thomas, Office of Associate Chief Counsel (Tax Exempt and 
Government Entities). However, other personnel from the IRS and 
Treasury Department participated in their development.

List of Subjects in 26 CFR Part 53

    Excise taxes, Foundations, Investments, Lobbying, Reporting and 
recordkeeping requirements.

Proposed Amendments to the Regulations

    Accordingly, 26 CFR part 53 is proposed to be amended as follows:

PART 53--FOUNDATION AND SIMILAR EXCISE TAXES

0
Paragraph 1. The authority citation for part 53 continues to read, in 
part, as follows:

    Authority: 26 U.S.C. 7805 * * *


Sec.  53.4963-1   [Amended]

0
Par. 2. Section 53.4963-1 is amended as follows:
0
1. Paragraph (a) is amended by removing the language ``4958, 4971'' and 
adding ``4958, 4966, 4967, 4971'' in its place.
0
2. Paragraph (c) is amended by removing the language ``4958, 4971'' and 
adding ``4958, 4966, 4967, 4971'' in its place.
0
Par. 3. Section 53.6011-1 is amended by:
0
1. Revising the first sentence of paragraph (b).
0
2. Removing from the third sentence of paragraph (b) the language 
``4958(a), or 4965(a),'' and adding ``4958(a), 4960(a), 4965(a), 
4966(a), or 4967(a),'' in its place.
    The revision reads as follows:


Sec.  53.6011-1  General requirement of return, statement or list.

* * * * *
    (b) Every person (including a governmental entity) liable for tax 
imposed by sections 4941(a), 4942(a), 4943(a), 4944(a), 4945(a), 
4955(a), 4958(a), 4959, 4960(a), 4965(a), 4966(a), 4967(a), or 4968(a), 
and every private foundation and every trust described in section 
4947(a)(2) which has engaged in an act of self-dealing (as defined in 
section 4941(d)) (other than an act giving rise to no tax under section 
4941(a)) shall file an annual return on Form 4720 and shall include 
therein the information required by such form and

[[Page 55656]]

the instructions issued with respect thereto. * * *
* * * * *


Sec.  53.6071-1   [Amended]

0
Par. 4. Section 53.6071-1 is amended by:
0
1. Redesignating paragraph (i) as paragraph (j).
0
2. Adding new paragraphs (i) and (j)(3).
    The additions read as follows:


Sec.  53.6071-1   Time for filing returns.

* * * * *
    (i) Taxes under section 4960, 4966, 4967, or 4968. A person 
(including a governmental entity) required by Sec.  53.6011-1(b) to 
file a return for a tax imposed by section 4960(a), 4966(a), 4967(a), 
or 4968(a) in a taxable year must file the Form 4720 on or before the 
15th day of the fifth month after the end of the person's taxable year 
(or, if the person has not established a taxable year for Federal 
income tax purposes, the person's annual accounting period).
    (j) * * *
    (3) Paragraph (i) of this section applies on and after the date of 
publication of the Treasury decision adopting these rules as final 
regulations in the Federal Register.

Kirsten Wielobob,
 Deputy Commissioner for Services and Enforcement.
[FR Doc. 2018-24285 Filed 11-5-18; 4:15 pm]
 BILLING CODE 4830-01-P