This action, pursuant to 5 U.S.C. 553, amends regulations issued to carry out a marketing order as defined in 7 CFR 900.2(j). This rule is issued under Marketing Order No. 989, both as amended (7 CFR part 989), hereinafter referred to as the “Order,” and the applicable provisions of the Agricultural Marketing Agreement Act of 1937, as amended (7 U.S.C. 601-674), hereinafter referred to as the “Act.” The Raisin Administrative Committee (Committee) locally administers the Order and is comprised of growers and handlers of raisins operating within the area of production and a public member. The Committee consists of 47 members of whom 35 shall represent producers, 10 shall represent handlers, 1 shall represent the cooperative bargaining association(s) and 1 shall be a public member.

The Agricultural Marketing Service (AMS) is issuing this rule in conformance with Executive Orders 12866, 13563, and 14094. Executive Orders 12866 and 13563 direct agencies to assess costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety effects, distributive impacts, and equity). Executive Order 13563 emphasizes the importance of quantifying both costs and benefits, reducing costs, harmonizing rules, and promoting flexibility. Executive Order 14094 directs agencies to conduct proactive outreach to engage interested and affected parties through a variety of means, such as through field offices, and alternative platforms and media. This action falls within a category of regulatory actions that the Office of Management and Budget (OMB) exempted from Executive Order 12866 review.

This rule has been reviewed under Executive Order 13175—Consultation and Coordination with Indian Tribal Governments, which requires agencies to consider whether their rulemaking actions would have Tribal implications. AMS has determined that this rule is unlikely to have substantial direct effects on one or more Indian Tribes, on the relationship between the Federal Government and Indian Tribes, or on the distribution of power and responsibilities between the Federal Government and Indian Tribes.

This rule has been reviewed under Executive Order 12988, Civil Justice Reform. This rule is not intended to have retroactive effect.

The Act provides that administrative proceedings must be exhausted before parties may file suit in court. Under section 608c(15)(A) of the Act, any handler subject to an order may file with the Department of Agriculture (USDA) a petition stating that the order, any provision of the order, or any obligation imposed in connection with the order is not in accordance with law and request a modification of the order or to be exempted therefrom. Such handler is afforded the opportunity for a hearing on the petition. After the hearing, USDA would rule on the petition. The Act provides that the district court of the United States in any district in which the handler is an inhabitant, or has his or her principal place of business, has jurisdiction to review USDA's ruling on the petition, provided an action is filed no later than 20 days after the date of the entry of the ruling.

This rule temporarily suspends the continuance referendum requirement under section 989.91(c). On October 20, 2022, the Committee recommended amending the marketing order through formal rulemaking and, in a separate request, recommended the suspension of the continuance referendum scheduled to occur sometime between November 2023 and November 2025. The Committee believes the suspension would eliminate any potential confusion among producers voting in two referendums in a two-year period.

Section 989.91(b) states that the Secretary shall terminate or suspend the operation of any or all provisions of the Order, whenever the Secretary finds that such provisions do not tend to effectuate the declared policy of the Act. Section 989.91(c) specifies the Secretary shall conduct a referendum no less than five crop years and no later than six crop years from November 26, 2018, to ascertain whether continuance of the Order is favored by producers. The requirement also specifies that subsequent referenda be conducted every six crop years thereafter. By this requirement, the timing of the next continuance referendum is scheduled to occur sometime between November 2023 and November 2025. AMS identifies this period as the same period when the formal rulemaking process would occur, which may also include its own referendum vote. In view of the anticipated time necessary to complete the proposed formal rulemaking action and the likelihood of an amendatory referendum being conducted within two years of the scheduled continuance referendum, AMS determined that the continuance referendum requirement should be suspended to minimize confusion among voters. Secondly, AMS determined that to conduct a continuance referendum during the same period for when the formal rulemaking is expected to occur would not allow the industry time to fully consider the impact of potentially new amendments to the Order. For these reasons, the continuance referendum requirement would not tend to effectuate the declared policy of the Act for that period of time, and therefore, AMS has determined not to conduct the continuance referendum at the time required by the Order.

Alternatively, AMS considered suspending the continuance referendum until immediately after the conclusion of the formal rulemaking. However, this timing would still result in multiple referenda occurring within the same 2-year period, which may cause voter confusion, and would prevent producers from having adequate time to evaluate any potential results of the amendatory process before voting on the continuance of the Order. To address these temporal concerns, AMS determined that the suspension of the continuance referendum requirement should extend until 2029, which is on course with the original structure of the timeframe under the Order as discussed in the preceding paragraph. This suspension would provide industry and the Committee time to assess the benefits of amendments resulting from the formal rulemaking, if any, prior to the continuance referendum, prevent any voter confusion, and also maintain the structure of the timetable in the Order. Based on that timetable, a continuance referendum would be conducted to determine if California raisin producers sufficiently support the Order as amended.

This rule suspends the continuance referendum requirement under section 989.91(c). The next scheduled continuance referendum will be conducted sometime between November 2029 and November 2030.

A 30-day comment period is provided to allow interested persons to respond to this interim final rule. AMS will consider all written comments received prior to the issuance of a final rule.

Pursuant to requirements set forth in the Regulatory Flexibility Act (RFA) (5 U.S.C. 601-612), AMS considered the economic impact of this action on small entities. Accordingly, AMS prepared this regulatory flexibility analysis. The purpose of the RFA is to fit regulatory actions to the scale of businesses that are subject to such actions so that small businesses will not be unduly or disproportionately burdened by the action. Marketing orders issued pursuant to the Act, and the rules issued thereunder, are unique in that they are brought through group action of essentially small entities acting on their own behalf.

Presently, there are approximately 18 handlers of raisins subject to regulation under the Order and approximately 2,000 raisin producers in the regulated area.

Small agricultural producers are defined by the Small Business Administration (SBA) as those having annual receipts of less than $4,000,000 (NAICS code 111332, Grape Vineyards). Small agricultural service firms are defined by the SBA as those having annual receipts of less than $34,000,000 (NAICS code 115114, Postharvest Crop Activities) (13 CFR 121.201).

Using USDA National Agricultural Statistics Service (NASS) data, the 2021 season average value of utilized production of California processed raisin-type grapes (most of which are dried into raisins) is $393.649 million. Dividing that figure by 2,000 producers yields an annual average revenue per producer of $196,825, well below the SBA large farm size of threshold of $4,000,000. In terms of annual sales of processed raisin-type grapes, the majority of producers may be classified as small entities.

Dividing the $393.649 million crop value figure by 18 handlers yields an average annual sales per handler estimate of $21,869,389. This annual average sales figure is measured at the producer-level crop value, and to draw conclusions about the proportion of small handlers, a handler margin estimate is needed.

There is no current publicly available estimate of an average raisin handler margin, but a 1988 economic study of the California raisin industry estimated producer-handler average margins of about 30 percent for bulk raisin shipments and about 60 percent for packaged shipments. Current handler margins are likely somewhat smaller, since the study was completed more than three decades ago, and current bulk handling and packaging technologies are more efficient.

An alternative method to compute an average handler margin for packaged raisins is to compare the NASS season average grower price per ton for processed raisin-type grapes (converted to its dried weight equivalent) with an average price per ton for packaged raisins that USDA paid under its Commodity Procurement Program in recent years ($1.41 per pound, $2,820 per ton). The NASS 2021 season average grower price for raisin-type grapes was $369 per ton. Using a standard conversion factor of 4.62 to convert to a dried-weight equivalent, the price per ton for raisins is $1,705 ($369 × 4.62). A computed handler margin estimate is 65 percent ($2,820/$1,705−1). Since the Commodity Procurement average price includes shipping cost to recipient locations, the 65 percent margin is moderately overstated.

If a handler had annual raisin sales of exactly $34 million (the SBA large firm size threshold) that would mean a handler margin of 55 percent above the producer level ($34,000,000/$21,869,389).

Since both abovementioned margin estimates for packaged raisin shipments (60 and 65 percent) are close to the 55 percent margin implied by the $34 million SBA size threshold, it can be concluded that there are raisin handlers with annual sales both above and below the size threshold. It is reasonable to assume that fewer than 9 of the 18 handlers have annual raisin sales well above $34 million. Therefore, more than 9, a majority of handlers, have raisin sales below $34 million and may be classified as small entities.

On October 20, 2022, the Committee recommended that AMS postpone the scheduled continuance referendum to avoid the referendum period overlapping with a formal rulemaking to amend the Order and any potential confusion it would otherwise cause producers. After considering the Committee's request, AMS determined that the scheduled continuance referendum should be suspended while AMS conducts a formal rulemaking to amend the Order and, if effectuated, while the industry operates under such amended Order.

Section 989.91(b) authorizes the Secretary to terminate or suspend the operation of any or all provisions of the Order, whenever the Secretary finds that such provisions do not tend to effectuate the declared policy of the act.

This interim final rule suspends the continuance referendum requirement under section 989.91(c) of the Federal marketing order regulating the handling of raisins produced from grapes grown in California. The next scheduled continuance referendum will be conducted no earlier than November 26, 2029. AMS will consider all comments received prior to publication of a final rule in the Federal Register .

In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. Chapter 35), the Order's information collection requirements have been previously approved by OMB and assigned OMB No. 0581-0178, Vegetable and Specialty Crops. No changes are necessary in those requirements as a result of this rule. Should any changes become necessary, they would be submitted to OMB for approval.

This interim final rule does not impose any additional reporting or recordkeeping requirements on either small or large raisin handlers. As with all Federal marketing order programs, reports and forms are periodically reviewed to reduce information requirements and duplication by industry and public sector agencies. AMS has not identified any relevant Federal rules that duplicate, overlap, or conflict with this interim final rule.

AMS is committed to complying with the E-Government Act, to promote the use of the internet and other information technologies to provide increased opportunities for citizen access to Government information and services, and for other purposes.

A small business guide on complying with fruit, vegetable, and specialty crop marketing agreements and orders may be viewed at: https://www.ams.usda.gov/rules-regulations/moa/small-businesses. Any questions about the compliance guide should be sent to Richard Lower at the previously mentioned address in the FOR FURTHER INFORMATION CONTACT section.

After consideration of all relevant material presented, including the information and recommendations submitted by the Committee and other available information, it is hereby found that this section 989.91(c) does not tend to effectuate the declared policy of the Act for the period specified herein and should be stayed for that period.

This interim final rule invites comments on the temporary suspension of the continuance referendum requirement under Marketing Order 989, which regulates the handling of raisins produced from grapes grown in California. A 30-day comment period is provided to allow interested persons to respond to this rule. All written comments timely received will be considered before a final rule is published in the Federal Register .

Pursuant to section 553(b)(B) of the Administrative Procedure Act, notice and comment are not required prior to the issuance of a final rule if an agency, for good cause, finds that “notice and public procedure thereon are impracticable, unnecessary, or contrary to the public interest.”

AMS has determined upon good cause that it is impracticable, unnecessary, and contrary to the public interest to give preliminary notice prior to putting this rule into effect because this rule should be implemented as soon as possible since the continuance referendum period was originally scheduled during this time period and the potential formal rulemaking will likely begin soon, the Committee discussed this issue at public meetings and unanimously recommended a suspension of the continuance referendum, and the rule provides a comment period and any comments received will be considered prior to finalization of this rule.

For the reasons stated above, AMS also finds that good cause exists for the interim final rule to be effective upon publication in the Federal Register .

For the reasons set forth in the preamble, the Agricultural Marketing Service amends 7 CFR part 989 as follows:

HSACU Institutions, 2023-2024: This rule makes changes to the existing list of institutions in appendix B of 7 CFR part 3434. The list of institutions is amended to reflect the institutions that are granted HSACU certification by the Secretary and are eligible for HSACU programs for the period starting July 1, 2023, and ending July 1, 2024.

Certification Process: As stated in 7 CFR 3434.4, an institution must meet the following criteria to receive HSACU certification: (1) Be a Hispanic-Serving Institution (HSI), (2) offer agriculture-related degrees, (3) not be designated an 1862 land-grant institution, (4) not appear on the Excluded Parties List System (EPLS), (5) be accredited, and (6) award at least 15% of agriculture-related degrees to Hispanic students over the two most recent academic years.

NIFA obtained the latest report from the U.S. Department of Education's National Center for Education Statistics that lists all HSIs and the degrees conferred by these institutions (completion data) during the 2020-21 academic year. NIFA used this report to identify HSIs that conferred a degree in an instructional program that appears in appendix A of 7 CFR part 3434 and to confirm that over the 2019-2020 and 2020-21 academic years at least 15% of the degrees in agriculture-related fields were awarded to Hispanic students. NIFA further confirmed that these institutions were nationally accredited.

The updated list of HSACUs is based on (1) completions data from 2019-20 and 2020-21, and (2) enrollment data from Fall 2021. NIFA identified 223 institutions that met the eligibility criteria to receive HSACU certification for fiscal year (FY) 2023 (July 1, 2023, to July 1, 2024).

Section 7102 of the Agriculture Act of 2018 (Pub. L. 115-334) amended Section 1404(14) of the National Agricultural Research, Extension, and Teaching Policy Act of 1977 (7 U.S.C. 3103(14)) to remove the opt-in, opt-out language for Hispanic Serving Agricultural Colleges and Universities (HSACU) in order to apply for Non Land-Grant College of Agriculture (NLGCA) designation.

Appeal Process: As set forth in 7 CFR 3434.8, NIFA will permit HSIs that are not granted HSACU certification to submit an appeal within 30 days of the publication of this rule.

Classification: This rule relates to public property, loans, grants, benefits, or contracts. Accordingly, pursuant to 5 U.S.C. 553, notice of proposed rulemaking and opportunity for comment are not required, and this rule may be made effective less than 30 days after publication in the Federal Register . This rule also is exempt from the provisions of Executive Order 12866. This action is not a rule as defined by the Regulatory Flexibility Act, as amended by the Small Business Regulatory Enforcement Fairness Act of 1996, 5 U.S.C. 601 et seq., or the Congressional Review Act, 5 U.S.C. 801 et seq., and thus is exempt from the provisions of those Acts. This rule contains no information collection or recordkeeping requirements under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq. ).

Accordingly, part 3434 of title 7 of the Code of Federal Regulations is amended as set forth below:

I. Discussion

The NRC is issuing a revision in the NRC's “Regulatory Guide” series. This series was developed to describe methods that are acceptable to the NRC staff for implementing specific parts of the agency's regulations, to explain techniques that the staff uses in evaluating specific issues or postulated events, and to describe information that the staff needs in its review of applications for permits and licenses.

The proposed Revision 1 to RG 1.183 was issued with a temporary identification of Draft Regulatory Guide, DG-1389. (ADAMS Accession No. ML21204A065).

This revision of the guide (Revision 1) addresses new issues identified since the guide was originally issued. These include (1) using the term maximum hypothetical accident loss-of-coolant accident (LOCA) to clarify the accident that the staff finds acceptable to use to meet the description in the applicable regulations, identified in Section A of RG 1.183, Revision 1, with a clear delineation between source term assumptions and plant response; (2) adding transient release fractions from empirical data from in-pile, prompt power pulse test programs and analyses from several international publications of fuel rod performance under prompt power excursion conditions; (3) revising steady-state release fractions for accidents other than the LOCA based on a revision to the American National Standards Institute/American Nuclear Society Standard 5.4, “Method for Calculating the Fractional Release of Volatile Fission Products from Oxide Fuel”; (4) adding information to acknowledge that the RG may provide useful information for satisfying the radiological dose analysis requirements in parts 50 and 52 of title 10 of the Code of Federal Regulations (10 CFR), for new LWR applicants, including advanced evolutionary and passive LWR design and siting; (5) providing additional guidance for modeling boiling-water reactor main steam isolation valve leakage; (6) adding guidance for accident tolerant fuel, high-burnup fuel, and increased enrichment source term analyses; (7) revising transport and decontamination models for the fuel handling design basis accident; (8) adding guidance for crediting hold-up and retention of main steam isolation valve leakage within the main steamlines and condenser for boiling-water reactors; and (9) providing additional guidance on meteorological assumptions.

The NRC published a notice of the availability of DG-1389 in the Federal Register on April 21, 2022 (87 FR 23891) for a 60-day public comment period. The public comment period closed on June 21, 2022. Public comments on DG-1389 and the staff responses to the public comments are available under ADAMS under Accession No. ML23082A309.

In the notice of availability for DG-1389, Section IV, “Specific Request for Comment,” the NRC sought specific comments on the draft staff technical assessment titled, “Technical Assessment of Hold-up and Retention of Main Steam Isolation Valve Leakage within the Main Steam Lines and Main Condenser” (ADAMS Accession No. ML20085J042); the NRC staff did not receive any public comments on the draft staff technical assessment. At this time, the staff has determined to incorporate the supporting technical basis information from that draft staff technical assessment into RG 1.183, Revision 1, Appendix A, Section A-5.5, rather than finalizing the draft staff technical assessment separately for inclusion in this RG. Accordingly, the reference to the draft staff technical assessment was deleted from the final RG.

As noted in the Federal Register on December 9, 2022 (87 FR 75671), this document is being published in the “Rules” section of the Federal Register to comply with publication requirements under 1 CFR chapter I.

This RG is a rule as defined in the Congressional Review Act (5 U.S.C. 801-808). However, the Office of Management and Budget has not found it to be a major rule as defined in the Congressional Review Act.

Issuance of RG 1.183, Revision 1, does not constitute backfitting as defined in 10 CFR 50.109, “Backfitting,” and as described in NRC Management Directive (MD) 8.4, “Management of Backfitting, Forward Fitting, Issue Finality, and Information Requests” (ADAMS Accession No. ML18093B087); affect the issue finality of an approval under 10 CFR part 52; or constitute forward fitting as defined and described in MD 8.4 because, as explained in RG 1.183, Revision 1, applicants and licensees are not required to comply with the positions set forth in this RG.

A member of the public may, at any time, submit suggestions to the NRC for improvement of existing RGs or for the development of new RGs. Suggestions can be submitted on the NRC's public website at https://www.nrc.gov/reading-rm/doc-collections/reg-guides/contactus.html. Suggestions will be considered in future updates and enhancements to the “Regulatory Guide” series.

The CFPB is issuing this Advisory Opinion through the procedures for its Advisory Opinions Policy. 1 Refer to those procedures for more information.

Section 1034(c) of the CFPA requires large financial institutions to comply with consumer requests for information concerning their accounts in a timely manner. 2 This Advisory Opinion interprets this provision for the purpose of highlighting the obligations it imposes upon large financial institutions. The CFPB has not previously issued supervisory findings or pursued an enforcement action under this provision. This Advisory Opinion is the CFPB's first guidance regarding section 1034(c). 3

Section 1034(c) applies to insured depository institutions and credit unions that offer or provide consumer financial products or services and that have total assets of more than $10 billion, as well as their affiliates. 4 The provision states that, subject to certain exceptions, banks and credit unions with over $10 billion in assets must “in a timely manner, comply with a consumer request for information in the control or possession of such covered person concerning the consumer financial product or service that the consumer obtained from such covered person, including supporting written documentation, concerning the account of the consumer.”  5 Section 1034(c) is a current legal obligation that became effective on July 21, 2011. 6

Congress placed section 1034(c) alongside provisions of the CFPA that establish a process for addressing consumer complaints submitted to the CFPB. Under sections 1034(a) and 1034(b), when a consumer submits a complaint or inquiry about a large bank or credit union, that entity “shall provide a timely response” to the CFPB, and the CFPB then provides a timely response to the consumer, including “any responses received” from the financial institution. 7 Through section 1034(c), Congress established an additional, direct channel for consumers to request information from large banks and credit unions without routing their inquiry through the CFPB or another government entity. And like a complaint submitted to the CFPB, a request for information under section 1034(c) can lead to the identification and resolution of errors by a large bank or credit union involving a consumer's account.

Responding to consumer requests for information is critical for ensuring high levels of customer service and enabling consumers to resolve issues with their accounts when they encounter problems. Large banks and credit unions possess information that is vital to meet these customer needs. Too often, however, it can be difficult and time consuming for individual consumers to obtain a clear answer to questions or resolve an account issue. The CFPB has observed that some larger financial institutions have moved away from a traditional relationship banking model with an emphasis on providing customized help to individuals. 8 Such individualized service is now generally reserved for high net-worth individuals, and is difficult for other households to find. For most consumers, larger banks and credit unions frequently rely on highly standardized processes rather than high-quality human interactions or digital channels that actually facilitate self-help. When a consumer has a question or problem, they typically cannot go to an individual at the bank or credit union who is already familiar with their account, such as the person that originally signed them up for the product. They are more likely to have to navigate a phone tree in the hope of speaking to the right person in a call center, to have to search through largely irrelevant material on a website to try to find the information they need, or to have to attempt to get a clear answer from a chatbot. 9

On June 14, 2022, the CFPB issued a request for information asking the public to provide input on customer service obstacles they face in interacting with large banks and credit unions. 10 Commenters relayed consumers' frustration and difficulty in obtaining critical information about their accounts. 11 This includes information that consumers need to stay current and avoid fees or penalties; to identify and resolve errors; and to close accounts that no longer serve their interests.

Through section 1034(c), Congress ensured that as banks and credit unions grow larger they must continue to meet consumers' need for information necessary to manage their finances, and thus must provide timely responses to consumer requests for information concerning their accounts. Such responses help meet consumers' reasonable expectations for customer service.

Section 1034(c) states that, subject to certain enumerated exceptions, large banks and credit unions “shall, in a timely manner, comply with a consumer request for information in the control or possession of [a large bank or credit union] concerning the consumer financial product or service that the consumer obtained from [the large bank or credit union], including supporting written documentation, concerning the account of the consumer.”  12 Thus, section 1034(c) applies to a consumer's request for information to a large bank or credit union where the information concerns the consumer's account for a consumer financial product or service, is in the large bank or credit union's control or possession, and does not fall into an enumerated exception.

The CFPA defines “consumer financial product or service” to include several types of financial products or services that consumers may obtain from a large bank or credit union, including deposit and savings accounts, credit products such as mortgage loans and credit cards, and loan servicing. 13 Under section 1034(c), large banks and credit unions that offer or provide consumer financial products or services must comply with consumer requests for information regarding their accounts. That obligation applies even if consumers do not expressly invoke section 1034(c). 14

Section 1034(c) applies to consumer requests for information “concerning” an account for a consumer financial product or service. The term “concerning” means “relating to” or “regarding” and therefore encompasses a wide range of information about a consumer's account. 15 Information concerning an account would include account information that appears on periodic statements or on online account portals, such as the amount of the balance in a deposit account, the interest rate on a loan or credit card, and information regarding transactions or payments involving an account. 16 It would include information regarding bill payment and other recurring transactions involving the account ( e.g., a list of all recurring payments out of the account). It would also include the terms and conditions of the account, including a schedule of fees that may be charged on the account. It could also include information about the status of a lien on real property that was released (or should have been released) years before. Such information can be necessary for consumers to manage their accounts and resolve disputes with their bank or credit union, or with merchants or other third parties. In contrast, section 1034(c) does not apply to a consumer's request for information that is not specifically related to a consumer's account, such as information regarding a large bank or credit union's internal operating procedures, financial performance, marketing strategy, or training program for its employees.

In addition, section 1034(c) requires a large bank or credit union to comply with a consumer's request for “information . . . including supporting written documentation.” The word “support” means “to assist,” “help,” or “provide with substantiation.”  17 Accordingly, through its reference to “supporting written documentation,” section 1034(c) requires large banks and credit unions to provide consumers, upon request, with written documents that will substantiate information provided in response to consumer questions, or that will assist consumers with understanding or verifying information regarding their accounts. For example, under section 1034(c), a consumer seeking information about past transactions on their account could request copies of past periodic statements or check images. Similarly, a consumer seeking information regarding the terms and conditions governing their account could request a copy of their account agreement (including a copy of the original signed agreement).

Section 1034(c) requires large banks and credit unions to provide account information and supporting documentation to the extent it is in their “control or possession.” The concepts of “control” and “possession” are familiar from other contexts involving requests for information, such as the discovery provisions in the Federal Rules of Civil Procedure and the Freedom of Information Act. 18 In the context of section 1034(c), a bank or credit union “possesses” information that is known by its employees or that can be found in its records, such as in its electronic or paper files. 19 A bank or credit union can also “control” information that it does not physically possess, where it has the legal right, authority, or practical ability to obtain the information. 20 For example, a large bank or credit union would control information held by an affiliate or service provider where it has the right or ability to receive that information from the affiliate or service provider.

Large banks and credit unions are not required to provide information that falls within one of the four enumerated exceptions in section 1034(c). 21 Specifically, those exceptions apply to (1) confidential commercial information, including an algorithm used to derive credit scores or other risk scores or predictors; (2) information collected for the purpose of preventing fraud or money laundering, or detecting or making any report regarding other unlawful or potentially unlawful conduct; (3) information required to be kept confidential by any other provision of law; and (4) any nonpublic or confidential information, including confidential supervisory information. 22

In addition, section 1034(c) does not require a large bank or credit union to respond to a consumer information request in a specific form, such as in writing, orally, or electronically. In this regard, section 1034(c) differs from section 1033 of the CFPA, which requires that certain information be made available “in an electronic form.”  23

Section 1034(c) provides that large banks and credit unions “shall, in a timely manner, comply” with consumer requests for information regarding their accounts for consumer financial products or services. It is well established that when the term “shall” is used in statutes, it generally means that something “is required.”  24 The addition of the word “comply”—which creates the phrase “shall . . . comply”—further indicates that section 1034(c) creates a mandatory obligation to do what the consumer requests. 25 Section 1034(c) thus grants consumers a right to request and receive account information that falls within the scope of the provision, and imposes a concomitant legal obligation on large banks and credit unions to respond to the consumer's request and to provide such account information.

Large banks and credit unions do not have to provide information in any particular manner, or using particular means. However, a large bank or credit union would not comply with section 1034(c) if it imposed conditions or requirements on consumers' information requests that unreasonably impeded consumers' ability to request and receive account information. Under the plain language of section 1034(c), if a consumer makes a “request for information in the control or possession of such covered person concerning the consumer financial product or service that the consumer obtained from such covered person” that does not fall into one of the specified exceptions, and a large bank or credit union refuses to provide that information unless the consumer satisfies an unreasonable condition, the bank or credit union has failed to “comply” with the request. 26 Section 1034(c) does not contain any language stating or suggesting that a large bank or credit union may impose conditions that unreasonably impede consumers' information requests. Such conditions, if permitted, would allow large banks and credit unions to frustrate and effectively nullify the right granted in section 1034(c). And there is no reason to believe that Congress intended for section 1034(c) to allow that result.

By contrast, a large bank or credit union would not violate section 1034(c) in the context of reasonable conditions on consumer information requests. For example, large banks or credit unions might require that the person making the request verify their identity, identify their account, and describe the information they are seeking. Similarly, large banks or credit unions might require the consumer to comply with reasonable data security measures. These kinds of conditions, when implemented in a reasonable manner, would not unreasonably impede consumers' ability to obtain information regarding their accounts. 27

As a general matter, requiring a consumer to pay a fee or charge to request account information, through whichever channels the bank uses to provide information to consumers, is likely to unreasonably impede consumers' ability to exercise the right granted by section 1034(c), and thus to violate the provision. Some consumers cannot afford to pay even a small fee to obtain information about their accounts. Even for consumers who can afford such fees, the fees can operate as a significant deterrent to making an information request. Thus, a large bank or credit union's practice of charging fees to respond to an information request would generally unreasonably impede consumers' exercise of their rights under section 1034(c). Regardless of how a large bank or credit union labels or categorizes a fee on its fee schedule or other documents, section 1034(c) does not permit unreasonable impediments to a request for information about a consumer's account. That likely includes charging fees (1) to respond to consumer inquiries regarding their deposit account balances; (2) to respond to consumer inquiries seeking the amount necessary to pay a loan balance; (3) to respond to a request for a specific type of supporting document, such as a check image or an original account agreement; and (4) for time spent on consumer inquiries seeking information and supporting documents regarding an account. 28

At the same time, it would generally not violate section 1034(c) for a large bank or credit union to impose a fee or charge in certain limited circumstances. For example, a large bank or credit union might charge a fee to a consumer who repeatedly requested and received the same information regarding their account ( e.g., repeatedly asked for a copy of the same document). 29 In that context, the large bank or credit union would have already met its obligation under section 1034(c) by complying with the consumer's earlier requests.

A large bank or credit union may also violate section 1034(c) by imposing other conditions or obstacles that unreasonably impede consumers' ability to make an information request. Depending on the facts and circumstances, such conditions or obstacles could include forcing consumers to endure excessively long wait times to make a request to a customer service representative, requiring consumers to submit the same request multiple times, requiring consumers to interact with a chatbot that does not understand or adequately respond to consumers' requests, or directing consumers to obtain information that the institution possesses from a third party instead. 30 Such conditions or obstacles may frustrate consumers' ability to exercise their right to request information under section 1034(c), and thus may violate that provision.

Section 1034(c) provides that large banks and credit unions “shall, in a timely manner, comply” with consumer requests for information. 31 Section 1034(c) thus does not specify a fixed time limit for responding that applies to all information requests. The CFPB will consider the specific circumstances and nature of a particular request to determine compliance. For example, whether a response to a 1034(c) request is timely may depend on the complexity of the request and/or the difficulty of responding. Where a request seeks basic information that is readily available to a large bank or credit union, to comply with section 1034(c) a bank or credit union would generally need to respond more quickly than if the request is more complex or seeks information that is less accessible. At the same time, even though a timely response for a complex response may involve a longer time period, that does not mean that large banks or credit unions can unduly delay their responses to more complicated requests.

What constitutes a timely response under section 1034(c) may also be informed by the timing requirements of other Federal laws and regulations with which large banks and credit unions must comply. For example, Regulation X requires mortgage servicers to respond to certain information requests within specific time periods depending on the nature of the requested information. 32 A large bank or credit union that is subject to Regulation X and that exceeded Regulation X's timing requirements for an information request likely would not be responding “in a timely manner” for purposes of section 1034(c) with respect to that same information request. Conversely, a bank or credit union subject to Regulation X would likely respond “in a timely manner” for purposes of section 1034(c) if it provided a response that satisfied the timing requirements in Regulation X. Thus, where both section 1034(c) and another Federal law or regulation applies to the same consumer information request, the CFPB does not view section 1034(c)'s “timely manner” requirement as likely to impose timing requirements that differ from the specific timing requirements of the other applicable Federal law or regulation. The CFPB expects that large banks and credit unions will already have policies and procedures in place to meet the timing requirements of other applicable laws and regulations.

By providing that large banks and credit unions “shall . . . comply” with consumer requests for information, section 1034(c) contemplates that large banks and credit unions will in fact provide consumers with the information they request to the extent it is in their control or possession. A large bank or credit union would violate section 1034(c) if it provided incomplete or inaccurate information in response to a consumer's information request.

With respect to completeness, a large bank or credit union would not comply with section 1034(c) if, for example, the consumer asked for information about all of the consumer's transactions with a given merchant since the account was opened, and the large bank or credit union possesses transaction information going back seven years, but its response provides only transaction information going back one year. However, a large bank or credit union would not violate section 1034(c) by withholding information that falls within the scope of one of the enumerated exceptions in section 1034(c)(2).

With respect to accuracy, a large bank or credit union would not comply with section 1034(c) if it provided inaccurate information to consumers in response to their requests. For example, if a consumer asked the large bank or credit union the amount of a particular fee it charges for the consumer's account ( e.g., the amount of a monthly maintenance fee for a deposit account), a large bank or credit union would not comply with section 1034(c) if it provided the wrong amount for that fee. In that circumstance, the large bank or credit union would not be providing responsive information in its control or possession ( i.e., the correct amount of the fee).

The CFPB has noted in other contexts that Federal consumer financial laws generally apply regardless of the technology used by institutions. 33 The same principle applies to section 1034(c). Chatbots or other automated responses may serve to expedite responses in some cases; however, in the absence of appropriate checks and quality assurance processes, these tools can inadvertently misdirect inquiries or provide inadequate responses. 34 Large banks and credit unions may violate section 1034(c) if they employ technologies that do not properly recognize consumer information requests or that provide inaccurate or incomplete information in response to those requests.

Comments Invited

The FAA invites you to send any written data, views, or arguments about this final rule. Send your comments to an address listed under ADDRESSES . Include “Docket No. FAA-2023-1998; Project Identifier MCAI-2023-01045-R” at the beginning of your comments. The most helpful comments reference a specific portion of the final rule, 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 this final rule 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 final rule.

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 AD 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 AD, 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 AD. Submissions containing CBI should be sent to Dan McCully, Aviation Safety Engineer, FAA, 1600 Stewart Avenue, Suite 410, Westbury, NY 11590; phone (404) 474-5548; email william.mccully@faa.gov. Any commentary that the FAA receives that is not specifically designated as CBI will be placed in the public docket for this rulemaking.

The FAA issued Emergency AD 2023-20-51, dated October 2, 2023 (the emergency AD), to address an unsafe condition on Airbus Helicopters Model AS332C, AS332C1, AS332L, AS332L1, AS332L2, and SA330J helicopters. The FAA sent the emergency AD to all known U.S. owners and operators of these helicopters. The emergency AD requires accomplishing a one-time inspection to measure the internal diameter of affected bushing retaining plates and depending on the results, inspecting the scissor attachment ball joint seating or replacing non-conforming bushing retaining plates. Depending on the results of the scissor attachment ball joint seating inspection, the emergency AD requires accomplishing repair in accordance with a method approved by the FAA, EASA, or Airbus Helicopters' EASA Design Organization Approval (DOA). Lastly, the emergency AD prohibits installing an affected bushing retaining plate unless it has passed its required inspection.

The emergency AD was prompted by EASA Emergency AD 2023-0174-E, dated October 2, 2023 (EASA AD 2023-0174-E), issued by EASA, which is the Technical Agent for the Member States of the European Union, to correct an unsafe condition on Airbus Helicopters Model SA 330 J, AS 332 C, AS 332 C1, AS 332 L, AS 332 L1, and AS 332 L2 helicopters. EASA AD 2023-0174-E states that during an overhaul of a main rotor assembly, three newly supplied main rotor swashplate retaining bushes were identified as out of tolerance with a diameter of 39 mm (1.535 in.) instead of 31 mm (1.22 in.). EASA AD 2023-0174-E also states that affected retaining bushes may be installed on main rotor rotating and non-rotating swashplates.

You may examine EASA AD 2023-0174-E in the AD docket at regulations.gov under Docket No. FAA-2023-1998.

The FAA is issuing this AD to detect out of tolerance main rotor swashplate bushing retaining plates. This condition, if not addressed, could result in damage to the main rotor assembly and subsequent loss of control of the helicopter.

The FAA reviewed EASA AD 2023-0174-E, which requires a one-time inspection to measure the internal diameter of affected retaining bushes and depending on the results, inspecting the scissor attachment ball joint seating or replacing non- conforming retaining bushes. Depending on the results of the scissor attachment ball joint seating inspection, EASA AD 2023-0174-E requires contacting AH [Airbus Helicopters] for approved repair instructions and accomplishing those instructions accordingly. Lastly, EASA AD 2023-0174-E prohibits installing an affected retaining bush unless it has passed its required inspection. Additionally, EASA AD 2023-0174-E refers to a “bushing retaining plate” as a “retaining bush.”

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

The FAA also reviewed Airbus Helicopters Emergency Alert Service Bulletins AS332-62-00-0001 and SA330-65-00-0003, each Revision 1 and dated September 29, 2023. This service information specifies procedures for measuring the internal diameter of the bush retainings on the rotating and non-rotating swashplates and, if at least one internal diameter of the three bush retainings is more than 33 mm (1.3 in.), contacting Airbus Helicopters, removing and discarding each out of tolerance bush retaining, and checking the ball joint seating on the support. If the ball joint is not properly seated on the support, this service information specifies contacting Airbus Helicopters to get a repair solution. Lastly, this service information specifies procedures for installing new bush retainings. Additionally, Airbus Helicopters refers to a “bushing retaining plate” as either a “bush retaining,” “stop ring,” “retaining bush,” or “locking ring” in its service information.

These helicopters have been approved by the aviation authority of the European Union and are approved for operation in the United States. Pursuant to the FAA's bilateral agreement with the European Union, EASA, its technical representative, has notified the FAA of the unsafe condition described in its emergency AD. The FAA is issuing this AD after evaluating all pertinent information and determining that the unsafe condition exists and is likely to exist or develop on other helicopters of these same type designs.

This AD requires accomplishing the actions specified in EASA AD 2023-0174-E, described previously, as incorporated by reference, except for any differences identified as exceptions in the regulatory text of this AD and except as discussed under “Differences Between this AD and the EASA Emergency AD.”

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 been coordinating this process with manufacturers and CAAs. As a result, EASA AD 2023-0174-E is incorporated by reference in this FAA final rule. This AD, therefore, requires compliance with EASA AD 2023-0174-E in its entirety through that incorporation, except for any differences identified as exceptions in the regulatory text of this AD. Using common terms that are the same as the heading of a particular section in EASA AD 2023-0174-E does not mean that operators need comply only with that section. For example, where the AD requirement refers to “all required actions and compliance times,” compliance with this AD requirement is not limited to the section titled “Required Action(s) and Compliance Time(s)” in EASA AD 2023-0174-E. Service information referenced in EASA AD 2023-0174-E for compliance will be available at regulations.gov under Docket No. FAA-2023-1998 after this final rule is published.

The service information referenced in EASA AD 2023-0174-E specifies contacting Airbus Helicopters to get a repair solution and EASA AD 2023-0174-E requires contacting AH [Airbus Helicopters] for approved repair instructions and accomplishing those instructions accordingly if a scissor attachment ball joint is not properly seated, whereas this AD requires repair done in accordance with a method approved by the FAA, EASA, or Airbus Helicopters' EASA DOA.

Section 553(b)(3)(B) of the Administrative Procedure Act (APA) (5 U.S.C. 551 et seq. ) authorizes agencies to dispense with notice and comment procedures for rules when the agency, for “good cause,” finds that those procedures are “impracticable, unnecessary, or contrary to the public interest.” Under this section, an agency, upon finding good cause, may issue a final rule without providing notice and seeking comment prior to issuance. Further, section 553(d) of the APA authorizes agencies to make rules effective in less than thirty days, upon a finding of good cause.

An unsafe condition exists that required the immediate adoption of Emergency AD 2023-20-51, issued on October 2, 2023, to all known U.S. owners and operators of these helicopters. The FAA found that the risk to the flying public justified waiving notice and comment prior to adoption of this rule because the affected components are part of an assembly that is critical to the control of a helicopter. As the FAA has no information pertaining to the quantity of non-conforming components that may currently exist in the U.S. fleet or how quickly the condition may propagate to failure, the actions required by this AD must be accomplished within two days. These conditions still exist, therefore, notice and opportunity for prior public comment are impracticable and contrary to the public interest pursuant to 5 U.S.C. 553(b)(3)(B).

In addition, the FAA finds that good cause exists pursuant to 5 U.S.C. 553(d) for making this amendment effective in less than 30 days, for the same reasons the FAA found good cause to forego notice and comment.

The requirements of the Regulatory Flexibility Act (RFA) do not apply when an agency finds good cause pursuant to 5 U.S.C. 553 to adopt a rule without prior notice and comment. Because the FAA has determined that it has good cause to adopt this rule without prior notice and comment, RFA analysis is not required.

The FAA estimates that this AD affects 14 helicopters of U.S. Registry. Labor rates are estimated at $85 per work-hour. Based on these numbers, the FAA estimates the following costs to comply with this AD.

Inspecting the bushing retaining plates takes about 0.5 work-hour for an estimated cost of $43 per helicopter and up to $602 for the U.S. fleet. If required, replacing a non-conforming bushing retaining plate takes about 6 work-hours and parts cost about $600 for an estimated cost of $1,110 per replacement.

If required, inspecting the scissor attachment ball joint seating takes about 3 work-hours and costs about $255 per helicopter. The corrective action that may be needed as a result of that inspection could vary significantly from helicopter to helicopter. The FAA has no data to determine the costs to accomplish the corrective action or the number of helicopters that may require corrective action.

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.

This AD will not have federalism implications under Executive Order 13132. This AD will 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, I certify that this AD:

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

(2) Will not affect intrastate aviation in Alaska.

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

Background I. Overview

This document amends the Income Tax Regulations (26 CFR part 1) by adding final regulations under section 509(a) of the Internal Revenue Code (Code). These final regulations amend § 1.509(a)-4 to provide guidance on amendments to the Code enacted by section 1241 of the Pension Protection Act of 2006 (PPA), Public Law 109-280, 120 Stat. 780 (August 17, 2006).

An organization described in section 501(c)(3) of the Code is classified as either a private foundation or a public charity. To be classified as a public charity, an organization must be described in section 509(a)(1), (2), or (3). Organizations described in section 509(a)(3) are known as “supporting organizations.” Supporting organizations achieve their public charity status by providing support to one or more organizations described in section 509(a)(1) or (2), which, in this context, are referred to as “supported organizations.”

To be described in section 509(a)(3), an organization must satisfy (1) an organizational test, (2) an operational test, (3) a relationship test, and (4) a disqualified person control test. The organizational and operational tests require that a supporting organization be organized, and at all times thereafter operated, exclusively for the benefit of, to perform the functions of, or to carry out the purposes of one or more supported organizations. The relationship test requires a supporting organization to establish one of three types of relationships with one or more supported organizations. A supporting organization that is operated, supervised, or controlled by one or more supported organizations is known as a “Type I” supporting organization. The relationship of a Type I supporting organization with its supported organization(s) is comparable to that of a corporate parent-subsidiary relationship. A supporting organization that is supervised or controlled in connection with one or more supported organizations is known as a “Type II” supporting organization. The relationship of a Type II supporting organization with its supported organization(s) involves common supervision or control by the persons supervising or controlling both the supporting organization and the supported organization(s). A supporting organization that is operated in connection with one or more supported organizations is known as a “Type III” supporting organization and is discussed further in the remainder of this preamble. Finally, the disqualified person control test requires that a supporting organization not be controlled directly or indirectly by certain disqualified persons.

Sections 1241 through 1243 of the PPA revised the requirements for supporting organizations. These final regulations under § 1.509(a)-4 address section 1241's five changes to the requirements an organization must satisfy to qualify as a Type III supporting organization.

The PPA made the following five changes to the requirements an organization must satisfy to qualify as a Type III supporting organization:

(1) Section 1241(c) of the PPA removed the ability of a charitable trust to rely on the special rule under § 1.509(a)-4(i)(2)(iii) as then in effect, which allowed a trust to satisfy the attentiveness requirement of the integral part test for non-functionally integrated Type III supporting organizations if the supported organization was a beneficiary of the trust and state law allowed the beneficiary to enforce the trust and compel an accounting of the trust;

(2) Section 1241(d) of the PPA directed the Secretary of the Treasury or her delegate (Secretary) to promulgate regulations under section 509 that establish a new distribution requirement for Type III supporting organizations that are not “functionally integrated” (a non-functionally integrated (NFI) Type III supporting organization) to ensure that a “significant amount” is paid to supported organizations; for this purpose, the term “functionally integrated” means a Type III supporting organization that is not required under regulations to make payments to supported organizations, because the supporting organization engages in activities that relate to performing the functions of, or carrying out the purposes of, its supported organization(s);

(3) Section 1241(b) of the PPA required a Type III supporting organization to provide annually to each of its supported organizations the information required by the Department of the Treasury (Treasury Department) and the IRS (referred to in § 1.509(a)-4(i)(2) as the notification requirement) to ensure that the supporting organization is responsive to the needs or demands of its supported organization(s);

(4) Section 1241(b) of the PPA also prohibited a Type III supporting organization from supporting any supported organization not organized in the United States; and

(5) Section 1241(b) of the PPA additionally prohibited a Type I or Type III supporting organization from accepting any gift or contribution from a person who, alone or together with certain related persons, directly or indirectly controls the governing body of a supported organization of the Type I or Type III supporting organization.

On August 2, 2007, the Treasury Department and the IRS published in the Federal Register (72 FR 42335) an advanced notice of proposed rulemaking (ANPRM) (REG-155929-06) in response to the PPA. The ANPRM described proposed rules to implement the changes made by the PPA to the Type III supporting organization requirements and solicited comments regarding those proposed rules.

On September 24, 2009, the Treasury Department and the IRS published a notice of proposed rulemaking (REG-155929-06) in the Federal Register (74 FR 48672) proposing regulations regarding certain requirements to qualify as a Type III supporting organization under the PPA (2009 proposed regulations). The 2009 proposed regulations set forth those proposed requirements in § 1.509(a)-4(i).

On December 28, 2012, the Treasury Department and the IRS published a Treasury Decision (TD 9605) in the Federal Register (77 FR 76382) containing final and temporary regulations under § 1.509(a)-4 regarding the requirements to qualify as a Type III supporting organization (2012 TD). Also on December 28, 2012, the Treasury Department and the IRS published a notice of proposed rulemaking (REG-155929-06) in the Federal Register (77 FR 76426) containing proposed regulations that incorporated the text of the temporary regulations in the 2012 TD by cross-reference. The temporary regulations in the 2012 TD made significant changes to the distribution requirement for NFI Type III supporting organizations. The 2012 TD adopted other aspects of the 2009 proposed regulations with some changes in response to comments and provided transition relief for Type III supporting organizations in existence on December 28, 2012, that met and continued to meet the test under former § 1.509(a)-4(i)(3)(ii), known as the “but for” test, as in effect prior to December 28, 2012, treating them as functionally integrated until the first day of their second taxable year beginning after December 28, 2012. Upon expiration of this relief period, the 2012 TD requires these organizations to meet the same rules as all other supporting organizations to be considered functionally integrated. The preamble to the 2012 TD also identified issues for possible future rulemaking and requested comments.

On January 6, 2014, the Treasury Department and the IRS published Notice 2014-4, 2014-2 I.R.B. 274, to provide additional transition relief for any Type III supporting organization (1) supporting at least one supported organization that is a governmental entity to which the supporting organization is responsive (within the meaning of § 1.509(a)-4(i)(3)) and (2) engaging in activities for or on behalf of the governmental supported organization that perform the functions of, or carry out the purposes of, the governmental supported organization and that, but for the involvement of the supporting organization, would normally be engaged in by the governmental supported organization itself. Notice 2014-4 stated that such an organization will be treated as a functionally integrated Type III supporting organization until the earlier of the date final regulations under § 1.509(a)-4(i)(4)(iv) are published in the Federal Register or the first day of the organization's third taxable year beginning after December 31, 2013.

On December 23, 2015, the Treasury Department and the IRS published a Treasury Decision (TD 9746) in the Federal Register (80 FR 79684) containing final regulations under § 1.509(a)-4(i) regarding the distribution requirement for NFI Type III supporting organizations, finalizing the rule in the 2012 proposed and temporary regulations with very minor changes (2015 final regulations). The preamble to the 2015 final regulations indicated that additional proposed regulations would be forthcoming to provide additional guidance for Type III supporting organizations, including specific rules under § 1.509(a)-4(i)(4)(iv) for Type III supporting organizations that support governmental supported organizations; the 2012 TD had reserved § 1.509(a)-4(i)(4)(iv). In addition, the preamble to the 2015 final regulations indicated that supporting organizations that support a governmental supported organization could continue to rely on Notice 2014-4 until the date of publication of the new proposed regulations.

On February 19, 2016, the Treasury Department and the IRS published a notice of proposed rulemaking (REG-118867-10) in the Federal Register (81 FR 8446) containing proposed regulations under § 1.509(a)-4(f) and (i) regarding the prohibition on certain contributions to Type I and Type III supporting organizations and the requirements for Type III supporting organizations (2016 proposed regulations). The 2016 proposed regulations addressed issues identified in the preamble to the 2012 TD as well as the comments (six in total) on the 2012 TD and Notice 2014-4.

The Treasury Department and the IRS received six comments in response to the 2016 proposed regulations. The comments are available for public inspection at https://www.regulations.gov or upon request. No public hearing was requested. After considering the comments received, the Treasury Department and the IRS adopt the 2016 proposed regulations in these final regulations with certain revisions described in the Summary of Comments and Explanation of Revisions.

This Summary of Comments and Explanation of Revisions addresses the comments that the Treasury Department and the IRS received in response to the 2016 proposed regulations and describes the revisions adopted in these final regulations. As described in this Summary of Comments and Explanation of Revisions, these final regulations define the term “control” for purposes of section 509(f)(2), which prohibits a Type I or Type III supporting organization from accepting any gift or contribution from any person who controls the governing body of the supported organization(s). These final regulations also set forth additional rules and requirements for Type III supporting organizations, including (1) additional requirements to meet the responsiveness test for all Type III supporting organizations; (2) additional rules regarding the qualification of an organization as a functionally integrated Type III supporting organization under § 1.509(a)-4(i)(4), including specific rules for supporting organizations that support governmental supported organizations; and (3) additional rules regarding the required annual distributions under § 1.509(a)-4(i)(5) by an NFI Type III supporting organization.

Section 509(f)(2) and § 1.509(a)-4(f)(5) prohibit Type I and Type III supporting organizations from accepting any gift or contribution from any person (other than an organization described in section 509(a)(1), (2), or (4)) who, alone or together with certain related persons (as described in § 1.509(a)-4(f)(5)(i)(B) or (C)), directly or indirectly controls the governing body of a supported organization of the Type I or Type III supporting organization, or from persons related to a person possessing such control. Section 509(f)(2) does not define “directly or indirectly controls.” The 2012 TD reserved § 1.509(a)-4(f)(5)(ii), titled “Meaning of control,” for future proposed regulations.

The 2016 proposed regulations proposed defining “control” consistently with the definition of control in § 1.509(a)-4(j), which relates to control by disqualified persons for purposes of the disqualified person control test in section 509(a)(3)(C) and § 1.509(a)-4(a)(4). In general, under the 2016 proposed regulations, the governing body of a supported organization is considered “controlled” by a person if that person, alone or by aggregating his or her votes or positions of authority with certain related persons described in § 1.509(a)-4(f)(5)(i)(B) or (C), may require the governing body of the supported organization to perform any act that significantly affects its operations or may prevent the governing body of the supported organization from performing any such act.

These final regulations adopt the definition of “control” proposed in the 2016 proposed regulations with minor changes to add clarity. These final regulations make clear that control exists if one or more persons described in § 1.509(a)-4(f)(5)(i)(A), (B), or (C) hold 50 percent or more of the total voting power of the governing body or have the right to exercise veto power over the actions of the governing body. These final regulations also incorporate language from § 1.509(a)-4(j)(1) to make clear that even if persons do not have control by virtue of having 50 percent or more of the voting power or a veto power, all pertinent facts and circumstances will be taken into consideration in determining whether such persons do in fact directly or indirectly control the governing body of a supported organization.

One commenter stated that if a parent supporting organization controls a supported organization, section 509(f)(2) would prohibit Type I and Type III supporting organizations of that controlled supported organization from accepting any gift or contribution from the parent supporting organization. To allow these contributions, the commenter recommended excluding from the definition of control the control a parent supporting organization exercises over its supported organizations.

Section 509(f)(2) only excepts gifts or contributions from organizations described in section 509(a)(1), (2), and (4). Congress did not provide an exception for section 509(a)(3) organizations. For this reason, the commenter's recommendation is not consistent with section 509(f)(2), and these final regulations do not adopt it.

Section 1.509(a)-4(i)(1) provides that, for each taxable year, a Type III supporting organization must satisfy (i) a notification requirement, (ii) a responsiveness test, and (iii) an integral part test provided in the regulations. The 2016 proposed regulations proposed additional rules regarding each of these requirements. These final regulations adopt the 2016 proposed rules with the modifications described in this part III.

Section 509(f)(1)(A) provides that an organization will not be considered a Type III supporting organization unless the organization provides to each supported organization, for each taxable year, such information as the Secretary may require to ensure that the organization is responsive to the needs or demands of the supported organizations. To satisfy this notification requirement, § 1.509(a)-4(i)(2) requires a Type III supporting organization to provide to each of its supported organizations for each taxable year: (1) A written notice addressed to a principal officer of the supported organization describing the type and amount of all of the support it provided to the supported organization during the supporting organization's preceding taxable year; (2) a copy of the supporting organization's most recently filed Form 990, Return of Organization Exempt from Income Tax, or other annual information return required to be filed under section 6033; and (3) a copy of the supporting organization's governing documents, including any amendments (unless previously provided and not subsequently amended). The 2016 proposed regulations proposed clarifying that for NFI Type III supporting organizations the description of support in the written notice must include all of the distributions described in § 1.509(a)-4(i)(6) to the supported organization. These final regulations adopt this clarification.

Section 1.509(a)-4(i)(2)(iii) requires that the notification be transmitted by the last day of the fifth calendar month following the close of “that taxable year.” Due to the lack of clarity regarding the reference to “that taxable year,” the 2016 proposed regulations proposed amending § 1.509(a)-4(i)(2) to clarify that a supporting organization must deliver the required documents to each of its supported organizations by the last day of the fifth month of the supporting organization's taxable year after the taxable year in which it provided the support it is reporting. The preamble to the 2016 proposed regulations stated that the proposed change is intended to reduce confusion but does not substantively change the due date or the content of the required notification. The preamble also stated that the date of delivery is determined by applying the general principles of section 7502. The final regulations adopt this proposed amendment without change.

One commenter requested clarification that the annual written notice may summarize all the programs and services a supporting organization performs for its supported organization. The Treasury Department and the IRS agree that a supporting organization may summarize its activities directly furthering the exempt purpose of the supported organization as long as that summary provides sufficient notice to the supported organization on the character of the activity and its related costs. The report must include a brief narrative description of the support provided and sufficient financial detail for the recipient to identify the types and amounts of support being reported.

Section 1.509(a)-4(i)(3)(i) provides that a supporting organization meets the responsiveness test if it is “responsive to the needs or demands of a supported organization.” To meet this responsiveness test, an organization must satisfy two elements—the “relationship requirement” and the “significant voice requirement.” Under the relationship requirement, described in § 1.509(a)-4(i)(3)(ii), the officers, directors, or trustees of the organization must have one of three specified relationships with the officers, directors, or trustees (and in some cases the members) of the supported organization. Under the significant voice requirement, described in § 1.509(a)-4(i)(3)(iii), the officers, directors, or trustees of the supported organization, by reason of their relationships described in § 1.509(a)-4(i)(3)(ii), must have a significant voice in the investment policies of the supporting organization, the timing of grants, the manner of making grants, and the selection of grant recipients by the supporting organization, and in otherwise directing the use of the income or assets of the supporting organization.

The preamble to the 2012 TD stated that, in determining the appropriate distribution amount for NFI Type III supporting organizations, the Treasury Department and the IRS considered the required relationship between a supporting organization and its supported organizations, and that the Treasury Department and the IRS intended to issue proposed regulations in the future that would amend the responsiveness test by requiring a Type III supporting organization to be responsive to all of its supported organizations.

In response to this proposal in the preamble to the 2012 TD, one commenter stated that a supporting organization should not be required to be responsive to all of its supported organizations because the resulting administrative burden would effectively limit the total number of organizations a supporting organization could support. The commenter suggested alternatives under which a supporting organization would be responsive to only a subset of its supported organizations that would vary from year to year.

As stated in the preamble to the 2016 proposed regulations, the distinguishing characteristic of Type III supporting organizations, and the basis for their public charity classification, is that they are responsive to and significantly involved in the operations of their publicly supported organizations. See § 1.509(a)-4(f)(4). Unless a Type III supporting organization is responsive to each of its supported organizations, the supported organizations cannot exercise the requisite level of oversight of and engagement with the supporting organization. Limiting the responsiveness requirement to fewer than all of the supported organizations may result in the necessary oversight and accountability being present for less than all of a supporting organization's operations. Consistent with this view, the 2016 proposed regulations proposed revising § 1.509(a)-4(i)(3)(i) to require a supporting organization to be responsive to the needs and demands of each of its supported organizations to meet the responsiveness test.

In addition, to illustrate how concerns about potential administrative burdens may be addressed consistent with the revised responsiveness test, the 2016 proposed regulations proposed a new Example 3 in § 1.509(a)-4(i)(3)(iv) to demonstrate one way in which a Type III supporting organization that supports multiple organizations may satisfy the responsiveness test in a manner that can be cost-effective. The Example shows that a supporting organization can meet the relationship requirement in § 1.509(a)-4(i)(3)(ii) in different ways with respect to each of its supported organizations. The Example also shows how a supporting organization can organize and hold regular meetings, provide information, and encourage communication to help ensure that its supported organizations have a significant voice in the operations of the supporting organization.

As noted in the preamble to the 2016 proposed regulations, another commenter in response to the preamble of the 2012 TD requested additional guidance regarding the ability of trusts to satisfy the significant voice requirement of the responsiveness test. The new Example 3 in the 2016 proposed regulations provides further illustration of how Type III supporting organizations, including charitable trusts, might satisfy the significant voice requirement of the responsiveness test. The Treasury Department and the IRS note that although the examples in the regulations relating to the responsiveness test may involve a Type III supporting organization that is organized as either a corporation or a trust, the applicable law and relevant regulatory provisions, as modified by the final regulations, are applicable to all Type III supporting organizations in the same manner, whether they are organized as corporations or trusts.

As the preamble to the 2016 proposed regulations stated, the Treasury Department and the IRS anticipate that Type III supporting organizations may be able to demonstrate that they satisfy the responsiveness test in a variety of ways, and that the determination will be based on all the facts and circumstances.

As a result of the proposed changes to the responsiveness test, the 2016 proposed regulations also include conforming changes to examples and other regulatory provisions, specifically, removing references to “supported organizations to which the supporting organization is responsive” since the supporting organization is to be responsive to each supported organization.

Two commenters to the 2016 proposed regulations address the responsiveness test, agreeing with the proposed amendments to § 1.509(a)-4(i)(3)(i) and the new example in § 1.509(a)-4(i)(3)(iv). Thus, these final regulations adopt these proposed amendments without change.

Section 1.509(a)-4(i)(1)(iii) provides that, for each taxable year, a Type III supporting organization must satisfy the integral part test. The integral part test under § 1.509(a)-4(i)(1)(iii) is satisfied by maintaining significant involvement in the operations of one or more supported organizations and providing support on which the supported organizations are dependent. To satisfy this test, a Type III supporting organization must meet the requirements either for a functionally integrated Type III supporting organization or for an NFI Type III supporting organization, as set forth in § 1.509(a)-4(i)(4) or (5), respectively.

One commenter to the 2016 proposed regulations stated that the cross reference in § 1.509(a)-4(d)(4)(i)(C) to the integral part test should be corrected to conform to the amendments made by the 2012 TD. The final regulations adopt this recommendation and revise § 1.509(a)-4(d)(4)(i)(C) to reference the requirements of the integral part test set forth in § 1.509(a)-4(i)(1)(iii).

A Type III supporting organization is functionally integrated under § 1.509(a)-4(i)(4) if it (1) engages in activities substantially all of which directly further the exempt purposes of one or more supported organizations and otherwise meets the requirements described in paragraph (i)(4)(ii) of that section, (2) is the parent of each of its supported organizations as described in paragraph (i)(4)(iii) of that section, or (3) supports a governmental supported organization and otherwise meets the requirements of paragraph (i)(4)(iv) of that section.

Section 1.509(a)-4(i)(4)(ii)(B) provides that all pertinent facts and circumstances will be taken into consideration in determining whether substantially all of a supporting organization's activities directly further the exempt purposes of its supported organization(s). One commenter to the 2016 proposed regulations requested that supporting organizations be given the option of meeting the “substantially all” test on average over a three- or five-year period. The commenter also recommended that transition relief be provided if an organization does not meet the test over the most recent three or five years before the promulgation of final regulations.

The 2012 TD adopted the substantially all test in § 1.509(a)-4(i)(4)(ii). The 2012 TD also provided transition relief in § 1.509(a)-4(i)(11)(ii) for existing organizations to adjust to the new rules. The 2016 proposed regulations did not include any substantive changes to § 1.509(a)-4(i)(4)(ii). Furthermore, the substantially all test in § 1.509(a)-4(i)(4)(ii)(B) takes into consideration all pertinent facts and circumstances, which allows for some consideration of year-to-year changes in activities. Finally, the Treasury Department and the IRS note that the commenter's proposed multi-year averaging test would be complex, create uncertainty about a supporting organization's functionally integrated status at the close of each taxable year, and would be difficult to administer. For these reasons, the final regulations do not adopt this recommendation.

Under § 1.509(a)-4(i)(4)(iii), a supporting organization is the parent of a supported organization, and thus is deemed to be functionally integrated, if the supporting organization exercises a substantial degree of direction over the policies, programs, and activities of the supported organization and a majority of the officers, directors, or trustees of the supported organization is appointed or elected, directly or indirectly, by the governing body, members of the governing body, or officers (acting in their official capacities) of the supporting organization.

As the 2009 proposed regulations noted, the classification of a parent organization as functionally integrated was intended to “apply to supporting organizations that oversee or facilitate the operation of an integrated system, such as hospital systems.” To more fully accomplish this objective, the 2016 proposed regulations proposed a revision to § 1.509(a)-4(i)(4)(iii) clarifying that for a supporting organization to qualify as the parent of each of its supported organizations, the supporting organization and its supported organizations must be part of an integrated system (such as a hospital system), and the supporting organization must engage in activities typical of the parent of an integrated system. The 2016 proposed regulations stated that examples of these activities include (but are not limited to) coordinating the activities of the supported organizations and engaging in overall planning, policy development, budgeting, and resource allocation for the supported organizations.

One commenter requested that the final regulations provide additional examples of integrated systems, such as private schools and universities, continuing care retirement communities, and residential rehabilitation facilities. The parenthetical in the 2016 proposed regulations—such as a hospital system—is stated as only one example and is not exclusive. This section of the regulations applies to any type of integrated system of which the parent organization and its supported organizations are a part. The test is whether the structure is that of an integrated system and whether the requirements of § 1.509(a)-4(i)(4)(iii) are satisfied, not whether the system is in a particular industry. The Treasury Department and the IRS conclude that it is unnecessary to add other examples of industries that may have integrated systems; doing so at this time may indicate that any industries not specifically mentioned in the final regulations are excluded. Accordingly, the final regulations do not adopt the commenter's request to provide additional examples. Nevertheless, in response to the comment and to make clear that a hospital system is just one example of an integrated system, the final regulations revise the parenthetical in the 2016 proposed regulations to read as follows: (such as, for example, a hospital system).

The commenter also recommended including additional examples of activities that are typical of a parent of an integrated system and suggested that the examples might include financial planning and forecasting, legal services, human resources, information management, billing and collection services, marketing, and community outreach and education. The Treasury Department and the IRS note that the list of activities in the 2016 proposed regulations was only illustrative of how a parent directs the overall policies, programs, and activities of the supported organizations within the integrated system and was not exclusive. Thus, the absence of any particular activity, such as financial planning, from this list is not determinative. The final regulations clarify that a parent of an integrated system of supported organizations must direct the overall policies, programs, and activities of the supported organizations (such as, for example, coordinating the activities of the supported organizations and engaging in overall planning, policy development, budgeting, and resource allocation). The Treasury Department and the IRS note that a parent of an integrated system may also perform system-wide administrative services, such as the examples provided by the commenter, in conjunction with directing the overall policies, programs, and activities of the supported organizations. For clarity, these final regulations omit the defined term “activities typical of a parent” in proposed § 1.509(a)-4(i)(4)(iii). The 2016 proposed regulations proposed to retain the requirement in § 1.509(a)-4(i)(4)(iii) that the governing body, members of the governing body, or officers of a parent supporting organization must appoint or elect a majority of the officers, directors, or trustees of the supported organization. The preamble to the 2016 proposed regulations stated that the use of the phrase “appointed or elected, directly or indirectly” means the supporting organization could qualify as a parent of a second-tier (or lower) subsidiary. Thus, for example, if the directors of supporting organization A appoint a majority of the directors of supported organization B, which in turn appoints a majority of the directors of supported organization C, the directors of supporting organization A will be treated as appointing the majority of the directors of both supported organization B and supported organization C. One commenter agreed with this interpretation and requested that it be addressed in the final regulations. These final regulations adopt this recommendation.

As stated in the preamble to the 2016 proposed regulations, the Treasury Department and the IRS interpret the existing requirement under § 1.509(a)-4(i)(4)(iii) that the parent organization have the power to appoint or elect a majority of the officers, directors, or trustees of each supported organization to include the requirement that the parent organization also have the power to remove and replace such officers, directors, or trustees, or otherwise have an ongoing power to appoint or elect with reasonable frequency. One commenter requested that language reflecting this interpretation be specifically added to § 1.509(a)-4(i)(4)(iii). The final regulations adopt this commenter's recommendation.

The 2012 TD reserved § 1.509(a)-4(i)(4)(iv) for future guidance on how a Type III supporting organization can qualify as functionally integrated by supporting a governmental entity. As interim guidance, Notice 2014-4 provided that a Type III supporting organization will be treated as functionally integrated if it (i) supports a supported organization that is a governmental entity to which the supporting organization is responsive; and (ii) engages in activities for or on behalf of that governmental supported organization that perform the functions of, or carry out the purposes of, that governmental supported organization and that, but for the involvement of the supporting organization, would normally be engaged in by the governmental supported organization itself. This interim guidance was subsequently extended by the 2015 final regulations. The 2016 proposed regulations proposed new rules under which a Type III supporting organization would qualify as functionally integrated by supporting governmental supported organizations. These final regulations adopt the proposed § 1.509(a)-4(i)(4)(iv), with the modifications discussed in the following paragraphs.

The 2016 proposed regulations proposed that a supporting organization that only supports governmental supported organizations would be considered functionally integrated if a substantial part of its total activities directly further the exempt purposes of its governmental supported organizations and, if the supporting organization supports more than one governmental supported organization, all of its governmental supported organizations either: (1) Operate within the same geographic region (defined as a city, county, or metropolitan area); or (2) work in close coordination or collaboration with each other to conduct a service, program, or activity that the supporting organization supports. The 2016 proposed regulations proposed defining a governmental supported organization as a governmental unit described in section 170(c)(1), or an organization described in section 170(c)(2) and (b)(1)(A) (other than in clauses (vii) and (viii)) that is an instrumentality of one or more governmental units described in section 170(c)(1). To satisfy the close coordination or collaboration requirement, the proposed regulations proposed requiring a supporting organization to maintain on file a letter from each of the governmental supported organizations (or a joint letter from all of them) describing their coordination or collaboration efforts with respect to the particular service, program, or activity. The 2016 proposed regulations proposed an exception to this rule for certain pre-existing organizations that support no more than one non-governmental supported organization along with one or more governmental supported organizations, as well as a transition rule for pre-existing organizations that continue to meet the requirements of Notice 2014-4.

Two commenters recommended that Type III functionally integrated supporting organizations should not be limited to only supporting governmental supported organizations. One commenter proposed that a supporting organization which supports both governmental and non-governmental supported organizations should qualify as functionally integrated if the supporting organization (i) conducts activities that perform the functions of or carry out the purposes of its governmental supported organization(s), (ii) its non-governmental supported organizations operate in the same geographic region or work in close coordination or collaboration with the governmental supported organization(s), and (iii) substantially all of the supporting organization's activities directly further the exempt purposes of its governmental supported organization(s).

The other commenter recommended replacing the requirement that all supported organizations be governmental supported organizations with a new requirement that substantially all the activities of the supporting organization either (i) directly further the purposes of the governmental supported organizations, or (ii) consist of grantmaking, fundraising, or investing for governmental supported organizations that meet either the same geographic region or close coordination and collaboration requirements in the 2016 proposed regulations.

A third commenter requested that, when a supporting organization supports more than one governmental supported organization, the governmental supported organizations should only be required to work in close coordination or collaboration. The commenter requested deleting the requirement that the governmental supported organizations conduct a service, program, or activity that the supporting organization supports.

The 2016 proposed regulations proposed allowing certain Type III supporting organizations that support governmental supported organizations to be classified as functionally integrated on the basis that the involvement of the governmental supported organizations in the supporting organization's activities would minimize the potential for abuse. As stated in the preamble to the 2016 proposed regulations, requiring close cooperation and collaboration on a common service, program, or activity that the supporting organization supports helps ensure that the governmental supported organizations will provide sufficient input to and oversight of the supporting organization. Moreover, the coordination and collaboration between the governmental supported organizations would be greatly diminished if they engaged in different services, programs, or activities. Furthermore, governmental input and oversight would be diluted if the definition of functionally integrated were expanded to permit these supporting organizations to support and be responsive to non-governmental supported organizations as well. Additionally, for the reasons discussed later in this preamble, the Treasury Department and the IRS utilize the substantial part test for supporting governmental supported organizations (instead of the substantially all test) but specifically exclude grant making and other financial activities from the definition of activities that directly further the exempt purposes of the governmental supported organizations. Accordingly, these final regulations do not adopt these recommendations. For clarity, these final regulations omit the defined term “geographic region” contained in proposed § 1.509(a)-4(i)(4)(iv)(C).

As noted previously in this preamble, the 2016 proposed regulations proposed that, for simplicity and administrability, the term “governmental supported organization” be defined using an existing Code definition of governmental unit. Three commenters stated their support for this definition. Thus, the final regulations adopt the definition in the 2016 proposed regulations with the clarification described in the following paragraph.

The preamble to the 2016 proposed regulations noted that, because a governmental unit described in section 170(c)(1) includes all of the agencies, departments, and divisions of that governmental unit, all such agencies, departments, and divisions will be treated as one governmental supported organization for purposes of § 1.509(a)-4(i)(4)(iv). One commenter stated its support for this position and requested that it be specifically written into the regulations. These final regulations adopt this commenter's recommendation. The final regulations specifically state that a governmental unit includes all of its agencies, departments, and divisions, and that they will be treated as one governmental supported organization for these purposes.

One commenter on the 2016 proposed regulations requested that an instrumentality of a governmental supported organization and the governmental supported organization with respect to which it is an instrumentality should be treated as one governmental supported organization. The final regulations do not adopt this recommendation because, unlike an agency, department, or division of a governmental unit, an instrumentality described in § 1.509(a)-4(i)(4)(iv)(B)( 2 ) is a separate legal entity.

The 2016 proposed regulations also proposed that supporting organizations that support only governmental supported organizations may qualify as functionally integrated only if a “substantial part” of their activities directly furthers the exempt purposes of their governmental supported organization(s). The 2016 proposed regulations proposed using the same definition of “directly further” contained in § 1.509(a)-4(i)(4)(ii)(C), the integral part test for functionally integrated Type III supporting organizations, as promulgated in the 2012 TD. This definition provides that fundraising, making grants, and investing and managing non-exempt-use assets are not activities that directly further the exempt purposes of the supported organization.

One commenter recommended that fundraising, making grants, and investing and managing non-exempt-use assets should be considered activities that directly further the exempt purposes of a governmental supported organization. The Treasury Department and the IRS determined that a Type III supporting organization should qualify as functionally integrated only if the supporting organization itself conducts activities that perform the functions of or carry out the purposes of its supported organization (as distinguished from providing financial support for the activities carried out by the supported organization). As the 2012 TD stated, fundraising, making grants, and investing and managing non-exempt-use assets relate to producing and distributing income to finance the charitable activities directly carried out by the supported organization. The 2016 proposed regulations did not adopt comments seeking to apply a different definition of “directly further” to supporting organizations that support governmental supported organizations. These final regulations do not adopt the commenter's proposal because using a different definition of “directly further” for governmental supported organizations would undermine a fundamental distinction that § 1.509(a)-4(i)(4) makes between functionally integrated and NFI Type III supporting organizations, i.e., directly conducting charitable activities versus financing charitable activities. The Treasury Department and the IRS also note the complexity and administrative difficulty of applying different definitions of “directly further” under the integral part test.

These final regulations adopt the requirement in the 2016 proposed regulations that a substantial part of the supporting organization's total activities must directly further the exempt purposes of its governmental supported organizations. These final regulations also add a new example to clarify that a supporting organization can meet this requirement and still make grants to one of its governmental supported organizations as a substantial part of its activities. As the preamble to the 2016 proposed regulations stated, the “substantial part” test in § 1.509(a)-4(i)(4)(iv) allows these supporting organizations to conduct more fundraising and other financial activities, if certain requirements are met, than is permitted under the “substantially all” test of § 1.509(a)-4(i)(4)(ii) that applies generally to be a functionally integrated Type III supporting organization. One commenter requested confirmation concerning the identity of these certain requirements that must be met. Under § 1.509(a)-4(i)(4) as promulgated by the 2012 TD and amplified by these final regulations in providing the rules for supporting governmental supported organizations, the organization must meet the annual notification requirement in § 1.509(a)-4(i)(2) and the responsiveness test in § 1.509(a)-4(i)(3), in addition to the specific requirements in § 1.509(a)-4(i)(4)(iv), in order to be a functionally integrated Type III supporting organization by virtue of supporting governmental supported organizations.

One commenter recommended providing a clear definition of what constitutes a substantial part of a supporting organization's total activities for purposes of meeting § 1.509(a)-4(i)(4)(iv). Another commenter recommended not adopting a bright line rule to measure the quantity of activities that equal a substantial part, but requested a statement in the final regulations that all pertinent facts and circumstances will be taken into account. This commenter also requested more examples of activities that directly further the exempt purpose of the governmental supported organization and clarification in the regulations to require that a substantial part of a supporting organization's activities directly further the exempt purposes of “at least one” (as opposed to all) of its governmental supported organizations when the governmental supported organizations share a common geographic region.

In response to these comments, the final regulations revise proposed § 1.509(a)-4(i)(4)(iv) to provide that, in determining whether a substantial part of a supporting organization's total activities directly further the exempt purposes of its governmental supported organization(s), all pertinent facts and circumstances will be taken into consideration. This approach is consistent with the approach in § 1.509(a)-4(i)(4)(ii)(B), which determines “substantially all” for the general test of being functionally integrated by considering all pertinent facts and circumstances. The final regulations also revise proposed § 1.509(a)-4(i)(4)(iv)(A) and add a new example in § 1.509(a)-4(i)(4)(v) to make clear that a supporting organization that supports more than one governmental supported organization as described in § 1.509(a)-4(i)(4)(iv)(A) satisfies the substantial part test if a substantial part of its activities directly furthers the exempt purpose of at least one of its governmental supported organizations.

One commenter stated that proposed § 1.509(a)-4(i)(4)(iv)(A)( 1 )( ii ), which uses the phrase “close coordination or collaboration,” should be made consistent with proposed § 1.509(a)-4(i)(4)(iv)(D), which uses the phrase “close cooperation or coordination.” The final regulations adopt this recommendation and make the provisions consistent by changing the phrasing in § 1.509(a)-4(i)(4)(iv)(C) of the final regulations to “close coordination or collaboration.” No substantive change is intended by this revision.

The 2016 proposed regulations proposed an exception to the general rule for supporting organizations that support governmental supported organizations. The exception would treat a Type III supporting organization in existence on or before February 19, 2016 (the date of the issuance of the 2016 proposed regulations), as functionally integrated if: (1) It supports one or more governmental supported organizations and no more than one supported organization that is not a governmental supported organization; (2) it designated each of its supported organizations as provided in § 1.509(a)- 4(d)(4) on or before February 19, 2016; and (3) a substantial part of its total activities directly furthers the exempt purposes of its governmental supported organization(s). One commenter stated that the proposed exception would allow it and similar organizations currently to qualify as functionally integrated. The final regulations adopt the proposed exception without change.

The 2016 proposed regulations also proposed further extending the transition relief provided in Notice 2014-4 and extended in the preamble to the 2015 final regulations. Under the 2016 proposed regulations, a Type III supporting organization in existence on or before February 19, 2016, that met and continues to meet the requirements of Notice 2014-4 would be treated as functionally integrated until the earlier of the first day of the organization's first taxable year beginning after the date final regulations are published under § 1.509(a)-4(i)(4)(iv) or the first day of the organization's second taxable year beginning after February 19, 2016. The Treasury Department and the IRS did not receive any comments about the transition rule or any requests to extend the transition period in the 2016 proposed regulations, which now has expired. The Treasury Department and the IRS therefore conclude supporting organizations have had sufficient time to adjust to the new rules and further transition relief is not necessary. Accordingly, these final regulations do not provide a further extension of the transition relief proposed in the 2016 proposed regulations.

Section 1.509(a)-4(i)(5) provides that a supporting organization meets the integral part test to be an NFI Type III supporting organization if it satisfies the distribution requirement of § 1.509(a)-4(i)(5)(ii) and the attentiveness requirement of § 1.509(a)-4(i)(5)(iii), or the pre-November 2, 1970, trust requirements of § 1.509(a)-4(i)(9). Section 1.509(a)-4(i)(5)(ii) provides that, with respect to each taxable year, a supporting organization must distribute to or for the use of one or more supported organizations an amount equaling or exceeding its “distributable amount.” Section 1.509(a)-4(i)(6) provides the amount of a distribution made to a supported organization is the amount of cash or the fair market value of the property distributed.

The 2016 proposed regulations proposed revising § 1.509(a)-4(i)(5)(ii) to state that a supporting organization must make distributions as described in § 1.509(a)-4(i)(6) in a total amount equaling or exceeding the supporting organization's distributable amount to satisfy the distribution requirement, and proposed revising § 1.509(a)-4(i)(6) to describe in detail what distributions count toward satisfying the distribution requirement. These final regulations adopt these proposed revisions, explained as follows, without change.

Section 1.509(a)-4(i)(5)(ii)(B) provides that the distributable amount is equal to the greater of 85 percent of an organization's adjusted net income for the immediately preceding taxable year (as determined by applying the principles of section 4942(f) of the Code and § 53.4942(a)-2(d)) or its minimum asset amount for the immediately preceding taxable year, reduced by the amount of taxes imposed on the supporting organization under subtitle A of the Code (subtitle A) during the immediately preceding taxable year.

Because the taxes under subtitle A are imposed on a supporting organization's unrelated business taxable income (pursuant to section 511 of the Code) and the activity that produces the unrelated business taxable income does not further the supported organization's exempt purposes, the preamble to the 2016 proposed regulations stated that these taxes should not be treated as the functional equivalent of an amount distributed to a supported organization. The 2016 proposed regulations, therefore, proposed removing the provision in § 1.509(a)-4(i)(5)(ii)(B) that reduces the distributable amount by the amount of taxes subtitle A imposed on a supporting organization during the immediately preceding taxable year.

One commenter stated that the distributable amount should be reduced by the amount of taxes imposed on the supporting organization's unrelated business income, as section 4942(d) provides for private foundations. In advocating to retain the reduction in the distributable amount, the commenter suggested that only the supporting organization's after-tax income from unrelated business activities should be considered available for distribution to its supported organizations.

A supporting organization's adjusted net income under § 1.509(a)-4(i)(5)(ii)(B) includes gross income from all sources, including investment income that is not subject to tax under section 511. The 2012 TD and the 2015 final regulations, therefore, stated it was necessary to revise the distribution requirement to ensure that NFI Type III supporting organizations distribute significant amounts to their supported organizations, as Congress directed in the PPA. As stated in the 2015 final regulations, the 85 percent of adjusted net income test makes it more likely that supported organizations will timely benefit from higher returns received by their supported organizations. Reducing the distributable amount by any taxes on the income would be counter to this objective.

The Treasury Department and the IRS further note that section 4942(d) only applies to private non-operating foundations. As the preamble to the 2012 TD recounted, a number of commenters to the 2009 proposed regulations stated that NFI Type III supporting organizations should not be subject to the higher payout for private non-operating foundations because they are distinguishable from them. These commenters stated that NFI Type III supporting organizations are more similar to private operating foundations and medical research organizations and therefore should be subject to their lower payout requirements. The 2012 TD and the 2015 final regulations adopted this recommendation, providing lower payout requirements for NFI Type III supporting organizations than for private non-operating foundations. Private operating foundations and medical research organizations are not able to reduce their payout requirements by the taxes imposed by subtitle A. See § 1.170A-9(d)(2)(v)(B); § 53.4942(b)-1(a)(1)(ii). The Treasury Department and the IRS conclude for the foregoing reasons that it would be inconsistent to apply a different rule to NFI Type III supporting organizations. Therefore, these final regulations adopt the 2016 proposed revision to § 1.509(a)-4(i)(5)(ii)(B) without change.

Section 1.509(a)-4(i)(6) provides details on the distributions by a supporting organization that count toward satisfying the distribution requirement imposed in § 1.509(a)-4(i)(5)(ii). The regulations provide that distributions include but are not limited to: (1) Any amount paid to a supported organization to accomplish the supported organization's exempt purposes; (2) any amount paid by the supporting organization to perform an activity that directly furthers the exempt purposes of the supported organization within the meaning of § 1.509(a)-4(i)(4)(ii), but only to the extent such amount exceeds any income derived by the supporting organization from the activity; (3) any reasonable and necessary administrative expenses paid to accomplish the exempt purposes of the supported organization(s), which do not include expenses incurred in the production of investment income; (4) any amount paid to acquire an exempt-use asset described in § 1.509(a)-4(i)(8)(ii); and (5) any amount set aside for a specific project that accomplishes the exempt purposes of a supported organization to which the supporting organization is responsive.

The list in § 1.509(a)-4(i)(6) is not exhaustive and other distributions may count towards the distribution requirement. As stated in the preamble to the 2016 proposed regulations, the use of a non-exclusive list creates uncertainty for supporting organizations and the IRS about what counts toward the distribution requirement. Therefore, the 2016 proposed regulations proposed revising and clarifying the list in § 1.509(a)-4(i)(6) of what counts toward the distribution requirement and making it an exclusive list.

Under § 1.509(a)-4(i)(6), reasonable and necessary administrative expenses paid to accomplish the exempt purposes of supported organizations, but not expenses incurred in the production of investment income, count toward the distribution requirement. For example, if a supporting organization conducts exempt activities that are for the benefit of, perform the functions of, or carry out the purposes of its supported organization(s) and also conducts nonexempt activities (such as investment activities or unrelated business activities), then the supporting organization's administrative expenses (such as salaries, rent, utilities and other overhead expenses) must be allocated between the exempt and nonexempt activities on a reasonable and consistently-applied basis. The supporting organization's administrative expenses attributable to the exempt activities are treated as distributions to its supported organization(s) if such expenses are reasonable and necessary. Conversely, the administrative expenses and operating costs attributable to the nonexempt activities are not treated as distributions to the supported organization(s). The 2016 proposed regulations proposed retaining this provision, with additional guidance regarding fundraising expenses.

Section 1.509(a)-4(i)(6) does not specifically address whether fundraising expenses count toward the distribution requirement. The 2016 proposed regulations addressed the issue, specifying that reasonable and necessary administrative expenses paid to accomplish the exempt purposes of a supported organization generally do not include fundraising expenses the supporting organization incurs. For example, when a supporting organization conducts a fundraising event for its supported organization(s) and distributes the proceeds of the event, net of its fundraising expenses, to its supported organization(s), only the amount that the supporting organization actually distributes to its supported organization(s) counts towards the distribution requirement. Thus, under the 2016 proposed regulations, the supporting organization's fundraising expenses do not count towards the distribution requirement.

If a supporting organization conducts a fundraising event at which the supporting organization instructs donors to make contributions directly to the supported organization, the 2016 proposed regulations proposed that those contributions would not count as a distribution from the supporting organization to its supported organization. However, in this situation the supporting organization could count towards the distribution requirement the reasonable and necessary expenses it incurs to solicit the contributions the donors pay directly to its supported organization: (1) to the extent that the amount of these solicitation expenses does not exceed the amount of contributions the supported organization actually receives; and (2) if the supporting organization can substantiate (as discussed later in this preamble) that those contributions were received as a result of the supporting organization's solicitation activities. The 2016 proposed regulations proposed this rule to provide consistency with the treatment of contributions that supporting organizations receive directly and then distribute to their supported organizations (net of the supporting organization's solicitation expenses).

While commenters were generally supportive of the proposal to count as distributions the fundraising expenses incurred to solicit contributions directly to the supported organization, one commenter recommended deleting the requirement that contributions be received directly by the supported organization for the fundraising expenses to count. Alternatively, the commenter requested this special rule for fundraising expenses also apply if the contributions were received directly by an agent of the supported organization.

Another commenter proposed that contributions the supporting organization received directly from the fundraising solicitation as a matter of convenience should be treated as contributions the supported organization received directly if the supporting organization is contractually obligated to remit the contributions to the supported organization and the supporting organization actually distributes the contributions to the supported organization within a reasonable time period. The commenter also proposed that the supporting organization be allowed to count its fundraising solicitation expenses in the year it incurred them so long as the supported organization received the corresponding contributions within a reasonable time period following the end of that year.

In response to these comments, these final regulations adopt the proposed rules with certain modifications and clarifications. These final regulations provide that expenses the supporting organization incurs to solicit contributions count towards the distribution requirement when the resulting contributions are received directly by a supported organization, but only to the extent that the supporting organization's expenses for each solicitation do not exceed the amount of contributions a supported organization actually receives, and only if the supporting organization substantiates that those contributions were received as a result of the supporting organization's solicitation activities. This limitation is applied on a solicitation-by-solicitation basis; the supporting organization may not aggregate its expenses, or the contributions a supported organization receives, from more than one solicitation to determine the amount of solicitation expenses that count towards its distribution requirement. The Treasury Department and the IRS intend that contributions are received directly by the supported organization when donors make their checks, credit card or other payments payable to the supported organization. The Treasury Department and the IRS also intend that when a supporting organization receives checks or processes credit card or other transactions that are payable to its supported organization, the supporting organization may count as distributions the expenses it incurs for soliciting those checks or credit card or other payments, but only up to the amount of contributions received directly by or paid directly to the supported organization and substantiated by the supported organization. Thus, for purposes of meeting its distribution requirement, the supporting organization may not count as distributions from the supporting organization to the supported organization the amount of the check and credit card or other contributions the donors make payable to the supported organization. Contributions made payable to the supporting organization that are transferred to the supported organization, however, may be counted as distributions from the supporting organization to the supported organization at the time that the funds are given by the supporting organization to the supported organization. These final regulations do not adopt a rule permitting payments that are first deposited with the supporting organization to count as contributions received directly by the supported organization (for purposes of permitting additional solicitation expenses related to those contributions to count as distributions). Preventing the supporting organization from counting those amounts twice toward satisfying the supporting organization's annual distribution requirements and accounting for those funds in the supporting organization's account would be administratively difficult.

One commenter also requested guidance on how to allocate contributions when the supporting organization and the supported organization share the costs of a solicitation event. The Treasury Department and the IRS do not intend for the rule for fundraising expenses to apply with respect to a solicitation event if the supported organization incurs more than de minimis costs related to the same solicitation event. Section 1.509(a)-4(i)(6)(i) permits supporting organizations to count any amount they pay to their supported organization as a distribution for purposes of satisfying the annual distribution requirement described in § 1.509(a)-4(i)(5)(ii). A supporting organization can, therefore, share the costs of a fundraiser by distributing to the supported organization an amount equal to the supporting organization's share of the joint fundraising expenses. Section 1.509(a)-4(i)(6)(i) would permit the supporting organization to count this payment as a distribution for purposes of § 1.509(a)-4(i)(5)(ii), negating the need for a special rule in proposed § 1.509(a)-4(i)(6)(iii)(B). The Treasury Department and the IRS note that it would be very difficult to determine and substantiate what portion of the contributions a supported organization receives are attributable to the supporting organization's expenditures. Thus, expanding the rule to cover joint solicitation efforts as the commenter suggests would increase the compliance burden on supporting organizations and supported organizations and would be difficult for the IRS to administer. These final regulations, therefore, do not adopt this recommendation.

One commenter requested a clarification that contributions made to a supported organization in response to a supporting organization's end-of-the-year fundraiser that the supported organization does not receive until the following year may be used to determine the portion of reasonable and necessary fundraising expenses the supporting organization may treat as a distribution for the year in which the fundraiser occurred. This commenter recommended a 90-day window in the second year for counting such contributions. These final regulations clarify that, for purposes of applying the limitation on the supporting organization's solicitation expenses for each taxable year that count toward its distribution requirement, any contributions the supported organization receives directly from donors that are attributable to a solicitation the supporting organization conducted in a particular taxable year includes any contributions the supported organization receives and substantiates in writing on or before the due date (without regard to extensions) of the supporting organization's Form 990 for the year in which it conducted the solicitation.

For example, assume a supporting organization makes a solicitation on December 15, 2024. The supported organization receives contributions from donors of $1x on December 26, 2024, and $2x on March 15, 2025, that are attributable to the solicitation made on December 15, 2024. The supported organization substantiates the total contributions of $3x in writing prior to May 15, 2025 (the due date without extensions of the supporting organization's Form 990 for 2024). The written substantiation indicates that these contributions were attributable to the December 15, 2024 solicitation. Under § 1.509(a)-4(i)(6)(iii)(B), the supporting organization may treat up to $3x of any reasonable and necessary expenses it incurred for the December 15, 2024 solicitation toward its distribution requirement.

A supporting organization may not take into account the same contributions in computing the fundraising expense limitation in more than one year or with respect to more than one solicitation. Thus, in the preceding example, the $2x contribution the supported organization received on March 15, 2025, may only be used by the supporting organization to determine its fundraising expense limitation for the December 15, 2024, solicitation. The supporting organization may not use the $2x again to determine its 2025 fundraising expense limitation.

The 2016 proposed regulations proposed requiring a supporting organization to obtain written substantiation from the supported organization of the amount of contributions the supported organization actually receives as a result of each of the supporting organization's solicitations. One commenter requested that the permitted written substantiation include an email from the supported organization that the supporting organization maintains in its electronic records. These final regulations adopt this recommendation, stating that the written substantiation may be provided by electronic media.

Another commenter requested that a supported organization be allowed to aggregate into a single annual written report the substantiation of all the contributions it received from the supporting organization's fundraising activities. The commenter also requested that the supported organization should only be responsible for reporting the amount of the contributions it received and not be responsible for calculating the supporting organization's fundraising activities.

These final regulations clarify that the supporting organization may substantiate the contributions provided to the supported organization by a single annual statement in writing from the supported organization, provided that the amount of contributions, if any, received by the supported organization as a result of each solicitation is separately identified. To satisfy § 1.509(a)-4(i)(6)(iii)(B), the written substantiation must be postmarked or electronically transmitted to the supporting organization no later than the due date (without regard to extensions) of the supporting organization's Form 990 for the year of the solicitation. In addition, written substantiation relied on by the supporting organization (whether provided in one or multiple reports) must separately state the amount of contributions, if any, received directly by the supported organization allocable to each solicitation made by the supporting organization that is covered in the report. The supporting organization is responsible for determining its solicitation expenses. The written substantiation the supporting organization is required to receive from the supported organization need only provide information relevant to the amount of contributions the supported organization received; it does not need to address the supporting organization's expenses.

Finally, one commenter requested that program-related investments (PRIs) count toward the distribution requirement. The preamble to the 2016 proposed regulations stated that, for purposes of meeting the integral part test, PRIs are not treated as distributions to the supported organizations. As the preamble to the 2016 proposed regulations stated, the Treasury Department and the IRS recognize that private foundations may use PRIs in a variety of ways to accomplish their exempt purposes and that PRIs thus are treated as qualifying distributions under section 4942. However, because supporting organizations must be operated exclusively for the benefit of, to perform the functions of, or to carry out the purposes of their supported organizations, they differ from private foundations. Furthermore, other provisions relating to the distribution requirement, such as the availability of set-asides and the potential for carry-forwards of excess distributions, provide significant flexibility for supporting organizations to meet the current and future needs of their supported organizations. For these reasons, these final regulations do not adopt this recommendation.

This Treasury Decision conforms the paragraphs throughout § 1.509(a)-4 to the Code of Federal Regulations by making non-substantive changes, including capitalizing letters of fourth level paragraphs. This Treasury Decision also modifies § 53.4947-1 to correct certain cross-references to § 1.509(a)-4.

These final regulations are applicable to taxable years beginning on or after October 16, 2023. Taxpayers may choose to apply these final regulations to taxable years beginning on or after February 19, 2016, and before October 16, 2023, so long as the taxpayer applies the provisions of these final regulations in their entirety and in a consistent manner.

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(b) of Executive Order 12866, as amended. Therefore, a regulatory impact assessment is not required.

The collection of information contained in these regulations has been reviewed and approved by the Office of Management and Budget in accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. 3507(d)) under control number 1545-2271.

The collection of information in these regulations is in § 1.509(a)-4(i)(4)(iv)(C) (written record of close coordination or collaboration by certain governmental supported organizations) and § 1.509(a)-4(i)(6)(iii)(B) (written record of contributions received by certain supported organizations). Requiring a supporting organization to collect (1) written records of its governmental supported organizations' close coordination or collaboration with each other and (2) written records of the contributions its supported organizations directly received from donors in response to solicitations by the supporting organization helps the IRS determine whether the supporting organization is a functionally integrated or non-functionally integrated Type III supporting organization. The record keepers are certain Type III supporting organizations.

Estimated number of recordkeepers: 6,089.

Estimated average annual burden hours per recordkeeper: 2 hours.

Estimated total annual recordkeeping burden: 12,178 hours.

Estimated frequency of collection of such information: Annual.

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 return information are confidential, as required by 26 U.S.C. 6103.

In connection with the requirements of the Regulatory Flexibility Act (5 U.S.C. chapter 6), it is hereby certified that these final regulations will not have a significant economic impact on a substantial number of small entities. This certification is based on the fact that these final 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 recognized by the IRS under section 501(c)(3), of which only 6,089 organizations self-identified as Type III supporting organizations. The universe of organizations that would be affected by § 1.509(a)-4(i)(4)(iv)(C) and § 1.509(a)-4(i)(6)(iii)(B) is a subset of all Type III supporting organizations, because those provisions apply either to organizations seeking to qualify as functionally integrated based on support of two or more governmental supported organizations or to non-functionally integrated organizations that solicit contributions that are received directly by a supported organization (rather than by the supporting organization). Thus, the number of organizations that will be affected by the collection of information under § 1.509(a)-4(i)(4)(iv)(C) and (i)(6)(iii)(B) will not be substantial. Moreover, the time to complete the recordkeeping requirements is expected to be no more than 2 hours for each organization, thus the regulations will not have a significant economic impact. The requirements under § 1.509(a)-4(i)(4)(iv)(C) and (i)(6)(iii)(B), therefore, will not have a significant economic impact.

Pursuant to section 7805(f) of the Code, this regulation was submitted to the Chief Counsel for the Office of Advocacy of the Small Business Administration for comment on its impact on small business and no comments were received.

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. The regulations do not 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 regulations do not have federalism implications, impose substantial direct compliance costs on State and local governments, or preempt State law within the meaning of the Executive order.

Pursuant to the Congressional Review Act (5 U.S.C. 801 et seq. ), the Office of Management and Budget's Office of Information and Regulatory Affairs designated this rule as not a “major rule,” as defined by 5 U.S.C. 804(2).

Notice 2014-4 is published in the Internal Revenue Bulletin and is available from the Superintendent of Documents, U.S. Government Printing Office, Washington, DC 20402, or by visiting the IRS website at: https://www.irs.gov/irb/20142_IRB/ar14.html?_ga=1.74171665.204111657.1425931511.

The principal authors of these regulations are Jonathan Carter and Don Spellmann, Office of Associate Chief Counsel (Employee Benefits, Exempt Organizations, and Employment Taxes). However, other personnel from the Treasury Department and the IRS participated in their development.

Accordingly, the Treasury Department and the IRS amend 26 CFR parts 1 and 53 as follows: