[Federal Register Volume 91, Number 130 (Thursday, July 9, 2026)]
[Rules and Regulations]
[Pages 42353-42356]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2026-13851]
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DEPARTMENT OF TREASURY
Internal Revenue Service
26 CFR Part 1
[TD 10051]
RIN 1545-BQ58
Charitable Remainder Annuity Trust Listed Transaction
AGENCY: Internal Revenue Service (IRS), Treasury.
ACTION: Final rule.
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SUMMARY: This document contains final regulations that identify certain
charitable remainder annuity trust (CRAT) transactions and
substantially similar transactions as listed transactions, a type of
reportable transaction. Material advisors and certain participants in
these listed transactions are required to file disclosures with the IRS
and will be subject to penalties for failure to disclose. The final
regulations affect participants in these transactions as well as
material advisors but provide that certain organizations whose only
role or interest in the transaction is as a charitable remainderman
will not be treated as participants in the transaction or as parties to
a prohibited tax shelter transaction subject to excise taxes and
disclosure requirements.
DATES:
Effective date: These regulations are effective on July 9, 2026.
Applicability date: For applicability date, see Sec. 1.6011-15(e).
FOR FURTHER INFORMATION CONTACT: Concerning the final regulations,
Charles D. Wien of the Office of Associate Chief Counsel (Passthroughs,
Trusts & Estates) (202) 317-5279 (not a toll-free number).
SUPPLEMENTARY INFORMATION:
Authority
This document amends the Income Tax Regulations (26 CFR part 1) by
adding final regulations under section 6011 of the Internal Revenue
Code (Code) to identify certain CRAT transactions as listed
transactions, a type of reportable transaction (final regulations).
Section 6001 of the Code provides an express delegation of
authority to the Secretary of the Treasury or his delegate (Secretary)
to require, either by notice served or by regulations, every taxpayer
to keep the records, render the statements, make the returns, and
comply with the rules and regulations that the Secretary deems
necessary to demonstrate tax liability.
Section 6011(a) of the Code provides an express delegation of
authority to the Secretary to require every taxpayer to ``make a return
or statement according to the forms and regulations prescribed by the
Secretary'' and ``include therein the information required by such
forms or regulations.''
Section 6707A(c) of the Code confirms the Secretary's authority to
identify transactions as ``reportable transactions'' and as ``listed
transactions'' and to require reporting of information relating to such
transactions pursuant to the authority conferred by section 6011.
Section 6707A(c)(1) defines the term ``reportable transaction'' to mean
``any transaction with respect to which information is required to be
included with a return or statement because, as determined under
regulations prescribed under section 6011, such transaction is of a
type which the Secretary determines as having a potential for tax
avoidance or evasion.'' In addition, section 6707A(c)(2) defines the
term ``listed transaction'' to mean a reportable transaction that is
``the same as, or substantially similar to, a transaction specifically
identified by the Secretary as a tax avoidance transaction for purposes
of section 6011.''
The final regulations also are issued under the express delegation
of authority under section 7805(a) of the Code, which authorizes the
Secretary to ``prescribe all needful rules and regulations for the
enforcement of [the Code], including all rules and regulations as may
be necessary by reason of any alteration of law in relation to internal
revenue.''
Background
On March 25, 2024, the Department of Treasury (Treasury Department)
and the IRS published a notice of proposed rulemaking (REG-108761-22)
in the Federal Register (89 FR 20569) proposing regulations at new
Sec. 1.6011-15 (proposed Sec. 1.6011-15) that would identify certain
CRAT transactions and substantially similar transactions as ``listed
transactions'' for purposes of
[[Page 42354]]
Sec. 1.6011-4 and sections 6111 and 6112 of the Code (proposed
regulations). The Treasury Department and the IRS received one comment
in response to the proposed regulations that are the subject of this
final rulemaking. The comment is available for public inspection at
https://www.regulations.gov or upon request. No public hearing was held
on the proposed regulations because there were no requests to speak.
Summary of and Response to Comment
The one comment received supports the proposed regulations and
agrees that the transactions described in the proposed regulations
miscomprehend the operation of the tier structure under section 664
that governs the characterization and taxation of distributions from
CRATs. In addition, the commenter noted that the CRATs described in the
proposed regulations have other technical flaws that would prevent the
purported CRATs from qualifying as CRATs under section 664(d)(1).
The commenter also agreed with the proposal that an organization
described in section 170(c) of the Code that the purported CRAT
designates as a recipient of the remainder interest is not treated as
(1) a participant under Sec. 1.6011-4(c)(3)(i)(A) in the transaction,
or (2) as a party to the transaction for purposes of section 4965 of
the Code solely by reason of its status as a recipient of the remainder
interest described in section 664(d)(1). Further, the commenter pointed
out that the charitable remainder beneficiary often is not even aware
of the existence of its remainder interest until the charitable
organization receives a distribution from the trust.
The proposed regulations requested comments concerning whether a
charitable remainder beneficiary could be a material advisor under
section 6111(b)(1)(A), and asked, in particular, whether the charitable
remainder beneficiary ever provides material aid, assistance, or advice
with respect to transactions described in proposed Sec. 1.6011-15(b),
the nature of the services being provided, and what fees the charitable
remainder beneficiary would receive for providing such material aid,
assistance, or advice. In response to this request for comments, the
commenter stated that, based on its experience, charitable remainder
beneficiaries rarely provide material aid, assistance, or advice, and
that any material aid, assistance, or advice is most often provided by
the promoters of the transaction. Additionally, the commenter stated it
is not aware of cases in which charitable remainder beneficiaries have
received fees, either directly or indirectly, for providing material
aid, assistance, or advice.
However, the commenter noted that it is possible that a charity
would provide general information about a CRAT to a participant in the
listed transaction. Specifically, it would not be unusual for a charity
to suggest consideration of a CRAT to a potential charitable donor or
to explain to that potential donor the elements and operation of a
trust that qualifies as a CRAT. The commenter requested that the final
regulations make clear that a charitable remainder beneficiary will not
be considered to provide material aid, assistance, or advice unless the
charitable remainder beneficiary provides information that specifically
endorses the abusive interpretation of the applicability and operation
of the tier structure under which CRAT distributions are taxed by
section 664(b).
Section 301.6111-3(b)(1) provides that a person is a material
advisor with respect to a transaction if the person provides any
material aid, assistance, or advice with respect to organizing,
managing, promoting, selling, implementing, insuring, or carrying out
any reportable transaction and directly or indirectly derives gross
income in excess of the threshold amount provided in Sec. 301.6111-
3(b)(3). Section 301.6111-3(b)(2)(i) provides that a person provides
material aid, assistance, or advice if the person makes or provides a
tax statement to or for the benefit of any person described in Sec.
301.6111-3(b)(2)(i). Section 301.6111-3(b)(2)(ii) generally provides
that a tax statement is any statement (including another person's
statement), oral or written, that relates to a tax aspect of a
transaction that causes the transaction to be a reportable transaction.
A description of the effect of section 664(b) that includes, or a
statement endorsing, the abusive interpretation of the application or
operation of the tier structure under section 664(b) would be
considered a tax statement as defined in Sec. 301.6111-3(b)(2)(ii) as
noted by the commenter, as would other statements regarding other
elements of the transaction described in these final regulations, such
as the validity of the terms of a CRAT used in the structure. However,
a mere suggestion or description of a trust qualifying as a CRAT would
not be a statement relating to a tax aspect of the transaction that
causes the transaction to be a reportable transaction. As a result, as
was discussed by the commenter, simply suggesting a donor's
consideration of the creation of, or providing general information
regarding, a trust qualifying as a CRAT would not be a tax statement
that would result in the charity being a material advisor. Furthermore,
to be a material advisor, the charitable remainderman must receive
gross income (such as a fee) at least equal to the thresholds in Sec.
301.6111-3(b)(3), and the commenter noted that it was not aware of
charitable remaindermen receiving fees for providing material aid,
assistance, or advice.
Because the application of rules governing who is considered a
material adviser seem sufficiently clear in this context, the Treasury
Department and IRS have determined that it is unnecessary to address
the issue in the regulatory text. Thus, the Treasury Department and IRS
decline to adopt the proposed change recommended by the commenter in
finalizing the proposed regulations, and the proposed regulations are
adopted as final without change.
Special Analyses
I. Regulatory Planning and Review
These regulations are not subject to review under section 6(b) of
Executive Order 12866 pursuant to the Memorandum of Agreement (July 4,
2025) between the Treasury Department and the Office of Management and
Budget (OMB) regarding review of tax regulations. Therefore, a
regulatory impact assessment is not required.
II. Paperwork Reduction Act
The estimated number of taxpayers impacted by these final
regulations is between 50 to 100 per year. No burden on these taxpayers
is imposed by these final regulations. Instead, the collection of
information contained in these final regulations is reflected in the
collection of information for Form 8886, Reportable Transaction
Disclosure Statement, and Form 8918, Material Advisor Disclosure
Statement, that have been reviewed and approved by the OMB in
accordance with the Paperwork Reduction Act (44 U.S.C. 3507(c)) under
control numbers 1545-1800 and 1545-0865.
To the extent there is a change in burden as a result of these
regulations, the change in burden will be reflected in the updated
burden estimates for Forms 8886 and 8918. The requirement to maintain
records to substantiate information on Forms 8886 and 8918 already is
contained in the burden associated with the control numbers for the
forms and remains unchanged.
An agency may not conduct or sponsor, and a person is not required
to respond to, a collection of information
[[Page 42355]]
unless the collection of information displays a valid OMB control
number.
III. Regulatory Flexibility Act
The Regulatory Flexibility Act (5 U.S.C. chapter 6) (RFA) requires
the agency to ``prepare and make available for public comment an
initial regulatory flexibility analysis'' which will ``describe the
impact of the proposed rule on small entities.'' 5 U.S.C. 603(a). The
term ``small entities'' is defined in 5 U.S.C. 601(6) to mean ``small
business,'' ``small organization,'' and ``small governmental
jurisdiction,'' which also are defined in 5 U.S.C. 601(3) through (5).
Small business size standards define whether a business is ``small''
and have been established for types of economic activities, or
industry, generally under the North American Industry Classification
System (NAICS). See title 13, part 121 of the Code of Federal
Regulations (titled ``Small Business Size Regulations''). The size
standards look at various factors, including annual receipts, number of
employees, and amount of assets, to determine whether the business is
small. See title 13, part 121.201 of the Code of Federal Regulations
for the Small Business Size Standards by NAICS Industry.
Section 605 of the Act allows an agency to certify a rule if the
rulemaking is not expected to have a significant economic impact on a
substantial number of small entities. The Treasury Department and the
IRS hereby certify 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 the majority of the effect
of the final regulations falls on individuals and trusts. Further, the
Treasury Department and the IRS expect that the reporting burden is
low; the information sought is necessary for regular annual return
preparation and ordinary recordkeeping.
For the reasons stated, a regulatory flexibility analysis under the
RFA is not required. Pursuant to section 7805(f) of the Code, the
proposed rule preceding this rulemaking 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.
IV. Unfunded Mandates Reform Act
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 (updated annually for inflation). This final
rule does 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.
V. Executive Order 13132: Federalism
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. This final rule does not have
federalism implications and does not impose substantial direct
compliance costs on State and local governments or preempt State law
within the meaning of the Executive order.
Drafting Information
The principal author of these final regulations is Charles D. Wien,
Office of Associate Chief Counsel (Passthroughs, Trusts, & Estates).
However, other personnel from the IRS and the Treasury Department
participated in the development of these regulations.
List of Subjects in 26 CFR Part 1
Income taxes, Reporting and recordkeeping requirements.
Adoption of Amendments to the Regulations
Accordingly, the Treasury Department and the IRS amend 26 CFR part
1 as follows:
PART 1--INCOME TAXES
Paragraph 1. The authority citation for part 1 is amended by adding
an entry for Sec. 1.6011-15 in numerical order to read, in part, as
follows:
Authority: 26 U.S.C. 7805 * * *
* * * * *
Section 1.6011-15 also issued under 26 U.S.C. 6001 and 26 U.S.C.
6011.
* * * * *
Par. 2. Section 1.6011-15 is added to read as follows:
Sec. 1.6011-15 Charitable remainder annuity trust listed transaction.
(a) In general. Transactions that are the same as, or substantially
similar to, a transaction described in paragraph (b) of this section
are identified as listed transactions for purposes of Sec. 1.6011-
4(b)(2).
(b) Charitable remainder annuity trusts. A transaction is described
in this paragraph (b) if:
(1) The grantor creates a trust purporting to qualify as a
charitable remainder annuity trust under section 664(d)(1) of the
Internal Revenue Code (Code);
(2) The grantor funds the trust with property having a fair market
value in excess of its basis (contributed property);
(3) The trustee sells the contributed property;
(4) The trustee uses some or all of the proceeds from the sale of
the contributed property to purchase an annuity; and
(5) On a Federal income tax return, the beneficiary of the trust
treats the annuity amount payable from the trust as if it were, in
whole or in part, an annuity payment subject to section 72 of the Code,
instead of as carrying out to the beneficiary amounts in the ordinary
income and capital gain tiers of the trust in accordance with section
664(b).
(c) Participation--(1) In general. A taxpayer has participated in a
transaction identified as a listed transaction in paragraph (a) of this
section if the taxpayer's tax return reflects tax consequences or a tax
strategy described in this section as provided under Sec. 1.6011-
4(c)(3)(i)(A). These tax consequences include those tax consequences
that would affect any gift tax return, whether or not such gift tax
return was filed. See Sec. 25.6011-4 of this chapter.
(2) Treatment of charitable remainderman. An organization described
in section 170(c) of the Code that the purported charitable remainder
annuity trust designates as a recipient of the remainder interest
described in section 664(d)(1) is not treated as a participant under
Sec. 1.6011-4(c)(3)(i)(A) in the transaction described in this section
solely by reason of its status as a recipient of the remainder interest
described in section 664(d)(1).
(d) Treatment of charitable remainderman under section 4965. A tax-
exempt entity (as defined in section 4965 of the Code) that is an
organization described in section 170(c) and that the purported
charitable remainder annuity trust designates as a recipient of the
remainder interest described in section 664(d)(1) is not treated as a
party to the transaction described in this section for purposes of
section 4965 solely by reason of its status as a recipient of the
remainder interest described in section 664(d)(1).
(e) Applicability date. This section's identification of
transactions that are the same as, or substantially similar to, the
[[Page 42356]]
transaction described in paragraph (b) of this section as listed
transactions for purposes of Sec. 1.6011-4(b)(2) is effective on July
9, 2026.
Frank J. Bisignano,
Chief Executive Officer.
Approved: April 15, 2026.
Kenneth J. Kies.
Assistant Secretary of the Treasury (Tax Policy).
[FR Doc. 2026-13851 Filed 7-8-26; 8:45 am]
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