Implementation of Form 990, 55746-55772 [2011-22614]

Agencies

• Internal Revenue Service
• DEPARTMENT OF THE TREASURY

[Federal Register Volume 76, Number 174 (Thursday, September 8, 2011)]
[Rules and Regulations]
[Pages 55746-55772]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-22614]



[[Page 55745]]

Vol. 76

Thursday,

No. 174

September 8, 2011

Part II





Department of the Treasury





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Internal Revenue Service





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26 CFR Parts 1 and 602





Implementation of Form 990; Final Rule

Federal Register / Vol. 76 , No. 174 / Thursday, September 8, 2011 / 
Rules and Regulations

[[Page 55746]]


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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Parts 1 and 602

[TD 9549]
RIN 1545-BH28


Implementation of Form 990

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Final regulations and removal of temporary regulations.

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SUMMARY: This document contains final regulations necessary to 
implement the redesigned Form 990, ``Return of Organization Exempt From 
Income Tax.'' These final regulations make revisions to the regulations 
to allow for new threshold amounts for reporting compensation, to 
require that compensation be reported on a calendar year basis, and to 
modify the scope of organizations subject to information reporting 
requirements upon a substantial contraction. The final regulations also 
eliminate the advance ruling process for new organizations, change the 
public support computation period for publicly supported organizations 
to five years, consistent with the revised Form 990, and clarify that 
support must be reported using the organization's overall method of 
accounting. All tax-exempt organizations required to file annual 
information returns are affected by these regulations.

DATES: Effective Date: These regulations are effective on September 8, 
2011.
    Applicability Date: For dates of applicability, see Sec. Sec.  
1.170A-9(k), 1.507-2(f), 1.509(a)-3(o), 1.6033-2(k), and 1.6043-3(e).

FOR FURTHER INFORMATION CONTACT: Terri Harris at (202) 622-6070 (not a 
toll-free number).

SUPPLEMENTARY INFORMATION:

Paperwork Reduction Act

    The collection of information contained in these final 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 1545-2117. The estimated annual burden 
per recordkeeper will vary, depending on individual circumstances. The 
collection of information in this final regulation is in Sec.  1.6033-
2. The information collected under Sec.  1.6033-2 relates to 
compensation reporting by tax-exempt organizations. The information 
that is required to be collected for purposes of Sec.  1.6033-2 is 
required to be submitted on Form 990, ``Return of Organization Exempt 
From Income Tax.'' For further information concerning this collection 
of information and the burden associated with the Form 990, or where to 
submit comments on this collection of information and the accuracy of 
the estimated burden, please refer to the instructions of the Form 990. 
The total annual reporting burden associated with this document is one 
hour.
    An agency may not conduct or sponsor, and a person is not required 
to respond to, a collection of information unless it displays a valid 
control number assigned by the Office of Management and Budget.
    Books or records relating to a collection of information must be 
retained as long as their contents may become material in the 
administration of any internal revenue law. Generally, tax returns and 
tax return information are confidential, as required by 26 U.S.C. 6103.

Background

Form 990

    Under section 6033 of the Internal Revenue Code (Code), 
organizations that are exempt from Federal income tax under section 
501(a) are generally required to file an annual information return 
reporting gross income, receipts, disbursements, and such other 
information as the IRS requires. Certain exceptions to this filing 
requirement apply. For example, churches are not required to file 
annual information returns. The Treasury regulations direct that the 
annual information return shall be filed on Form 990, ``Return of 
Organization Exempt From Income Tax'' or Form 990-PF, ``Return of 
Private Foundation or Section 4947(a)(1) Nonexempt Charitable Trust 
Treated as a Private Foundation.'' The regulations further specify 
certain information to be reported on the return.
    The IRS revises forms and instructions on an annual basis to 
reflect changes in the law and evolving tax administration needs. On 
December 20, 2007, the IRS released a redesigned Form 990. The Form 990 
had not been significantly revised since 1979, and both the IRS and 
stakeholders regarded the form as needing major revision to keep pace 
with changes in the law and with the increasing size, diversity, and 
complexity of the exempt sector. With the exception of certain smaller 
organizations for which there is a graduated transition period, 
organizations began using the new form for the 2008 tax year (returns 
filed in 2009).
    On September 9, 2008, the IRS and the Treasury Department issued 
final and temporary regulations under sections 170(b), 507, 509(a), 
6033, and 6043 necessary to implement the redesigned Form 990, ``Return 
of Organization Exempt from Income Tax,'' (TD 9423) in the Federal 
Register (73 FR 52528). Also on September 9, 2008, the IRS and the 
Treasury Department issued a notice of proposed rulemaking cross-
referencing those Temporary Regulations and inviting public comment and 
requests for a public hearing (REG-142333-07) in the Federal Register 
(73 FR 52218).
    The IRS did not receive any requests for a public hearing. The IRS 
received one written comment responding to this notice. After 
consideration of the comment, the proposed regulations are revised and 
published in final form substantially as proposed. The major areas of 
comment and revision are discussed in the following Explanation of 
Provisions.

Summary of Comments and Explanation of Provisions

Private Foundation Status and Advance Rulings

    In its application for recognition of tax-exempt status (Form 1023, 
``Application for Recognition of Exemption Under Section 501(c)(3) of 
the Internal Revenue Code''), a section 501(c)(3) organization also 
requests a determination of its private foundation status or public 
charity status, that is, whether it is a private foundation and, if 
not, the Code provision excepting it from private foundation 
classification. Under the current statute and prior regulations, an 
organization could request either an advance ruling or a definitive 
ruling addressing the organization's exemption under section 501(c)(3) 
and its private foundation status under section 509(a). The proposed 
regulations eliminated the advance ruling process and provided instead 
that an organization would be a publicly supported organization (thus 
qualifying for public charity status) in its first five years if it 
could show, in its application for exemption, that it could reasonably 
be expected to receive the requisite public support during such period.
    The comment suggested that the final regulations clarify the 
process for requesting an updated ruling or determination letter as to 
public charity status under Sec. Sec.  1.170A-9(f)(5) and 1.509(a)-
3(e). This process is now explained in Rev. Proc. 2011-10, 2011-

[[Page 55747]]

2 IRB 294 and its successors. Thus, the final regulations do not 
incorporate this suggestion.

Computation Period for Public Support

    The proposed regulations changed the computation period for public 
support from a four-year period comprised of the four years prior to 
the taxable year being tested to a five-year period ending with the 
taxable year being tested. An organization that meets a public support 
test for a taxable year is treated as publicly supported for that 
taxable year and the immediately succeeding taxable year. An 
organization that does not meet a public support test for a taxable 
year may be at risk of being classified as a private foundation as of 
the first day of the succeeding taxable year if the organization also 
fails to meet a public support test for that succeeding taxable year. 
Because the IRS and the Treasury Department recognized that an 
organization will not be able to compute its public support for a 
taxable year under the changed computation period until the subsequent 
taxable year, the notice of proposed rulemaking requested comments on 
specific situations that might warrant relief from the imposition of 
Chapter 42 excise taxes. In addition, organizations that believed that 
it would be unfair or inequitable to impose the private foundation 
excise taxes or penalties against them for all or part of the first 
year in which they were reclassified as private foundations were 
invited to contact the IRS, Exempt Organizations, Rulings and 
Agreements, Washington, DC. No organizations contacted the IRS.
    The comment suggested that the final regulations should treat 
organizations that fail a public support test for two consecutive years 
as private foundations as of the beginning of the second test year only 
for purposes of section 507 (termination of private foundation status) 
and section 4940 (excise tax on investment income), and that such an 
organization should not be treated as a private foundation for all 
other purposes until the beginning of the third consecutive taxable 
year. The commenter suggested that such a rule was necessary because 
organizations cannot always predict the amount of support they receive 
from year-to-year. The comment analogized this suggestion to the rule 
that previously applied when a new organization reached the end of its 
five-year advance ruling period. Under the prior regulations, an 
organization generally was treated as publicly supported until 90 days 
after the end of the advance ruling period, or, if Form 8734, ``Support 
Schedule for Advance Ruling Period,'' was timely submitted, until the 
IRS made a final determination of its status. If an organization failed 
to qualify as a publicly supported organization, only the section 4940 
investment income tax and section 507 termination tax applied for the 
five-year advance ruling period that had already ended. The 
reclassified organization and its disqualified persons would be subject 
to all the Chapter 42 excise taxes applicable to private foundations 
and disqualified persons only after the end of the 90-day period or 
when the IRS made a final determination.
    In response to the comment, the final regulations provide that an 
organization that fails a public support test for two consecutive 
taxable years will be treated as a private foundation as of the 
beginning of the second year of failure only for purposes of sections 
507, 4940, and 6033. An organization will be treated as a private 
foundation for all purposes beginning the first day of the third 
consecutive taxable year.
    The comment also suggested adding examples applying the ``facts and 
circumstances test'' under Sec.  1.170(A)-9T(f)(3) or issuing other 
guidance providing examples of the application of this test. The 
proposed regulations contained numerous examples reflecting the five-
year computation period in Sec. Sec.  1.170A-9T(f)(9), 1.509(a)-
3T(c)(6), and 1.509(a)-3T(e)(3), including several examples 
illustrating the application of the facts and circumstances test in 
Sec.  1.170A-9(f)(9). The final regulations retain the examples in the 
proposed regulations but do not include additional examples, as it was 
not clear what additional clarification was needed.

Method of Accounting

    Previously, when a section 501(c)(3) organization computed its 
public support, it was required to use the cash method of accounting to 
report the amount of public support it received on Schedule A, ``Public 
Charity Status and Public Support,'' even if the organization used the 
accrual method of accounting to keep its books under section 446, and 
otherwise report on Form 990. Under the proposed regulations, when a 
section 501(c)(3) organization computed its public support and reported 
the information on Schedule A, it was required to use the same 
accounting method that it uses to keep its books under section 446 and 
that it otherwise uses to report on its Form 990.
    The comment observed that an organization using the accrual method 
of accounting to keep its books and to calculate its public support 
will need to include the present value of a multi-year grant as support 
in the year in which the grant commitment is received. The commenter 
suggested that this could deter private foundations from making 
substantial multi-year grants to an organization due to a concern that 
the grant could cause the organization to fail the public support test 
and be reclassified as a private foundation. The comment suggested that 
the unusual grant rules in the final regulations be expanded to add a 
new factor giving favorable consideration to certain types of multi-
year private foundation grants. Alternatively, the comment suggested 
that the regulations should permit organizations to elect, for purposes 
of the public support test, to accrue multi-year grants ratably over 
the period to which they relate.
    The final regulations do not incorporate these suggestions. While 
the requirement to compute public support in accordance with an 
organization's normal method of accounting generally is advantageous 
and less cumbersome for most organizations, the IRS and the Treasury 
Department recognize that some accrual-method organizations receiving 
substantial multi-year grants from private foundations and individuals 
may be concerned that the requirement to account for those multi-year 
grants on an accrual-method may adversely affect their public charity 
status. However, the longer, five-year testing period in the proposed 
and final regulations should mitigate the impact of recognizing a 
larger amount of support from one source in a single year.
    In addition, one of the goals of the redesign of the Form 990 was 
to implement consistent reporting throughout each organization's Form 
990 and financial records in order to reduce an organization's 
recordkeeping burden and to increase transparency of an organization's 
activities to the general public. In general, use of an organization's 
normal method of accounting for calculation of its public support 
reduces the recordkeeping and reporting burden on accrual-method 
taxpayers, as they no longer must maintain separate cash method records 
solely for reporting public support on Schedule A. The revised Form 
990, Schedule A, sets forth easier-to-follow rules for calculating 
public support and captures the information necessary for the 
organization and the general public to monitor an organization's 
compliance with the public support tests. Consistent financial 
reporting on the basis of an organization's normal accounting method 
throughout the organization's Form 990, including the support test in

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Schedule A, facilitates reconciliation of the Form 990 reporting with 
an organization's audited financial statements, increasing the ability 
of the general public to rely on an organization's Form 990 as an 
accurate reflection of the organization's financial circumstances. 
Consistent reporting thus assists in the oversight of the charitable 
community by the general public, as well as by the IRS. Given these 
considerations, the IRS and the Treasury Department have determined not 
to adopt the suggested elective change to the accounting method for 
multi-year grants.
    The IRS and the Treasury Department also decline to adopt the 
suggestion that the unusual grant rules be expanded to include multi-
year grants. The public support test is designed to ensure that an 
organization is not funded by a small number of large donors, and IRS 
and the Treasury Department do not believe it should exclude a large 
contribution from a single donor simply because it is paid out over a 
number of years. The fact that a grant is a multi-year grant has 
historically been taken into consideration in determining whether a 
particular grant constitutes an unusual grant, at times to the benefit 
and at times to the detriment of the recipient organization. The 
unusual grant exclusion generally applies to substantial contributions 
or bequests that (1) Are attracted by the publicly supported nature of 
the organization, (2) are unusual or unexpected in their amount, and 
(3) would adversely affect the organization's public charity status 
because of their amount. The final regulations in Sec. Sec.  1.170A-
9(f)(6)(ii)(B) and 1.509(a)-3(c)(3)(iii) provide that all pertinent 
facts and circumstances continue to be taken into consideration when 
determining whether a particular contribution will be excluded from the 
support calculation under the unusual grant exclusion, with no single 
factor being determinative.
    If an accrual basis organization receives a substantial multi-year 
grant from a private foundation or individual that, taken along with 
all other facts and circumstances, would satisfy the standards in 
Sec. Sec.  1.170A-9(f)(6) and 1.509(a)-3(c)(3) for treatment as an 
unusual grant, such a grant generally would be excluded from the 
computation of public support. An organization may request a private 
letter ruling pursuant to Sec. Sec.  1.170A-9(f)(6)(iv) and 1.509(a)-
3(c)(5) that a multi-year grant constitutes an unusual grant under 
Sec. Sec.  1.170A-9(f)(6)(ii) and 1.509(a)-3(c)(3), based on all the 
facts and circumstances. See also Rev. Proc 2011-4 (2011-1 IRB 123) and 
its successors. Additionally, Rev. Proc. 81-7 (1981-1 CB 621), provides 
guidelines regarding grants and contributions, including multi-year 
grants to finance capital items, that will be considered unusual grants 
under Sec. Sec.  1.170A-9(f)(6)(ii) and 1.509(a)-3(c)(3) and related 
provisions without a private letter ruling from the IRS.

Reliance

    The proposed regulations provided that donors may rely on an 
organization's ruling that the organization is described in sections 
170(b)(1)(A)(vi) and 509(a)(1) or in section 509(a)(2) until notice of 
a change in status is provided to the public (such as by publication in 
the Internal Revenue Bulletin), unless the donor was responsible for, 
or aware of, the act or failure to act that results in the 
organization's loss of public charity status. The proposed regulations 
further provided that donors may rely on advance rulings that expire on 
or after June 9, 2008, until notice of a change in status is provided 
to the public (such as by publication in the Internal Revenue 
Bulletin).
    The comment suggested that the final regulations should incorporate 
a safe harbor under which a grantor or contributor will not be 
considered responsible for, or aware of, an act or failure to act that 
will result in loss of public charity status, such as those set forth 
in Rev. Proc. 89-23 (1989-1 CB 844) and Rev. Proc. 81-6 (1981-1 CB 
620). The IRS and the Treasury Department agree that grantor reliance 
safe harbors, such as those noted, are still appropriate, but believe 
that this guidance is more appropriately provided in non-regulatory 
form, such as revenue procedures. Therefore, the final regulations do 
not incorporate this suggestion.
    However, the final regulations do restore, in Sec. Sec.  1.170A-
9(f)(5)(iii) and 1.509-3(e)(2)(ii), language that was inadvertently 
deleted from the proposed regulations giving limited grantor and donor 
reliance based on a written statement from the grantee organization.
    Section 4966 imposes an excise tax on a sponsoring organization of 
a donor advised fund (DAF) for each taxable distribution it makes from 
a DAF. Under section 4966(c), a taxable distribution generally is any 
distribution from a DAF to any natural person, or to any other person 
if (i) The distribution is for any purpose other than one specified in 
section 170(c)(2)(B), or (ii) the sponsoring organization maintaining 
the DAF does not exercise expenditure responsibility with respect to 
such distribution in accordance with section 4945(h). Among other 
things, a taxable distribution does not include a distribution from a 
DAF to any organization described in section 170(b)(1)(A) (other than a 
disqualified supporting organization).
    Notice 2006-109 (2006-2 C.B. 1121) requested comments on the 
application of the Pension Protection Act of 2006, Public Law 109-280 
(120 Stat. 780 (2006)) (PPA) to DAFs and supporting organizations. 
Several comments were received requesting that sponsoring organizations 
of DAFs be allowed to rely on an IRS ruling or determination of an 
organization's public charity status for various purposes, including 
for purposes of determining whether a distribution to an organization 
would be a taxable distribution under section 4966. The IRS and the 
Treasury Department agree that reliance relief for sponsoring 
organizations of DAFs is appropriate. Accordingly, the final 
regulations provide that, for purposes of section 4966, sponsoring 
organizations of DAFs may rely on an IRS determination letter or ruling 
that the organization is described in sections 170(b)(1)(A)(vi) and 
509(a)(1) or in section 509(a)(2) to the same extent as other grantors 
and contributors. The final regulations also allow sponsoring 
organizations of DAFs to rely on a favorable determination issued to a 
grantee that a grant is an unusual grant.

Private Foundation Termination

    Section 1.507-2 addresses private foundation terminations under 
section 507(b). The proposed regulations revised Sec.  1.507-2 to 
delete references to the four-year computation period and the 
transition rules related to 12-month terminations that are obsolete. 
Section 507(b)(1)(B) allows an organization to terminate its private 
foundation status by meeting the requirements of section 509(a)(1), 
(a)(2), or (a)(3) (and thus operating as a public charity) for a 
continuous period of 60 months, provided the organization (1) Prior to 
commencement of the 60-month period, notifies the Secretary in the 
manner prescribed by regulations that it is terminating private 
foundation status, and (2) later establishes to the satisfaction of the 
Secretary in a manner prescribed by regulations that it operated as a 
public charity during the 60-month period. The proposed regulations 
continued to provide that a terminating private foundation could 
request an advance ruling regarding its public charity status under 
Sec.  1.507-2T(d). The proposed regulations also retained the provision 
requiring terminating private foundations to provide sufficient 
information to the IRS

[[Page 55749]]

within 90 days of the end of the 60-month period to allow the IRS to 
make a determination on public charity status.
    The comment suggested that the final regulations should simplify 
the process of terminating private foundation status under Sec.  1.507-
2 by eliminating the requirement that an organization file certain 
information with the IRS within 90 days after completing the 60-month 
termination period. The comment observed that the IRS eliminated the 
Form 8734 filing requirement for newly-formed organizations with 
advance rulings, choosing instead to rely on the information reported 
on Schedule A to monitor public support.
    The final regulations do not incorporate this suggestion. In 
eliminating the advance ruling period and liberalizing the procedures 
for new organizations, the IRS took into consideration the experiential 
data indicating the high incidence of qualification for public charity 
status at the end of the advance ruling period. As stated in the notice 
of proposed rulemaking, approximately 95 percent of the organizations 
that received advance rulings later received definitive rulings that 
they were public charities. The IRS does not have analogous 
experiential data relating to organizations attempting to terminate 
private foundation status under section 507(b)(1)(B) to support a 
similar change in these procedures.
    In addition, if the organization fails to qualify as a public 
charity for the entire 60-month period, it will continue to be treated 
as a private foundation for the entire 60-month period. Thus, unlike a 
new organization that had an advance ruling as a public charity, an 
organization terminating its private foundation status continues to be 
classified as a terminating private foundation during the 60-month 
period and continues as such until the IRS receives and makes a 
determination on the organization's 90-day submission of information 
following the end of its advance ruling period.

Substantial Contributor

    The term ``substantial contributor,'' for purposes of Chapter 42, 
is defined under section 507(d)(2) and Sec.  1.507-6. The comment 
suggested that, given that a new organization that fails to qualify as 
publicly supported after its first five years of existence will not be 
treated as a private foundation for any purpose during its first five 
years, the final regulations should clarify whether, for purposes of 
Chapter 42, the identity of substantial contributors to the 
organization will be determined by taking into account contributions 
received while the organization was a public charity, or only 
contributions received after the date the organization is reclassified 
as a private foundation.
    Because section 1.507-6 is not within the scope of these final 
regulations, the final regulations do not incorporate this suggestion.

Miscellaneous

    In Sec.  1.170A-9(f), changes were made in the proposed regulation 
to clarify that the facts and circumstances test described in paragraph 
(f)(3) takes into account all pertinent facts and circumstances, and 
not just those listed in paragraph (f)(3)(iii); additional conforming 
changes were made in the final regulations. In Sec.  1.507-2, language 
inadvertently added to the proposed regulation when clarifying the 
factors for determining whether a grantee organization has an 
independent governing body was deleted. In addition, the final 
regulations include language conforming Sec.  1.6033-2(g) to the 
changes made to section 6033(a)(3)(B) of the Code under the PPA. Since 
the date of enactment of the PPA, August 17, 2006, the Commissioner's 
discretionary authority to relieve organizations from the annual filing 
requirement under section 6033(a) has not applied to supporting 
organizations described in section 509(a)(3) of the Code. Section 
1.6033-2(g)(6), which provides the general statement of the 
Commissioner's discretionary authority to relieve organizations from 
the annual filing requirement under section 6033(a), has been corrected 
to include the modifying language provided by the PPA in section 
6033(a)(3)(B). Sections 1.6033-2(g)(1)(iii) and 1.6033-2(g)(1)(iv) have 
been amended to include conforming changes. Several other incidental 
changes were made throughout the final regulations in order to increase 
clarity and consistency, none of which modify the substance of the 
proposed regulations.
    Additionally, the final regulations include a correction in Sec.  
1.6033-2(i) to the place to which an organization's change of operation 
notifications is sent.

Effective/Applicability Date and Transition Rules

    These final regulations generally are effective on September 8, 
2011, and generally apply to taxable years beginning on or after 
January 1, 2008. All organizations, including organizations that 
received a definitive ruling prior to the effective date of these 
regulations, must use the new five-year computation period to calculate 
public support for their first taxable year beginning on or after 
January 1, 2008, and for all subsequent taxable years.

Special Analyses

    It has been determined that this Treasury decision is not a 
significant regulatory action as defined in Executive Order 12866, as 
supplemented by Executive Order 13565. Therefore, a regulatory 
assessment is not required. It has also been determined that section 
553(b) of the Administrative Procedure Act (5 U.S.C. chapter 5) does 
not apply. It is hereby certified that the collection of information in 
this regulation will not have a significant economic impact on a 
substantial number of small entities. This certification is based on 
the fact that burden on tax-exempt entities will be reduced by (1) 
Eliminating the separate advance ruling process and the additional 
process for subsequently seeking a definitive ruling, (2) clarifying 
rules regarding the method of accounting and period for reporting 
certain items, and (3) providing discretion for the IRS to narrow or 
clarify circumstances under which reporting is required. Accordingly, a 
Regulatory Flexibility Analysis under the Regulatory Flexibility Act (5 
U.S.C. chapter 6) is not required. Pursuant to section 7805(f) of the 
Code, these regulations have been submitted to the Chief Counsel for 
Advocacy of the Small Business Administration for comment on its impact 
on small business.

Statement of Availability for Documents Published in the Internal 
Revenue Bulletin

    For copies of recently issued revenue procedures, revenue rulings, 
notices and other guidance published in the Internal Revenue Bulletin 
or Cumulative Bulletin please visit the IRS Web site at https://www.irs.gov.

Drafting Information

    The principal author of this regulation is Terri Harris, Office of 
Associate Chief Counsel (Tax Exempt and Government Entities). However, 
other personnel from the IRS and the Treasury Department participated 
in their development.

List of Subjects

26 CFR Part 1

    Income taxes, Reporting and recordkeeping requirements.

26 CFR Part 602

    Reporting and recordkeeping requirements.

[[Page 55750]]

Amendments to the Regulations

    Accordingly, 26 CFR parts 1 and 602 are amended as follows:

PART 1--INCOME TAXES

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

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


0
Par. 2. Section1.170A-9 is amended by revising paragraphs (f) and (k) 
to read as follows:


Sec.  1.170A-9  Definition of section 170(b)(1)(A) organization.

* * * * *
    (f) Definition of section 170(b)(1)(A)(vi) organization--(1) In 
general. An organization is described in section 170(b)(1)(A)(vi) if 
it--
    (i) Is referred to in section 170(c)(2) (other than an organization 
specifically described in paragraphs (b) through (e) of this section); 
and
    (ii) Normally receives a substantial part of its support from a 
governmental unit referred to in section 170(c)(1) or from direct or 
indirect contributions from the general public (``publicly 
supported''). For purposes of this paragraph (f), an organization is 
publicly supported if it meets the requirements of either paragraph 
(f)(2) of this section (33\1/3\ percent support test) or paragraph 
(f)(3) of this section (facts and circumstances test). Paragraph (f)(4) 
of this section defines ``normally'' for purposes of the 33\1/3\ 
percent support test and the facts and circumstances test, and for new 
organizations in the first five years of the organization's existence 
as a section 501(c)(3) organization. Paragraph (f)(5) of this section 
provides for determinations of foundation classification and rules for 
reliance by donors and contributors. Paragraphs (f)(6), (f)(7), and 
(f)(8) of this section list the items that are included and excluded 
from the term support. Paragraph (f)(9) of this section provides 
examples of the application of this paragraph. Types of organizations 
that, subject to the provisions of this paragraph (f), generally 
qualify under section 170(b)(1)(A)(vi) as ``publicly supported'' are 
publicly or governmentally supported museums of history, art, or 
science, libraries, community centers to promote the arts, 
organizations providing facilities for the support of an opera, 
symphony orchestra, ballet, or repertory drama or for some other direct 
service to the general public.
    (2) Determination whether an organization is ``publicly 
supported''; 33\1/3\ percent support test. An organization is publicly 
supported if the total amount of support (see paragraphs (f)(6), 
(f)(7), and (f)(8) of this section) that the organization normally (see 
paragraph (f)(4)(i) of this section) receives from governmental units 
referred to in section 170(c)(1), from contributions made directly or 
indirectly by the general public, or from a combination of these 
sources, equals at least 33\1/3\ percent of the total support normally 
received by the organization. See paragraph (f)(9), Example 1 of this 
section.
    (3) Determination whether an organization is ``publicly 
supported''; facts and circumstances test. Even if an organization 
fails to meet the 33\1/3\ percent support test described in paragraph 
(f)(2) of this section, it is publicly supported if it normally (see 
paragraph (f)(4)(i) of this section) receives a substantial part of its 
support from governmental units, from contributions made directly or 
indirectly by the general public, or from a combination of these 
sources, and meets the other requirements of this paragraph (f)(3). In 
order to satisfy the facts and circumstances test, an organization must 
meet the requirements of paragraphs (f)(3)(i) and (f)(3)(ii) of this 
section. In addition, the organization must be in the nature of an 
organization that is publicly supported, taking into account all 
pertinent facts and circumstances, including the factors listed in 
paragraphs (f)(3)(iii)(A) through (f)(3)(iii)(E) of this section.
    (i) Ten-percent support limitation. The percentage of support (see 
paragraphs (f)(6), (f)(7) and (f)(8) of this section) normally received 
by an organization from governmental units, from contributions made 
directly or indirectly by the general public, or from a combination of 
these sources, must be substantial. For purposes of this paragraph 
(f)(3), an organization will not be treated as normally receiving a 
substantial amount of governmental or public support unless the total 
amount of governmental and public support normally received equals at 
least 10 percent of the total support normally received by such 
organization.
    (ii) Attraction of public support. An organization must be so 
organized and operated as to attract new and additional public or 
governmental support on a continuous basis. An organization will be 
considered to meet this requirement if it maintains a continuous and 
bona fide program for solicitation of funds from the general public, 
community, or membership group involved, or if it carries on activities 
designed to attract support from governmental units or other 
organizations described in section 170(b)(1)(A)(i) through 
(b)(1)(A)(vi). In determining whether an organization maintains a 
continuous and bona fide program for solicitation of funds from the 
general public or community, consideration will be given to whether the 
scope of its fundraising activities is reasonable in light of its 
charitable activities. Consideration will also be given to the fact 
that an organization, in its early years of existence, may limit the 
scope of its solicitation to persons deemed most likely to provide seed 
money in an amount sufficient to enable it to commence its charitable 
activities and expand its solicitation program.
    (iii) In addition to the requirements set forth in paragraphs 
(f)(3)(i) and (f)(3)(ii) of this section that must be satisfied, all 
pertinent facts and circumstances, including the following factors, 
will be taken into consideration in determining whether an organization 
is ``publicly supported'' within the meaning of paragraph (f)(1) of 
this section. However, an organization is not generally required to 
satisfy all of the factors in paragraphs (f)(3)(iii)(A) through 
(f)(3)(iii)(E) of this section. The factors relevant to each case and 
the weight accorded to any one of them may differ depending upon the 
nature and purpose of the organization and the length of time it has 
been in existence.
    (A) Percentage of financial support. The percentage of support 
received by an organization from public or governmental sources will be 
taken into consideration in determining whether an organization is 
``publicly supported.'' The higher the percentage of support above the 
10 percent requirement of paragraph (f)(3)(i) of this section from 
public or governmental sources, the lesser will be the burden of 
establishing the publicly supported nature of the organization through 
other factors, including those described in this paragraph (f)(3), 
while the lower the percentage, the greater will be the burden. If the 
percentage of the organization's support from public or governmental 
sources is low because it receives a high percentage of its total 
support from investment income on its endowment funds, such fact will 
be treated as evidence of an organization being ``publicly supported'' 
if such endowment funds were originally contributed by a governmental 
unit or by the general public. However, if such endowment funds were 
originally contributed by a few individuals or members of their 
families, such fact will increase the burden on the organization of 
establishing that it is ``publicly supported'' taking into account all 
pertinent facts and circumstances,

[[Page 55751]]

including the other factors described in paragraph (f)(3)(iii) of this 
section.
    (B) Sources of support. The fact that an organization meets the 
requirement of paragraph (f)(3)(i) of this section through support from 
governmental units or directly or indirectly from a representative 
number of persons, rather than receiving almost all of its support from 
the members of a single family, will be considered evidence of an 
organization being ``publicly supported.'' In determining what is a 
``representative number of persons,'' consideration will be given to 
the type of organization involved, the length of time it has been in 
existence, and whether it limits its activities to a particular 
community or region or to a special field which can be expected to 
appeal to a limited number of persons.
    (C) Representative governing body. The fact that an organization 
has a governing body which represents the broad interests of the 
public, rather than the personal or private interests of a limited 
number of donors (or persons standing in a relationship to such donors 
which is described in section 4946(a)(1)(C) through (a)(1)(G)), will be 
considered evidence of an organization being ``publicly supported.'' An 
organization will be treated as having a representative governing body 
if it has a governing body (whether designated in the organization's 
governing instrument or bylaws as a Board of Directors, Board of 
Trustees, or similar governing body) which is comprised of public 
officials acting in their capacities as such; of individuals selected 
by public officials acting in their capacities as such; of persons 
having special knowledge or expertise in the particular field or 
discipline in which the organization is operating; of community 
leaders, such as elected or appointed officials, clergymen, educators, 
civic leaders, or other such persons representing a broad cross-section 
of the views and interests of the community; or, in the case of a 
membership organization, of individuals elected pursuant to the 
organization's governing instrument or bylaws by a broadly based 
membership.
    (D) Availability of public facilities or services; public 
participation in programs or policies. (1) The fact that an 
organization generally provides facilities or services directly for the 
benefit of the general public on a continuing basis (such as a museum 
or library which holds open its building or facilities to the public, a 
symphony orchestra which gives public performances, a conservation 
organization which provides educational services to the public through 
the distribution of educational materials, or an old age home which 
provides domiciliary or nursing services for members of the general 
public) will be considered evidence that such organization is 
``publicly supported.''
    (2) The fact that an organization is an educational or research 
institution which regularly publishes scholarly studies that are widely 
used by colleges and universities or by members of the general public 
will also be considered evidence that such organization is ``publicly 
supported.''
    (3) The following factors will also be considered evidence that an 
organization is ``publicly supported'':
    (i) The participation in, or sponsorship of, the programs of the 
organization by members of the public having special knowledge or 
expertise, public officials, or civic or community leaders.
    (ii) The maintenance of a definitive program by an organization to 
accomplish its charitable work in the community, such as combating 
community deterioration in an economically depressed area that has 
suffered a major loss of population and jobs.
    (iii) The receipt of a significant part of its funds from a public 
charity or governmental agency to which it is in some way held 
accountable as a condition of the grant, contract, or contribution.
    (E) Additional factors pertinent to membership organizations. The 
following are additional factors to be considered in determining 
whether a membership organization is ``publicly supported'':
    (1) Whether the solicitation for dues-paying members is designed to 
enroll a substantial number of persons in the community or area, or in 
a particular profession or field of special interest (taking into 
account the size of the area and the nature of the organization's 
activities).
    (2) Whether membership dues for individual (rather than 
institutional) members have been fixed at rates designed to make 
membership available to a broad cross section of the interested public, 
rather than to restrict membership to a limited number of persons.
    (3) Whether the activities of the organization will be likely to 
appeal to persons having some broad common interest or purpose, such as 
educational activities in the case of alumni associations, musical 
activities in the case of symphony societies, or civic affairs in the 
case of parent-teacher associations. See Example 2 through Example 5 
contained in paragraph (f)(9) of this section for illustrations of this 
paragraph (f)(3).
    (4) Definition of normally; general rule--(i) Normally; 33\1/3\ 
percent support test. An organization ``normally'' receives the 
requisite amount of public support and meets the 33\1/3\ percent 
support test for a taxable year and the taxable year immediately 
succeeding that year, if, for the taxable year being tested and the 
four taxable years immediately preceding that taxable year, the 
organization meets the 33\1/3\ percent support test on an aggregate 
basis.
    (ii) Normally; facts and circumstances test. An organization 
``normally'' receives the requisite amount of public support and meets 
the facts and circumstances test of paragraph (f)(3) for a taxable year 
and the taxable year immediately succeeding that year, if, for the 
taxable year being tested and the four taxable years immediately 
preceding that taxable year, the organization meets the facts and 
circumstances test on an aggregate basis. In the case of paragraphs 
(f)(3)(iii)(A) and (f)(3)(iii)(B) of this section, facts pertinent to 
years preceding the five-year period may also be taken into 
consideration. The combination of factors set forth in paragraphs 
(f)(3)(iii)(A) through (f)(3)(iii)(E) of this section that an 
organization normally must meet does not have to be the same for each 
five-year period so long as there exists a sufficient combination of 
factors to show compliance with the facts and circumstances test.
    (iii) Special rule. The fact that an organization has normally met 
the requirements of the 33\1/3\ percent support test for a current 
taxable year, but is unable normally to meet such requirements for a 
succeeding taxable year, will not in itself prevent such organization 
from meeting the facts and circumstances test for such succeeding 
taxable year.

    (iv) Example. The application of paragraphs (f)(4)(i), (f)(4)(ii), 
and (f)(4)(iii) of this section may be illustrated by the following 
example:

    Example. (i) X is recognized as an organization described in 
section 501(c)(3). On the basis of support received during taxable 
years 2008, 2009, 2010, 2011, and 2012, in the aggregate, X receives 
at least 33\1/3\ percent of its support from governmental units 
referred to in section 170(c)(1), from contributions made directly 
or indirectly by the general public, or from a combination of these 
sources. Consequently, X meets the 33\1/3\ percent support test for 
taxable year 2012 (the current taxable year). X also meets the 33\1/
3\ support test for 2013, as the immediately succeeding taxable 
year.

[[Page 55752]]

    (ii) In taxable years 2009, 2010, 2011, 2012, and 2013, in the 
aggregate, X does not receive at least 33\1/3\ percent of its 
support from governmental units referred to in section 170(c)(1), 
from contributions made directly or indirectly by the general 
public, or from a combination of these sources. However, X still 
meets the 33\1/3\ percent support test for taxable year 2013 based 
on the aggregate support received for taxable years 2008 through 
2012.
    (iii) In taxable years 2010, 2011, 2012, 2013, and 2014, in the 
aggregate, X does not receive at least 33\1/3\ percent of its 
support from governmental units referred to in section 170(c)(1), 
from contributions made directly or indirectly by the general 
public, or from a combination of these sources. X does not meet the 
33\1/3\ percent support test for taxable year 2014.
    (iv) X meets the facts and circumstances test for taxable year 
2013 and for taxable year 2014 (the immediately succeeding taxable 
year) based on the aggregate support X receives, X's fundraising 
program, and consideration of other factors, including those listed 
in paragraphs (f)(3)(iii)(A) through (f)(3)(iii)(E) of this section, 
during taxable years 2009, 2010, 2011, 2012, and 2013. Therefore, 
even though X does not meet the 33\1/3\ percent support test for 
taxable year 2014, X is still an organization described in section 
170(b)(1)(A)(vi) for that year.

    (v) Normally; first five years of an organization's existence. (A) 
An organization ``normally'' receives the requisite amount of public 
support and meets the 33\1/3\ percent public support test or the facts 
and circumstances test during its first five taxable years as a section 
501(c)(3) organization if the organization can reasonably be expected 
to meet the requirements of the 33\1/3\ percent support test or the 
facts and circumstances test during that period. With respect to such 
organization's sixth taxable year, the general definition of normally 
set forth in paragraphs (f)(4)(i), (f)(4)(ii), and (f)(4)(iii) of this 
section apply. Alternatively, the organization shall be treated as 
``normally'' meeting the 33\1/3\ percent support test or the facts and 
circumstances test for its sixth taxable year (but not its seventh 
taxable year) if it meets the 33\1/3\ percent support test or the facts 
and circumstances test under the definition of normally set forth in 
paragraphs (f)(4)(i), (f)(4)(ii), and (f)(4)(iii) of this section for 
its fifth taxable year (based on support received in its first through 
fifth taxable years).
    (B) Basic consideration. In determining whether an organization can 
reasonably be expected (within the meaning of paragraph (f)(4)(v)(A) of 
this section) to meet the requirements of the 33\1/3\ percent support 
test or the facts and circumstances test during its first five taxable 
years, the basic consideration is whether its organizational structure, 
current or proposed programs or activities, and actual or intended 
method of operation are such as can reasonably be expected to attract 
the type of broadly based support from the general public, public 
charities, and governmental units that is necessary to meet such tests. 
The factors that are relevant to this determination, and the weight 
accorded to each of them, may differ from case to case, depending on 
the nature and functions of the organization. The information to be 
considered for this purpose shall consist of all pertinent facts and 
circumstances, including the factors set forth in paragraph (f)(3) of 
this section.

    (vi) Example. The application of paragraph (f)(4)(v) of this 
section may be illustrated by the following example:

    Example. (i) Organization Y was formed in January 2008, and uses 
a taxable year ending December 31. After September 9, 2008, and 
before December 31, 2008, Organization Y filed Form 1023 requesting 
recognition of exemption as an organization described in section 
501(c)(3) and in sections 170(b)(1)(A)(vi) and 509(a)(1). In its 
application, Organization Y established that it can reasonably be 
expected to operate as a publicly supported organization under 
paragraph (f)(2) or (f)(3) and paragraph (f)(4)(v) of this section. 
Subsequently, Organization Y received a ruling or determination 
letter that it is an organization described in section 501(c)(3) and 
sections 170(b)(1)(A)(vi) and 509(a)(1) effective as of the date of 
its formation.
    (ii) Organization Y is described in sections 170(b)(1)(A)(vi) 
and 509(a)(1) for its first five taxable years (the taxable years 
ending December 31, 2008, through December 31, 2012).
    (iii) Organization Y can qualify as a publicly supported 
organization for the taxable year ending December 31, 2013, if 
Organization Y can meet the requirements of either paragraph (f)(2) 
or paragraph (f)(3) of this section or Sec.  1.509(a)-3(a) and Sec.  
1.509(a)-(3)(b) for the taxable years ending December 31, 2009, 
through December 31, 2013, or for the taxable years ending December 
31, 2008, through December 31, 2012.

    (vii) Organizations reclassified as private foundations. (A) New 
publicly supported organizations. If a new publicly supported 
organization described under section 170(b)(1)(A)(vi) cannot meet the 
requirements of the 33\1/3\ percent test of paragraph (f)(2) or the 
facts and circumstances test of paragraph (f)(3) for its sixth taxable 
year under the general definition of normally set forth in paragraphs 
(f)(4)(i), (f)(4)(ii), and (f)(4)(iii) of this section or under the 
alternate rule set forth in paragraph (f)(4)(v) of this section 
(effectively failing to meet a public support test for both its fifth 
and sixth taxable years), it will be treated as a private foundation as 
of the first day of its sixth taxable year only for purposes of 
sections 507, 4940, and 6033. Such an organization must file a Form 
990-PF, ``Return of Private Foundation or Section 4947(a)(1) Nonexempt 
Charitable Trust Treated as a Private Foundation,'' and will be liable 
for the net investment tax imposed by section 4940 and, if applicable, 
the private foundation termination tax imposed by section 507(c), for 
its sixth taxable year. For succeeding taxable years, the organization 
will be treated as a private foundation for all purposes.
    (B) Other publicly supported organizations. A publicly supported 
organization described in section 170(b)(1)(A)(vi) (other than a new 
publicly supported organization described in paragraph (f)(4)(vii)(A) 
of this section) that has failed to meet both the 33\1/3\ percent 
support test and the facts and circumstances test for any two 
consecutive taxable years will be treated as a private foundation as of 
the first day of the second consecutive taxable year only for purposes 
of sections 507, 4940, and 6033. Such an organization must file a Form 
990-PF, ``Return of Private Foundation or Section 4947(a)(1) Nonexempt 
Charitable Trust Treated as a Private Foundation,'' and will be liable 
for the net investment tax imposed by section 4940 and, if applicable, 
the private foundation termination tax imposed by section 507(c), for 
the second consecutive failed taxable year. For succeeding taxable 
years, the organization will be treated as a private foundation for all 
purposes.
    (5) Determinations of foundation classification and reliance. (i) A 
ruling or determination letter that an organization is described in 
section 170(b)(1)(A)(vi) may be issued to an organization. Such 
determination may be made in conjunction with the recognition of the 
organization's tax-exempt status or at such other time as the 
organization believes it is described in section 170(b)(1)(A)(vi). The 
ruling or determination letter that the organization is described in 
section 170(b)(1)(A)(vi) may be revoked if, upon examination, the 
organization has not met the requirements of paragraph (f) of this 
section. The ruling or determination letter that the organization is 
described in section 170(b)(1)(A)(vi) also may be revoked if the 
organization's application for a ruling or determination contained one 
or more material misstatements or omissions of fact or if such 
application was part of a scheme or plan to avoid or evade any 
provision of the Internal Revenue Code. The revocation of the 
determination that an organization is described in section 
170(b)(1)(A)(vi) does not preclude revocation of the

[[Page 55753]]

determination that the organization is described in section 501(c)(3).
    (ii) Status of grantors or contributors. For purposes of sections 
170, 507, 545(b)(2), 642(c), 4942, 4945, 4966, 2055, 2106(a)(2), and 
2522, grantors or contributors may rely upon a determination letter or 
ruling that an organization is described in section 170(b)(1)(A)(vi) 
until the IRS publishes notice of a change of status (for example, in 
the Internal Revenue Bulletin or Publication 78, ``Cumulative List of 
Organizations described in Section 170(c) of the Internal Revenue Code 
of 1986,'' which can be searched at https://www.irs.gov.) For this 
purpose, grantors or contributors also may rely on an advance ruling 
that expires on or after June 9, 2008. However, a grantor or 
contributor may not rely on such an advance ruling or any determination 
letter or ruling if the grantor or contributor was responsible for, or 
aware of, the act or failure to act that resulted in the organization's 
loss of classification under section 170(b)(1)(A)(vi) or acquired 
knowledge that the IRS had given notice to such organization that it 
would be deleted from such classification.
    (iii) Reliance by grantors or contributors. A grantor or 
contributor, other than one of the organization's founders, creators, 
or foundation managers (within the meaning of section 4946(b)), will 
not be considered to be responsible for, or aware of, the act or 
failure to act that resulted in the loss of the organization's 
``publicly supported'' classification under section 170(b)(1)(A)(vi), 
if such grantor or contributor has made such grant or contribution in 
reliance upon a written statement by the grantee organization that such 
grant or contribution will not result in the loss of such 
organization's classification as a publicly supported organization as 
described in section 170(b)(1)(A)(vi). Such statement must be signed by 
a responsible officer of the grantee organization and must set forth 
sufficient information, including a summary of the pertinent financial 
data for the five taxable years immediately preceding the current 
taxable year, to assure a reasonably prudent person that his grant or 
contribution will not result in the loss of the grantee organization's 
classification as a publicly supported organization as described in 
section 170(b)(1)(A)(vi). If a reasonable doubt exists as to the effect 
of such grant or contribution, or if the grantor or contributor is one 
of the organization's founders, creators, or foundation managers, the 
procedure set forth in paragraph (f)(6)(iv) of this section for 
requesting a determination from the IRS may be followed by the grantee 
organization for the protection of the grantor or contributor.
    (6) Definition of support; meaning of general public--(i) In 
general. In determining whether the 33\1/2\ percent support test or the 
10 percent support limitation described in paragraph (f)(3)(i) of this 
section is met, contributions by an individual, trust, or corporation 
shall be taken into account as support from direct or indirect 
contributions from the general public only to the extent that the total 
amount of the contributions by any such individual, trust, or 
corporation during the period described in paragraph (f)(4)(i) or 
paragraph (f)(4)(ii) of this section does not exceed two percent of the 
organization's total support for such period, except as provided in 
paragraph (f)(6)(ii) of this section. Therefore, for example, any 
contribution by one individual will be included in full in the 
denominator of the fraction determining the 33\1/2\ percent support or 
the 10 percent support limitation, but will be includible in the 
numerator of such fraction only to the extent that such amount does not 
exceed two percent of the denominator. In applying the two percent 
limitation, all contributions made by a donor and by any person or 
persons standing in a relationship to the donor that is described in 
section 4946(a)(1)(C) through (a)(1)(G) and the related regulations 
shall be treated as made by one person. The two percent limitation 
shall not apply to support received from governmental units referred to 
in section 170(c)(1) or to contributions from organizations described 
in section 170(b)(1)(A)(vi), except as provided in paragraph (f)(6)(v) 
of this section. For purposes of paragraphs (f)(2), (f)(3)(i), and 
(f)(7)(iii)(A)(2) of this section, the term indirect contributions from 
the general public includes contributions received by the organization 
from organizations (such as section 170(b)(1)(A)(vi) organizations) 
that normally receive a substantial part of their support from direct 
contributions from the general public, except as provided in paragraph 
(f)(6)(v) of this section. See the examples in paragraph (f)(9) of this 
section for the application of this paragraph (f)(6)(i). For purposes 
of this paragraph (f), the term contributions includes qualified 
sponsorship payments (as defined in Sec.  1.513-4) in the form of money 
or property (but not services).
    (ii) Exclusion of unusual grants. (A) For purposes of applying the 
two percent limitation described in paragraph (f)(6)(i) of this section 
to determine whether the 33\1/3\ percent support test or the 10 percent 
support limitation in paragraph (f)(3)(i) of this section is satisfied, 
one or more contributions may be excluded from both the numerator and 
the denominator of the applicable support fraction if such 
contributions meet the requirements of paragraph (f)(6)(iii) of this 
section. The exclusion provided by this paragraph (f)(6)(ii) is 
generally intended to apply to substantial contributions or bequests 
from disinterested parties, which contributions or bequests--
    (1) Are attracted by reason of the publicly supported nature of the 
organization;
    (2) Are unusual or unexpected with respect to the amount thereof; 
and
    (3) Would, by reason of their size, adversely affect the status of 
the organization as normally being publicly supported for the 
applicable period described in paragraph (f)(4) of this section.
    (B) In the case of a grant (as defined in Sec.  1.509(a)-3(g)) that 
meets the requirements of this paragraph (f)(6)(ii), if the terms of 
the granting instrument require that the funds be paid to the recipient 
organization over a period of years, the grant amounts received by the 
organization may be excluded for such year or years in which they would 
otherwise be includible in computing support under the method of 
accounting on the basis of which the organization regularly computes 
its income in keeping its books under section 446. However, no item of 
gross investment income may be excluded under this paragraph (f)(6). 
The provisions of this paragraph (f)(6) shall apply to exclude unusual 
grants made during any of the applicable periods described in paragraph 
(f)(4) or paragraph (f)(6) of this section. See paragraph (f)(6)(iv) of 
this section as to reliance by a grantee organization upon an unusual 
grant ruling under this paragraph (f)(6).
    (iii) Determining factors. In determining whether a particular 
contribution may be excluded under paragraph (f)(6)(ii) of this 
section, all pertinent facts and circumstances will be taken into 
consideration. No single factor will necessarily be determinative. For 
some of the factors similar to the factors to be considered, see Sec.  
1.509(a)-3(c)(4).
    (iv) Grantors and contributors. Prior to the making of any grant or 
contribution that will allegedly meet the requirements for exclusion 
under paragraph (f)(6)(ii) of this section, a potential grantee 
organization may request a determination whether such grant or 
contribution may be so excluded. Requests for such

[[Page 55754]]

determination may be filed by the grantee organization in the time and 
manner specified by revenue procedure or other guidance published in 
the Internal Revenue Bulletin. The issuance of such determination will 
be at the sole discretion of the Commissioner. The organization must 
submit all information necessary to make a determination on the factors 
referred to in paragraph (f)(6)(iii) of this section. If a favorable 
determination is issued, such determination may be relied upon by the 
grantor or contributor of the particular contribution in question for 
purposes of sections 170, 507, 545(b)(2), 642(c), 4942, 4945, 4966, 
2055, 2106(a)(2), and 2522 and by the grantee organization for purposes 
of paragraph (f)(6)(ii) of this section.
    (v) Grants from public charities. Pursuant to paragraph (f)(6)(i) 
of this section, contributions received from a governmental unit or 
from a section 170(b)(1)(A)(vi) organization are not subject to the two 
percent limitation described in paragraph (f)(6)(i) of this section 
unless such contributions represent amounts which have been expressly 
or impliedly earmarked by a donor to such governmental unit or section 
170(b)(1)(A)(vi) organization as being for, or for the benefit of, the 
particular organization claiming section 170(b)(1)(A)(vi) status. See 
Sec.  1.509(a)-3(j)(3) for examples illustrating the rules of this 
paragraph (f)(6)(v).
    (7) Definition of support; special rules and meaning of terms--(i) 
Definition of support. For purposes of this paragraph (f), the term 
``support'' shall be as defined in section 509(d) (without regard to 
section 509(d)(2)). The term ``support'' does not include--
    (A) Any amounts received from the exercise or performance by an 
organization of its charitable, educational, or other purpose or 
function constituting the basis for its exemption under section 501(a). 
In general, such amounts include amounts received from any activity the 
conduct of which is substantially related to the furtherance of such 
purpose or function (other than through the production of income); or
    (B) Contributions of services for which a deduction is not 
allowable.
    (ii) For purposes of the 33\1/3\ percent support test and the 10 
percent support limitation in paragraph (f)(3)(i) of this section, all 
amounts received that are described in paragraph (f)(7)(i)(A) or 
paragraph (f)(7)(i)(B) of this section are to be excluded from both the 
numerator and the denominator of the fractions determining compliance 
with such tests, except as provided in paragraph (f)(7)(iii) of this 
section.
    (iii) Organizations dependent primarily on gross receipts from 
related activities. (A) Notwithstanding the provisions of paragraph 
(f)(7)(i) of this section, an organization will not be treated as 
satisfying the 33\1/3\ percent support test or the 10 percent support 
limitation in paragraph (f)(3)(i) of this section if it receives--
    (1) Almost all of its support (as defined in section 509(d)) from 
gross receipts from related activities; and
    (2) An insignificant amount of its support from governmental units 
(without regard to amounts referred to in paragraph (f)(7)(i)(A) of 
this section) and contributions made directly or indirectly by the 
general public.
    (B) Example. The application of this paragraph (f)(7)(iii) may be 
illustrated by the following exa