Reliance Standards for Making Good Faith Determinations, 57709-57717 [2015-24346]

Agencies

• Internal Revenue Service
• DEPARTMENT OF THE TREASURY

[Federal Register Volume 80, Number 186 (Friday, September 25, 2015)]
[Rules and Regulations]
[Pages 57709-57717]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-24346]


=======================================================================
-----------------------------------------------------------------------

DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 53

[TD 9740]
RIN 1545-BL23


Reliance Standards for Making Good Faith Determinations

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Final regulations.

-----------------------------------------------------------------------

SUMMARY: This document contains final regulations regarding the 
standards for making a good faith determination that a foreign 
organization is a charitable organization that is not a private 
foundation, so that grants made to that foreign organization may be 
qualifying distributions and not taxable expenditures. The regulations 
also make additional changes to conform the final regulations to 
statutory amendments made by the Deficit Reduction Act of 1984 and the 
Pension Protection Act of 2006. The regulations will affect private 
foundations seeking to make good faith determinations.

DATES: Effective date: These regulations are effective on September 25, 
2015.
    Applicability date: For the dates of applicability, see Sec. Sec.  
53.4942(a)-3(f) and 53.4945-5(f)(3).

FOR FURTHER INFORMATION CONTACT: Ward L. Thomas, (202) 317-6173 (not a 
toll-free number).

SUPPLEMENTARY INFORMATION: 

Paperwork Reduction Act

    The collection of information in these final regulations is the 
good faith determination set forth in Sec. Sec.  53.4942(a)-3(a)(6) and 
53.4945-5(a)(5). The collection of information contained in these 
regulations is reflected in the collection of information for Form 990-
PF, ``Return of Private Foundation or Section 4947(a)(1) Trust Treated 
as Private Foundation,'' that 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-
0052. 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 might become material in the 
administration of any internal revenue law.

Background

    This document contains amendments to 26 CFR part 53 under chapter 
42, subtitle D of the Internal Revenue Code (Code). To avoid certain 
excise taxes under chapter 42, a private foundation (referred to in 
this preamble as a ``foundation'' or ``grantor'') \1\ must make a 
minimum level of ``qualifying distributions'' (as defined in section 
4942 of the Code) each year and must avoid making taxable expenditures 
(as defined in section 4945). A foundation generally may treat grants 
made for charitable purposes to certain foreign organizations as 
qualifying distributions under section 4942 if the foundation makes a 
good faith determination that the foreign organization is an 
organization described in sections 501(c)(3) and 509(a)(1), (a)(2), or 
(a)(3) (a ``public charity'') that is not a ``disqualified supporting 
organization'' described in section 4942(g)(4)(A)(i) or (ii), or is an 
organization described in sections 501(c)(3) and 4942(j)(3) (an 
``operating foundation,'' also known as a ``private operating 
foundation''). Similarly, foundations may treat grants for charitable 
purposes to certain foreign organizations as other than taxable 
expenditures under section 4945 without having to exercise expenditure 
responsibility if the foundation makes a good faith determination that 
the foreign organization is a public charity (other than a disqualified 
supporting organization) or is an operating foundation described in 
section 4940(d)(2) (an ``exempt operating foundation''). In this 
preamble, a foreign grantee that is a public charity or operating 
foundation that may receive a qualifying distribution (or a grant for 
which expenditure responsibility is not required) is referred to as a 
``qualifying public charity.'' \2\ This good faith determination is 
commonly known as an ``equivalency determination.''
---------------------------------------------------------------------------

    \1\ The regulations under section 4942 refer to ``distributing 
foundations'' making distributions to ``donee organizations,'' 
whereas the regulations under section 4945 refer to ``grantor 
foundations'' making or paying grants to ``grantee organizations.'' 
For simplicity, this preamble refers to grantors making grants or 
distributions to grantee organizations, in reference to both Code 
sections.
    \2\ The class of qualifying public charities for purposes of 
section 4945 is a slightly smaller subset of those for purposes of 
section 4942. Thus, grants to foreign organizations determined to be 
operating foundations that are not exempt operating foundations, and 
grants by operating foundations to foreign organizations determined 
to be disqualified supporting organizations, may be qualifying 
distributions under section 4942 but the grantor must nevertheless 
exercise expenditure responsibility to avoid excise taxes under 
section 4945 on such grants.
---------------------------------------------------------------------------

    Longstanding regulations under both sections 4942 and 4945 provide 
that a foundation will ordinarily be considered to have made a ``good 
faith determination'' if the determination is based on an affidavit of 
the grantee or on an opinion of counsel of either the grantor or the 
grantee. The affidavit or opinion must set forth sufficient facts 
concerning the operations and support of the grantee for the IRS to 
determine that the grantee would be likely to qualify as a public 
charity or an operating foundation. See Sec. Sec.  53.4942(a)-3(a)(6) 
and 53.4945-5(a)(5). In this preamble, we refer to this rule, which 
gives assurance to

[[Page 57710]]

foundations meeting the rule that their grants to foreign organizations 
will ordinarily be considered to be qualifying distributions and not 
taxable expenditures, as the ``special rule.''
    Revenue Procedure 92-94, 1992-2 CB 507, provides further guidance 
by providing a ``simplified procedure'' that foundations may follow, 
both for making ``good faith determinations'' under Sec. Sec.  
53.4942(a)-3(a)(6) and 53.4945-5(a)(5), and for making similar 
``reasonable judgments'' under Sec.  53.4945-6(c)(2)(ii) that a foreign 
organization is described in section 501(c)(3) (or in section 
4947(a)(1), and thus treated under section 4947(a)(1) as described in 
section 501(c)(3) for purposes of chapter 42 of the Code). Under the 
revenue procedure, if the grantor's determination that a foreign 
organization is described in section 501(c)(3) or section 4947(a)(1) of 
the Code and is either a public charity or an operating foundation is 
based on a ``currently qualified'' affidavit prepared by the grantee 
containing the information specified in the revenue procedure, then the 
foundation will be deemed to have made a good faith determination (for 
purposes of Sec. Sec.  53.4942(a)-3(a)(6) and 53.4945-5(a)(5)) and a 
reasonable judgment (for purposes of Sec.  53.4945-6(c)(2)(ii)). If a 
foundation possesses information that suggests the affidavit may not be 
reliable, it must consider that information in determining whether the 
affidavit is currently qualified.
    Revenue Procedure 92-94 provides that an affidavit will be 
considered currently qualified if: (1) The facts it contains reflect 
the grantee organization's latest complete accounting year (or the 
affidavit is updated to reflect the grantee organization's current 
data) and (2) the relevant substantive requirements of sections 
501(c)(3) and 4947(a)(1) and sections 509(a)(1), (2), or (3) or section 
4942(j)(3) remain unchanged. If a grantee's status under the relevant 
Code sections does not depend on financial support, which can change 
from year to year, an affidavit need be updated only by asking the 
grantee to amend the description of any facts in the original affidavit 
that have changed. If the facts have not changed, an attested statement 
by the grantee to that effect is enough to update an affidavit. 
However, if a grantee's status as a public charity or operating 
foundation depends on financial support, the affidavit must be updated 
at least every other year by asking the grantee to provide an attested 
statement containing enough financial data to establish that it 
continues to meet the requirements of the applicable Code section.
    On September 24, 2012, the Department of the Treasury (Treasury 
Department) and the IRS published a notice of proposed rulemaking (REG-
134974-12) in the Federal Register (77 FR 58796) that contained 
proposed regulations regarding the standards for making a good faith 
determination that a foreign organization is a qualifying public 
charity, so that grants made to the foreign organization may be 
qualifying distributions and not taxable expenditures. The proposed 
regulations would have modified the special rule in Sec. Sec.  
53.4942(a)-3(a)(6) and 53.4945-5(a)(5) by generally expanding the class 
of advisors upon whose advice foundations may ordinarily rely in making 
good faith determinations beyond the attorneys for the grantor and 
grantee to ``qualified tax practitioners'' (including attorneys, CPAs, 
and enrolled agents subject to the requirements of Circular 230). In 
addition, the proposed regulations would have clarified that a 
determination based on written advice is ordinarily considered made in 
good faith if the foundation's reliance on the written advice meets the 
requirements of Sec.  1.6664-4(c)(1), which are the standards for 
reasonable reliance in good faith on professional tax advice for 
penalty relief purposes. The proposed regulations also would have 
updated the regulations to reflect legislative changes regarding 
qualifying public charities.
    The proposed revisions to the regulations were intended to 
facilitate grantmaking by foundations to foreign organizations by 
making it easier and less costly for foundations to obtain written 
advice from qualified tax practitioners to assure that a grant will 
ordinarily be considered a qualifying distribution (and not a taxable 
expenditure). The preamble to the proposed regulations explained that 
expanding the class of practitioners on whose written advice a 
foundation may base a good faith determination was expected to decrease 
the cost of seeking professional advice regarding these determinations, 
enabling foundations to engage in international philanthropy in a more 
cost-effective manner. At the same time, expressly allowing reliance 
for purposes of the special rule on a broader spectrum of professional 
tax advisors was expected to encourage more foundations to obtain 
written tax advice, thus promoting the quality of the determinations 
being made. To facilitate this, foundations were permitted to rely on 
the provisions of the proposed regulations for grants made on or after 
September 24, 2012.
    The preamble to the proposed regulations specifically requested 
comments on three issues. First, comments were requested on whether a 
time limit for reliance on an affidavit or written advice would be 
appropriate, and if so, the proper length of such a time limit. Second, 
comments were sought on whether Rev. Proc. 92-94 should be modified to 
take into account changes to the public support test regulations for 
public charity qualification that were finalized in 2011 (TD 9549; 76 
FR 55745). Third, although the proposed regulations did not change the 
ability of foundations to rely on grantee affidavits for purposes of 
the special rule, the Treasury Department and the IRS notified the 
public that they were considering whether it would be appropriate to 
remove reliance on affidavits for purposes of the special rule, or to 
restrict it (for example, by permitting use of affidavits only for 
grants below a certain dollar amount or by requiring supporting 
information), and requested comments.
    No public hearing was requested or held; however, 11 comments from 
the public were received. All comments are available at 
www.regulations.gov or upon request. After consideration of the 
comments, the proposed regulations are adopted as amended by this 
Treasury decision.

Summary of Comments and Explanation of Provisions

    Commenters were generally supportive of the proposed regulations, 
with several expressing their hope or expectation that the proposed 
regulations would reduce barriers to, and streamline the process of, 
international grantmaking. Commenters noted that expanding the class of 
professionals upon whose written advice a foundation may base its good 
faith determination would reduce the costs of making equivalency 
determinations by enabling the sector to take advantage of economies of 
scale to increase the quality and efficiency of good faith 
determinations regarding foreign grantees. The majority of comments 
focused primarily on the three issues for which comments specifically 
were requested: (1) The circumstances under which it would be 
appropriate for foundations to rely on grantee affidavits in making 
equivalency determinations, (2) the permitted reliance period for an 
affidavit or advisor's written advice, and (3) modification of Rev. 
Proc. 92-94.
    The final regulations balance two important considerations: (1) 
Removing barriers to international grantmaking by foundations (as well 
as by entities

[[Page 57711]]

treated like foundations for these purposes) and (2) ensuring that 
foundations' good faith determinations are informed by a sufficient 
understanding of the applicable law, are based on all relevant factual 
information, and are likely to be correct. The Treasury Department and 
IRS take note that, according to publicly available data, foundations 
(acting in reliance on the proposed regulations, as permitted) now may 
obtain written advice of a qualified tax practitioner for purposes of 
making a good faith determination at a substantially lower cost than 
was previously available, in part due to economies of scale experienced 
by organizations employing qualified tax practitioners specializing in 
providing written advice to several grantors.
    The major areas of comment and the revisions are discussed in this 
preamble.

Expanded Class of Advisors

    In accordance with the proposed regulations and public comments, 
the final regulations modify the special rule to expand the class of 
advisors providing written advice on which foundations may ordinarily 
rely to qualified tax practitioners, including CPAs and enrolled agents 
(as well as attorneys) who are subject to the standards of practice 
before the IRS set out in Circular 230. A qualified tax practitioner 
may include an attorney serving as a foundation's in-house counsel, as 
well as a foundation's outside counsel. Because Circular 230 requires 
that, to practice before the IRS, an attorney or CPA must be licensed 
in a state, territory, or possession of the U.S., and an enrolled agent 
must be enrolled by the IRS, the final regulations effectively require 
that the advisor be authorized to practice in a state, territory, or 
possession of the U.S. or as an enrolled agent. In addition, like the 
proposed regulations, the final regulations provide that a 
determination based on the written advice of a qualified tax 
practitioner ordinarily will be considered as made in good faith if the 
foundation's reliance meets the requirements of Sec.  1.6664-4(c)(1). 
As noted in the preamble to the proposed regulations, Sec.  1.6664-
4(c)(1) provides that all pertinent facts and circumstances must be 
taken into account in determining whether a taxpayer has reasonably 
relied in good faith on written advice, but a foundation's reliance on 
written advice is not reasonable and in good faith if the foundation 
knows, or reasonably should have known, that a qualified tax 
practitioner lacks knowledge of the relevant aspects of U.S. tax law 
(which, in this context, would include the U.S. tax law of charities). 
Moreover, a foundation may not rely on written advice if it knows, or 
has reason to know, that relevant facts were not disclosed to the 
qualified tax practitioner or that the written advice is based on a 
representation or assumption that the foundation knows, or has reason 
to know, is unlikely to be true.

Reliance on Opinion of Foreign Counsel

    One commenter suggested that the final regulations clarify that 
foundations and qualified tax practitioners may obtain advice from 
foreign counsel on questions of foreign law when making good faith 
determinations. The final regulations, consistent with the proposed 
regulations, provide that, for purposes of the special rule, if a 
foundation's determination is based on the written advice of a 
qualified tax practitioner, the foundation will ordinarily be 
considered to have made a good faith determination. The Treasury 
Department and the IRS are concerned that, standing alone, an opinion 
of foreign counsel, who may or may not have expertise in U.S. tax law, 
may not ordinarily be a sufficient basis for a determination of a 
foreign organization's status. Thus, under the final regulations, 
foundations basing their determination on an opinion of counsel of the 
grantor or grantee will no longer come within the special rule unless 
the counsel is a qualified tax practitioner. However, neither the 
proposed regulations nor the final regulations proscribe the use of 
foreign counsel in otherwise seeking to make a good faith 
determination, including use of foreign counsel in gathering 
information relevant to the determination. The standards of practice 
before the IRS and requirements for written advice address reliance by 
qualified tax practitioners on foreign counsel for questions of foreign 
law. Sections 10.22(b), 10.35(a), and 10.37(b) of Circular 230 
generally permit a practitioner to consult with and rely on other 
experts in appropriate circumstances. It follows, therefore, that a 
foundation may reasonably rely on written advice received from a 
qualified tax practitioner in accordance with Sec.  1.6664-4(c)(1) that 
in turn reasonably relies on advice or assistance from foreign counsel 
as to questions of foreign law or other matters within such counsel's 
expertise.

Reliance on Grantee Affidavits

    The preamble to the proposed regulations requested comments on 
whether a foundation's ability to base a good faith determination on an 
affidavit should be removed, and if not, whether the use of such 
affidavits should be restricted. In the preamble, the Treasury 
Department and the IRS expressed their concern that, for purposes of 
the special rule, grantee affidavits, standing alone, are not always as 
reliable a basis for making good faith determinations as written advice 
from qualified tax practitioners and asked for comments. Several 
comments were received in response to this request.
    Most commenters that addressed the issue recommended that 
foundations continue to be permitted to base a good faith determination 
on an affidavit of a foreign organization attested to by a principal 
officer of the foreign organization. These commenters noted that 
grantee affidavits are often a reliable means of collecting facts about 
the organization and operations of the foreign grantee, even if, as one 
commenter noted, on matters of U.S. tax law a grantmaker cannot 
ordinarily rely on a foreign organization's conclusion that the grantee 
has a particular tax status. Several commenters noted that the current 
procedures outlined in Rev. Proc. 92-94 require that affidavits include 
significant detail and specific accompanying information, which, in 
their experience, ensures that a foundation has a clear picture of the 
organization and operation of the foreign organization before making a 
determination based on the affidavit. However, these commenters also 
noted that, in their experience, it was often necessary for someone at 
the foundation (presumably with knowledge of U.S. tax law) to work 
closely with a foreign organization to ensure that the principal 
officer attesting to the affidavit understands exactly what is called 
for and that the affidavit is appropriately completed.
    Many commenters stated that foundations should not be required to 
obtain professional tax advice and requested assurance that a 
foundation could continue to make good faith determinations without 
having to engage counsel or another qualified tax practitioner, 
especially if the foundation or the grant is small. One commenter noted 
that engaging a qualified tax practitioner may impose substantial costs 
on a foundation, particularly if the foundation makes repeated grants 
to the same organization. Another commenter stated that it would be 
excessive for the regulations to suggest that a grantmaker must 
ordinarily use professional advisors in order for a determination to be 
in good faith, but noted that if a grantmaker goes without professional 
advice, it is fair for the IRS to review its conclusions and its 
process for reaching

[[Page 57712]]

those conclusions to see if the grantmaker has complied with the good 
faith determination standard in the regulations.
    One commenter favored eliminating the grantee affidavit as a free-
standing means for making equivalency determinations. In the 
commenter's experience, the staff and volunteers of most, but not all, 
foreign grantees have neither the training nor the experience with U.S. 
tax law needed to make determinations called for by Rev. Proc. 92-94. 
Therefore, the commenter believed it is important to eliminate reliance 
on the grantee affidavit.
    The Treasury Department and the IRS agree that a grantee affidavit 
may be a reliable basis for forming a good faith determination in 
appropriate situations, for example, if the grantee has sufficient 
knowledge of U.S. tax law to ensure that the affidavit is appropriately 
completed and contains all relevant information. However, many foreign 
organizations may lack knowledge of U.S. tax law of charities, as noted 
by one commenter. In addition, although some foundations have knowledge 
of U.S. tax law sufficient to assess the reliability of grantee 
affidavits, to assist foreign grantees in completing the affidavits 
properly (if necessary), and to appropriately apply the law to the 
facts stated in the affidavit, the Treasury Department and IRS do not 
believe that such knowledge of U.S. tax law is universal. Accordingly, 
the Treasury Department and IRS do not think it is appropriate to 
ordinarily consider a good faith determination to have been made solely 
because it is based on a grantee affidavit. Therefore, under the final 
regulations, a grantee affidavit is not included in the special rule as 
a basis upon which a determination ordinarily will be considered a good 
faith determination.
    The final regulations do not, however, foreclose the use of grantee 
affidavits as a source of information in otherwise making a good faith 
determination. Nor does elimination of the affidavit for purposes of 
the special rule mean that the foundation must obtain written advice 
from a qualified tax practitioner in order to make a good faith 
determination. For example, a foundation manager with understanding of 
U.S. charity tax law may under the general rule make a good faith 
determination that a foreign grantee is a qualifying public charity 
based on the information in an affidavit supplied by the grantee. 
Furthermore, foundation managers or their in-house counsel may 
themselves be qualified tax practitioners, whose written advice may be 
reasonably relied upon for determinations to come within the special 
rule.
    One commenter suggested that to ensure that affidavits of foreign 
organizations provide a reliable basis for making a good faith 
determination, the IRS should further clarify what supporting 
documentation must be provided by a foreign organization and when 
private foundations may in good faith rely on the responses of foreign 
organizations. This commenter recommended that the IRS amplify Rev. 
Proc. 92-94 to state explicitly when the response of the foreign 
organization is sufficient and when additional supporting documentation 
(for example, a copy of the relevant law) should be requested from the 
organization. The Treasury Department and the IRS have concluded, 
however, that due to the many possible factual differences in foreign 
organizations' structures, governance, operations, financial support, 
and relevant local laws and practices, it would be difficult to provide 
specific guidance governing affidavits and supporting documentation in 
various situations.
    Some commenters raised concerns that removing reliance on grantee 
affidavits for purposes of the special rule would increase costs for 
foundations and inhibit international grantmaking, particularly for 
those grantors making many small grants to foreign organizations. 
However, commenters generally agreed with the Treasury Department and 
IRS that the changes proposed in the regulations could lower the cost 
of obtaining professional advice on equivalency determinations by 
expanding the class of advisors who may provide written advice to 
foundation managers. Indeed, based on publicly available information, 
it appears that foundations relying on the proposed rules (as 
permitted) are now able to obtain professional advice from qualified 
tax practitioners to come within the special rule at a significantly 
reduced cost. Furthermore, under the final regulations, grantee 
affidavits remain a cost-effective way of obtaining information 
relevant to making good faith determinations and foundations may 
continue to rely on them when making determinations to the extent 
reliance is reasonable and appropriate under the facts and 
circumstances. Accordingly, the Treasury Department and IRS believe 
that the final regulations achieve the balance of facilitating 
international grantmaking while still ensuring that equivalency 
determinations are appropriately made.
    To mitigate the effects of elimination of reliance on grantee 
affidavits for purposes of the special rule, the final regulations 
provide a 90-day transition period similar to that set forth in Sec.  
53.4945-5(f)(2) (dealing with the implementation of the expenditure 
responsibility rules). During this 90-day period, foundations may 
distribute grants in accordance with the former regulations regarding 
the use of grantee affidavits and opinions of counsel of the grantor or 
grantee. In addition, under the final regulations, if a grant is 
distributed pursuant to a written commitment made prior to the 
applicability date of the final regulations and the grantor made a 
determination in good faith based on the prior regulations, the 
distribution is treated as compliant as long as the grant is paid out 
to the grantee within five years.

Period for Reliance on Written Advice

    The preamble to the proposed regulations requested comments on 
whether a time limit for reliance on written advice is appropriate, and 
if so, suggestions for the length of time that should be considered 
reasonable. Most commenters responded affirmatively to this request and 
favored guidance setting forth a definite period for reliance on 
written advice, with most suggesting a period of generally two years 
(starting from the date of the written advice or the time of the 
factual information on which the written advice is based).
    More specifically, commenters recommended that foundations be able 
to rely on written advice that a foreign organization meets a public 
support test under Sec.  1.170A-9(f)(4)(vii)(B) or Sec.  1.509(a)-
3(c)(1)(i) for periods similar to those in the rules applicable to 
publicly supported organizations that have been recognized by the IRS 
as exempt under section 501(c)(3) and described in section 
170(b)(1)(A)(vi) or 509(a)(2).\3\ For example, one commenter noted that 
for section 170(b)(1)(A)(vi) and section 509(a)(2) organizations, if an 
organization meets the public support test for a five-year test period, 
then for most purposes, including for purposes of sections 4942 and 
4945, the organization is treated as publicly supported for the two tax 
years immediately following the end of the five-year support test 
period. See Sec.  1.170A-9(f)(4)(vii)(B) and Sec.  1.509(a)-3(c)(1)(i). 
Thus, if an organization meets a public support test for a five-year 
test period ending in 2014, the organization

[[Page 57713]]

is also considered publicly supported in 2015 and (for most purposes) 
2016.
---------------------------------------------------------------------------

    \3\ These rules provide that a publicly supported organization 
that fails to meet the applicable public support test for two 
consecutive 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.
---------------------------------------------------------------------------

    Commenters also noted that Rev. Proc. 92-94, section 4.05, provides 
a general two-year period for reliance on an affidavit with regard to a 
foreign grantee's public support status, such that it is ordinarily 
necessary to obtain a full update of financial information to determine 
public support under sections 170(b)(1)(A)(vi) and 509(a)(2) only every 
other year. Citing these provisions, some commenters requested that the 
final regulations permit reliance for two tax years after the end of 
the foreign organization's last tax year of financial information used 
to determine the organization's public support. Thus, for example, 
commenters suggested that a 2012 equivalency determination based on 
financial information from 2007-2011 should be sufficient to 
demonstrate that the organization would be considered a public charity 
for both 2012 and 2013, resulting in a period of reliance of up to two 
years, depending on when in 2012 the determination was made. One 
commenter suggested that reliance should extend only until the 15th day 
of the fifth month after the end of the first year following the test 
period--in the example above, until May 15, 2013--and that a qualified 
tax practitioner should have to review the foreign grantee's sources of 
financial support for 2012 before issuing advice that the organization 
can be treated as publicly supported for the remainder of 2013.
    For other qualifying public charities, which do not have a public 
support requirement, such as schools or hospitals, one commenter 
requested a reliance period of five years, with a requirement to get a 
certificate after three years that the relevant law and facts have not 
changed in any material respect. Another commenter suggested that a 
foundation be able to rely on advice if the information (other than 
that for the public support requirement) is current in the present or 
immediately preceding accounting period of the grantee.
    The Treasury Department and the IRS agree with commenters that 
providing a specific timeframe for reliance on written advice for 
purposes of the special rule will provide clarity for foundations 
seeking to meet the requirements of the rule and will promote 
determinations that are consistently based on current information. 
Therefore, the final regulations provide that, for purposes of the 
special rule, written advice of a qualified tax practitioner serving as 
the basis for a good faith determination must be ``current.'' Written 
advice will be considered current if, as of the date of the 
distribution, the relevant law on which the advice was based has not 
changed since the date of the written advice and the factual 
information on which the advice was based is from the organization's 
current or prior year. However, consistent with rules for 
determinations of public support over a five-year test period for U.S. 
public charities, written advice that an organization satisfied the 
public support requirements under section 170(b)(1)(A)(vi) or section 
509(a)(2) based on support over a test period of five years will be 
treated as current for the two years of the grantee immediately 
following the end of the five-year test period. For purposes of these 
rules, an organization's year refers to its taxable year for U.S. tax 
purposes, or its annual accounting period if it does not have a U.S. 
taxable year. Additional guidance and examples illustrating the 
application of these rules may be provided in the update to Rev. Proc. 
92-94, discussed further in the next section of this preamble.
    It should be noted that the rules regarding when written advice 
will be considered current apply only for purposes of the special rule. 
Although this standard reflects a belief that it will usually be 
reasonable to rely on written advice of a qualified tax practitioner if 
the advice and underlying facts are no more than two years old 
(provided the foundation does not know or have reason to know that such 
information is no longer accurate), it is possible that written advice 
that is not current for purposes of the special rule may, under some 
facts and circumstances, reasonably serve as the basis for a good faith 
determination under the general rule. The age of the facts underlying 
the written advice would be a consideration in determining whether a 
good faith determination has been made.
    Qualified tax practitioners must, of course, satisfy all 
requirements for written advice under Circular 230 as of the date of 
issuance of the written advice (including requirements regarding the 
factual basis for the advice). The rules regarding when written advice 
will be considered current for purposes of making distributions to 
grantees do not alter the Circular 230 standards applicable to 
qualified tax practitioners, which provide that the practitioner must 
base the written advice on reasonable factual assumptions and 
reasonably consider all relevant facts and circumstances that the 
practitioner knows or reasonably should know. To avoid any implication 
that the reliance period under the special rule would permit written 
advice to be based on outdated factual information, the final 
regulation has been revised to clarify that the written advice must 
contain sufficient facts to permit the IRS to determine that the 
grantee would be likely to qualify as a public charity at the time the 
advice is written.

Update of Rev. Proc. 92-94

    The preamble to the proposed regulations also requested comments on 
whether Rev. Proc. 92-94 should be modified to take into account 
changes in the public support test and whether additional guidelines 
regarding appropriate timeframes for gathering information should be 
provided. Most commenters recommended updating Rev. Proc. 92-94 and 
noted that it is frequently used by qualified tax practitioners for 
gathering factual information on which to base their written advice. 
Commenters also recommended that an updated revenue procedure address 
several key issues relating to foreign organizations, including foreign 
school compliance with Rev. Proc. 75-50, 1975-2 CB 587, the nature of 
support from foreign governments, and foreign hospital compliance with 
section 501(r) (subsequently addressed at Sec.  1.501(r)-1(b)(17)).
    The IRS intends to publish an updated revenue procedure, revised to 
reflect the changes implemented in these regulations as well as changes 
to the public support tests for section 170(b)(1)(A)(vi) and 509(a)(2) 
organizations set forth in final regulations implementing the redesign 
of Form 990, published in the Federal Register (TD 9549; 76 FR 55746) 
on September 8, 2011. The Treasury Department and the IRS will consider 
the issues raised by commenters in developing the updated revenue 
procedure.

Reliance on Written Advice Shared by Another Foundation

    One commenter asked for confirmation that a foundation could share 
the written advice of its in-house counsel or other qualified tax 
practitioner with other foundations, and that the other foundations 
could make their determinations based on the shared advice, without 
incurring excise taxes.
    Written advice relating to the grantee's status for purposes of an 
equivalency determination is based on the facts and circumstances of 
the grantee, and not on the facts and circumstances of the grantor 
foundation that received the advice. Therefore, it is possible that the 
conclusions reached in

[[Page 57714]]

the written advice one foundation received from a qualified tax 
practitioner could reasonably be used by another foundation to make a 
good faith determination about the same grantee. This may be the case, 
for example, if the foundation with whom the written advice is shared 
knows the qualified tax practitioner well and is familiar with the due 
diligence practices of the foundation that provided the facts to the 
qualified tax practitioner and received the written advice. However, 
when written advice obtained by one foundation is later shared with a 
second foundation (or shared even further with other foundations), the 
foundation seeking to base its good faith determination on the written 
advice may have no knowledge of the qualified tax practitioner that 
gave the advice or whether all material facts were disclosed to the 
practitioner. Although reliance on shared advice of a trusted tax 
practitioner that is based on all the material facts may be economical, 
and in some cases may be reasonable and appropriate, the Treasury 
Department and the IRS are concerned that, in other cases, the 
foundation receiving the advice may not be in a position to 
appropriately evaluate the reliability of the written advice that was 
shared. Thus, the final regulations do not prohibit a foundation from 
using written advice shared with it by another foundation in making a 
good faith determination if it is reasonable to do so under all the 
facts and circumstances (including the age of the facts supporting the 
written advice). However, the final regulations clarify that for a 
foundation seeking the benefit of the special rule, the written advice 
a foundation relies on in making its determination must be received 
from the qualified tax practitioner (rather than from another 
foundation).

Equivalency Determinations by Sponsoring Organizations of Donor Advised 
Funds

    Commenters suggested that the Treasury Department and the IRS 
clarify that sponsoring organizations of donor advised funds can use 
these final regulations to make equivalency determinations for purposes 
of distributions from donor advised funds to foreign organizations. 
Until further guidance is issued, sponsoring organizations of donor 
advised funds may use these regulations as guidance in making 
equivalency determinations (applying the definition of ``disqualified 
supporting organization'' under section 4966(d)(4) in lieu of section 
4942(g)(4)(A)(i) or (ii)).\4\
---------------------------------------------------------------------------

    \4\ This is consistent with the Joint Committee on Taxation, 
Technical Explanation of H.R. 4, the ``Pension Protection Act of 
2006'' (JCX-38-06, Aug. 3, 2006) at p. 349, which provides:
    For purposes of the requirement that a distribution be ``to'' an 
organization described in section 170(b)(1)(A), in general, it is 
intended that rules similar to the rules of Treasury regulation 
Sec.  53.4945-5(a)(5) apply. Under such regulations, for purposes of 
determining whether a grant by a private foundation is ``to'' an 
organization described in section 509(a)(1), (2), or (3) and so not 
a taxable expenditure under section 4945, a foreign organization 
that otherwise is not a section 509(a)(1), (2), or (3) organization 
is considered as such if the private foundation makes a good faith 
determination that the grantee is such an organization. Similarly, 
under the provision, if a sponsoring organization makes a good faith 
determination (under standards similar to those currently applicable 
for private foundations) that a distributee organization is an 
organization described in section 170(b)(1)(A) (other than a 
disqualified supporting organization), then a distribution to such 
organization is not considered a taxable distribution.
---------------------------------------------------------------------------

Reliance by Public Charities

    One commenter proposed that the final regulations also allow public 
charities to make equivalency determinations to avoid the requirements 
imposed on them by Rev. Rul. 68-489, 1968-2 CB 210, for grants to 
organizations not exempt under section 501(c)(3). That ruling permits a 
section 501(c)(3) organization to distribute funds to organizations not 
exempt under section 501(c)(3) if the grantor organization ensures use 
of the funds for section 501(c)(3) purposes by limiting distributions 
to specific projects in furtherance of its own exempt purposes, retains 
control and discretion as to the use of the funds, and maintains 
records establishing that the funds were used for section 501(c)(3) 
purposes. The commenter's proposal is outside the scope of this 
regulations project, but it may be considered in future guidance.

Equivalency Determinations for Domestic Grantees and Foreign Government 
Grantees

    One commenter requested that the equivalency determination 
procedures be made expressly applicable to grantees in the U.S. as well 
as foreign grantees if the domestic grantee is not required to obtain a 
determination from the IRS or the determination is pending with the 
IRS. Another commenter requested clarification that a foundation could 
use the same procedures to determine the status of grantees that are 
foreign governments, agencies or instrumentalities of foreign 
governments, or international organizations (which are treated as 
section 509(a)(1) organizations under Sec.  53.4945-5(a)(4)(iii), even 
if they are not described in section 501(c)(3), so long as the grant is 
made exclusively for charitable purposes). Both of these suggestions 
are beyond the scope of this regulations project but may be considered 
in future guidance.

Parallel Changes to Similar Regulations

    Commenters suggested that the Treasury Department and the IRS make 
corresponding changes to other regulations that provide for 
determinations similar to equivalency determinations. Section 53.4945-
6(c)(2) requires generally that a grant made to an organization not 
described in section 501(c)(3) be maintained in a separate charitable 
fund, unless made to a foreign organization that in the reasonable 
judgment of a foundation manager is described in section 501(c)(3) 
(other than section 509(a)(4)). Section 1.1441-9 sets forth exemptions 
from withholding of tax on exempt income of foreign tax-exempt 
organizations, and allows a withholding agent to accept an opinion from 
a U.S. counsel concluding that a foreign organization is described in 
section 501(c)(3) and is not a private foundation, supported by an 
affidavit of the organization. For more than 20 years, under Rev. Proc. 
92-94, a foundation has been able to make the reasonable judgment 
required by Sec.  53.4945-6(c)(2) by following the same procedure for 
making a good faith determination under Sec. Sec.  53.4942(a)-3(a)(6) 
and 53.4945-5(a)(5). The Treasury Department and the IRS anticipate 
that any revised version of that revenue procedure will continue to 
provide that foundations may meet the requirements of Sec.  53.4945-
6(c)(2) by meeting the requirements of Sec. Sec.  53.4942(a)-3(a)(6) 
and 53.4945-5(a)(5). The suggested changes to Sec.  1.1441-9 are beyond 
the scope of this regulations project, but may be considered in future 
guidance.

Amendments to Regulations Conforming to Statutory and Regulatory 
Changes

    The final regulations also include several amendments to conform 
the regulations to prior statutory changes. Specifically, changes were 
made to Sec. Sec.  53.4942(a)-3(a)(2)(i), 53.4942(a)-3(a)(6)(i), 
53.4945-5(a)(1), 53.4945-5(a)(5)(i), 53.4945-5(a)(6)(ii), and 53.4945-
5(b)(5). Section 4945(d)(4) was amended in 1984 to treat exempt 
operating foundations under section 4940(d)(2) as organizations that 
may receive grants for which expenditure responsibility is not 
required. Sections 4942 and 4945(d)(4) were amended in

[[Page 57715]]

2006 to eliminate certain section 509(a)(3) supporting organizations 
from the class of organizations that may receive distributions treated 
as qualifying distributions and that may receive grants for which 
expenditure responsibility is not required. Changes to conform the 
regulations to these statutory changes were made in Sec. Sec.  
53.4942(a)-3(a)(6)(i) and 53.4945-5(a)(5)(i) of the proposed 
regulations, and the changes to the other parts of Sec. Sec.  
53.4942(a)-3 and 53.4945-5 are being made in the final regulations for 
consistency. Similarly, for purposes of consistency with the changes in 
the proposed regulations being implemented in these final regulations, 
Sec.  53.4945-5(b)(5) is being updated to allow written advice from a 
qualified tax practitioner for purposes of this provision, as well as 
grantee affidavits and opinions of counsel of the grantee, which 
continue to be permitted for the purposes of Sec.  53.4945-5(b)(5).

Effective/Applicability Date and Transition Relief

    The final regulations apply generally to distributions made after 
the date of publication of this Treasury decision in the Federal 
Register. However, a good faith determination may continue to be made 
in accordance with the prior regulations for any distribution to a 
foreign organization within 90 days after such date. Also, a foundation 
that has made a written commitment on or before the date of publication 
of these final regulations in the Federal Register may make 
distributions to the foreign organization, in fulfillment of that 
commitment and pursuant to a determination made in good faith in 
accordance with the prior regulations, for up to five years from the 
date of publication.

Availability of IRS Documents

    For copies of recently issued revenue procedures, revenue rulings, 
notices and other guidance published in the Internal Revenue Bulletin, 
please visit the IRS Web site at https://www.irs.gov or contact the 
Superintendent of Documents, U.S. Government Printing Office, 
Washington, DC 20402.

Special Analyses

    Certain IRS regulations, including these, are exempt from the 
requirements of Executive Order 12866, as supplemented and reaffirmed 
by Executive Order 13563. Therefore, a regulatory impact assessment is 
not required. It also has been determined that section 553(b) of the 
Administrative Procedure Act (5 U.S.C. chapter 5) does not apply to 
these regulations.
    It is hereby certified that the collection of information in these 
regulations will not have a significant economic impact on a 
substantial number of small entities. The collection of information is 
in Sec. Sec.  53.4942(a)-3(a)(6) and 53.4945-5(a)(5) and is part of the 
collection of information for Form 990-PF. The equivalency 
determination process set forth in these regulations provides 
foundations with an optional procedure for determining that foreign 
organizations are qualifying public charities. The Treasury Department 
and the IRS believe that the economic impact of the proposed 
regulations on grantors making equivalency determinations has already 
been a reduction in cost of obtaining written tax advice, by expanding 
the class of practitioners whose written advice may form the basis of 
good faith determinations. The final regulations finalize this policy. 
The final regulations continue to permit grantee affidavits to be used 
in making good faith determinations under the general rule (although 
without the same level of reliance as under the special rule) and it is 
expected that affidavits will continue to be used for such purpose with 
small grants. Therefore, a Regulatory Flexibility Analysis under the 
Regulatory Flexibility Act (5 U.S.C. chapter 6) is not required. 
Pursuant to section 7805(f) of the Internal Revenue Code, the notice of 
proposed rulemaking preceding these regulations was submitted to the 
Chief Counsel for Advocacy of the Small Business Administration for 
comment on its impact on small businesses, and no comment was received.

Drafting Information

    The principal author of these regulations is Ward L. Thomas of the 
Office of Associate Chief Counsel (Tax-Exempt and Government Entities). 
However, other personnel from the Treasury Department and the IRS 
participated in their development.

List of Subjects in 26 CFR Part 53

    Excise taxes, Foundations.

Adoption of Amendments to the Regulations

    Accordingly, 26 CFR part 53 is amended as follows:

 PART 53--FOUNDATION AND SIMILAR EXCISE TAXES

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

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


0
Par. 2. Section 53.4942 (a)-3 is amended by:
0
1. Revising paragraphs (a)(2) introductory text, (a)(2)(i), and (a)(6).
0
2. Adding paragraph (f).
    The revisions and addition read as follows:


Sec.  53.4942(a)-3  Qualifying distributions defined.

    (a) * * *
    (2) Definition. The term ``qualifying distribution'' means:
    (i) Any amount (including program related investments, as defined 
in section 4944(c), and reasonable and necessary administrative 
expenses) paid to accomplish one or more purposes described in section 
170(c)(1) or (2)(B), other than any contribution to:
    (a) A private foundation which is not an operating foundation (as 
defined in section 4942(j)(3)), except as provided in paragraph (c) of 
this section;
    (b) An organization controlled (directly or indirectly) by the 
contributing private foundation or one or more disqualified persons 
with respect to such foundation, except as provided in paragraph (c) of 
this section; or
    (c) An organization described in section 4942(g)(4)(A)(i) or (ii), 
if paid by a private foundation that is not an operating foundation;
* * * * *
    (6) Certain foreign organizations--(i) In general. A distribution 
for purposes described in section 170(c)(2)(B) to a foreign 
organization, which has not received a ruling or determination letter 
that it is an organization described in section 509(a)(1), (a)(2), or 
(a)(3) or in section 4942 (j)(3), will be treated as a distribution 
made to an organization described in section 509(a)(1), (a)(2), or 
(a)(3) (other than an organization described in section 
4942(g)(4)(A)(i) or (ii)) or in section 4942(j)(3) if the distributing 
foundation has made a good faith determination that the donee 
organization is an organization described in section 509(a)(1), (a)(2), 
or (a)(3) (other than an organization described in section 
4942(g)(4)(A)(i) or (ii)) or in section 4942(j)(3). A determination 
ordinarily will be considered a good faith determination if the 
determination is based on current written advice received from a 
qualified tax practitioner concluding that the donee is an organization 
described in section 509(a)(1), (a)(2), or (a)(3) (other than an 
organization described in section 4942(g)(4)(A)(i) or (ii)) or in 
section 4942(j)(3), and if the foundation reasonably relied in good 
faith on the written advice in accordance with the requirements of 
Sec.  1.6664-4(c)(1) of this

[[Page 57716]]

chapter. The written advice must set forth sufficient facts concerning 
the operations and support of the donee organization for the Internal 
Revenue Service to determine that the donee organization would be 
likely to qualify as an organization described in section 509(a)(1), 
(a)(2), or (a)(3) (other than an organization described in section 
4942(g)(4)(A)(i) or (ii)) or in section 4942(j)(3) as of the date of 
the written advice. For purposes of this section, except as provided in 
the next sentence, written advice will be considered current if, as of 
the date of distribution, the relevant law on which the advice is based 
has not changed since the date of the written advice and the factual 
information on which the advice is based is from the donee's current or 
prior taxable year (or annual accounting period if the donee does not 
have a taxable year for United States federal tax purposes). Written 
advice that a donee met the public support test under section 
170(b)(1)(A)(vi) or section 509(a)(2) for a test period of five years 
will be treated as current for purposes of distributions to the donee 
during the two taxable years (or, as applicable, annual accounting 
periods) of the donee immediately following the end of the five-year 
test period.
    (ii) Definitions. For purposes of this paragraph (a)(6)--
    (a) The term ``foreign organization'' means any organization that 
is not described in section 170(c)(2)(A).
    (b) The term ``qualified tax practitioner'' means an attorney, a 
certified public accountant, or an enrolled agent, within the meaning 
of 31 CFR 10.2 and 10.3, who is subject to the requirements in 31 CFR 
part 10.
* * * * *
    (f) Effective/applicability date and transition relief. Paragraphs 
(a)(2)(i) and (a)(6) of this section are effective on and apply with 
respect to distributions made after September 25, 2015. However, 
foundations may continue to rely on the provisions of paragraph (a)(6) 
of this section as contained in 26 CFR part 53, revised April 1, 2015, 
with respect to distributions made on or before December 24, 2015 
pursuant to a good faith determination made in accordance with such 
provisions. Also, foundations may continue to rely on the provisions of 
paragraph (a)(6) of this section as contained in 26 CFR part 53, 
revised April 1, 2015, with respect to distributions pursuant to a 
written commitment made on or before September 25, 2015 and pursuant to 
a good faith determination made on or before such date in accordance 
with such provisions if the committed amount is distributed within five 
years of such date.

0
Par. 3. Section 53.4945-5 is amended by:
0
1. Revising paragraphs (a)(1), (a)(5), (a)(6)(ii), and (b)(5).
0
2. Adding paragraph (f)(3).
    The revisions and addition read as follows:


Sec.  53.4945-5  Grants to organizations.

    (a) Grants to nonpublic organizations--(1) In general. Under 
section 4945(d)(4) the term ``taxable expenditure'' includes any amount 
paid or incurred by a private foundation as a grant to an organization 
(other than an organization described in section 509(a)(1), (a)(2), or 
(a)(3) (other than an organization described in section 
4942(g)(4)(A)(i) or (ii)) or in section 4940(d)(2)), unless the private 
foundation exercises expenditure responsibility with respect to such 
grant in accordance with section 4945(h). However, the granting 
foundation does not have to exercise expenditure responsibility with 
respect to amounts granted to organizations described in section 
4945(f).
* * * * *
    (5) Certain foreign organizations--(i) In general. If a private 
foundation makes a grant to a foreign organization, which does not have 
a ruling or determination letter that it is an organization described 
in section 509(a)(1), (a)(2), or (a)(3) or in section 4940(d)(2), the 
grant will nonetheless be treated as a grant made to an organization 
described in section 509(a)(1), (a)(2), or (a)(3) (other than an 
organization described in section 4942(g)(4)(A)(i) or (ii)) or in 
section 4940(d)(2) if the grantor private foundation has made a good 
faith determination that the grantee organization is an organization 
described in section 509(a)(1), (a)(2), or (a)(3) (other than an 
organization described in section 4942(g)(4)(A)(i) or (ii)) or in 
section 4940(d)(2). A determination ordinarily will be considered a 
good faith determination if the determination is based on current 
written advice received from a qualified tax practitioner concluding 
that the grantee is an organization described in section 509(a)(1), 
(a)(2), or (a)(3) (other than an organization described in section 
4942(g)(4)(A)(i) or (ii)) or in section 4940(d)(2), and if the 
foundation reasonably relied in good faith on the written advice in 
accordance with the requirements of Sec.  1.6664-4(c)(1) of this 
chapter. The written advice must set forth sufficient facts concerning 
the operations and support of the grantee organization for the Internal 
Revenue Service to determine that the grantee organization would be 
likely to qualify as an organization described in section 509(a)(1), 
(a)(2), or (a)(3) (other than an organization described in section 
4942(g)(4)(A)(i) or (ii)) or in section 4940(d)(2) as of the date of 
the written advice. For purposes of these rules, except as provided in 
the next sentence, written advice will be considered current if, as of 
the date of the grant payment, the relevant law on which the advice is 
based has not changed since the date of the written advice and the 
factual information on which the advice is based is from the grantee's 
current or prior taxable year (or annual accounting period if the 
grantee does not have a taxable year for United States federal tax 
purposes). Written advice that a grantee met the public support test 
under section 170(b)(1)(A)(vi) or section 509(a)(2) for a test period 
of five years will be treated as current for purposes of grant payments 
to the grantee during the two taxable years (or, as applicable, annual 
accounting periods) of the grantee immediately following the end of the 
five-year test period. See paragraphs (b)(5) and (6) of this section 
for additional rules relating to foreign organizations.
    (ii) Definitions. For purposes of this paragraph (a)(5)--
    (a) The term ``foreign organization'' means any organization that 
is not described in section 170(c)(2)(A).
    (b) The term ``qualified tax practitioner'' means an attorney, a 
certified public accountant, or an enrolled agent, within the meaning 
of 31 CFR 10.2 and 10.3, who is subject to the requirements in 31 CFR 
part 10.
    (6) * * *
    (ii) To governmental agencies. If a private foundation makes a 
grant to an organization described in section 170(c)(1) and such grant 
is earmarked for use by another organization, the granting foundation 
need not exercise expenditure responsibility with respect to such grant 
if the section 170(c)(1) organization satisfies the Commissioner in 
advance that:
    (a) Its grantmaking program is in furtherance of a purpose 
described in section 170(c)(2)(B), and
    (b) The section 170(c)(1) organization exercises ``expenditure 
responsibility'' in a manner that would satisfy this section if it 
applied to such section 170(c)(1) organization. However, with respect 
to such grant, the granting foundation must make the reports required 
by section 4945(h)(3) and paragraph (d) of this section, unless such 
grant is earmarked for use by an organization described in section 
509(a)(1), (a)(2), or (a)(3) (other than an

[[Page 57717]]

organization described in section 4942(g)(4)(A)(i) or (ii)), or in 
section 4940(d)(2).
    (b) * * *
    (5) Certain grants to foreign organizations. With respect to a 
grant to a foreign organization (other than an organization described 
in section 509(a)(1), (a)(2), or (a)(3) (other than an organization 
described in section 4942(g)(4)(A)(i) or (ii)) or in section 4940(d)(2) 
or treated as so described pursuant to paragraph (a)(4) or (5) of this 
section), paragraph (b)(3)(iv) or (b)(4)(iv) of this section shall be 
deemed satisfied if the agreement referred to in paragraph (b)(3) or 
(4) of this section imposes restrictions on the use of the grant 
substantially equivalent to the limitations imposed on a domestic 
private foundation under section 4945(d). Such restrictions may be 
phrased in appropriate terms under foreign law or custom and ordinarily 
will be considered sufficient if an affidavit or opinion of counsel (of 
the grantor or grantee) or written advice of a qualified tax 
practitioner is obtained stating that, under foreign law or custom, the 
agreement imposes restrictions on the use of the grant substantially 
equivalent to the restrictions imposed on a domestic private foundation 
under paragraph (b)(3) or (4) of this section.
* * * * *
    (f) * * *
    (3) Effective/applicability date of paragraphs (a)(1), (a)(5), 
(a)(6)(ii), and (b)(5) and transition relief. Paragraphs (a)(1), 
(a)(5), (a)(6)(ii), and (b)(5) of this section are effective on and 
apply with respect to grants paid after September 25, 2015. However, 
foundations may continue to rely on paragraph (a)(5) as contained in 26 
CFR part 53, revised April 1, 2015, with respect to grants paid on or 
before December 24, 2015 pursuant to a good faith determination made in 
accordance with such provisions. Also, foundations may continue to rely 
on paragraph (a)(5) as contained in 26 CFR part 53, revised April 1, 
2015, with respect to grants paid pursuant to a written commitment made 
on or before September 25, 2015 and pursuant to a good faith 
determination made on or before such date in accordance with such 
provisions if the committed amount is paid out within five years of 
such date.

John M. Dalrymple,
Deputy Commissioner for Services and Enforcement.
    Approved: September 16, 2015.
Mark J. Mazur,
Assistant Secretary of the Treasury (Tax Policy).
[FR Doc. 2015-24346 Filed 9-23-15; 8:45 am]
 BILLING CODE 4830-01-P