[Federal Register Volume 83, Number 216 (Wednesday, November 7, 2018)]
[Proposed Rules]
[Pages 55653-55656]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-24285]
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DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 53
[REG-107163-18]
RIN 1545-BO80
Regulations To Prescribe Return and Time for Filing for Payment
of Section 4960, 4966, 4967, and 4968 Taxes and To Update the Abatement
Rules for Section 4966 and 4967 Taxes
AGENCY: Internal Revenue Service (IRS), Treasury.
ACTION: Notice of proposed rulemaking.
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SUMMARY: This document contains proposed regulations specifying which
return to use to pay certain excise taxes and the time for filing the
return. The regulations also implement the statutory addition of two
excise taxes to the first-tier taxes subject to abatement. These
regulations affect applicable tax-exempt
[[Page 55654]]
organizations and their related organizations, applicable educational
institutions, sponsoring organizations that maintain certain donor
advised funds, fund managers of such sponsoring organizations, and
certain donors, donor advisors and persons related to a donor or donor
advisor of a donor advised fund.
DATES: Written or electronic comments and requests for a public hearing
must be received by December 7, 2018.
ADDRESSES: Send submissions to: CC:PA:LPD:PR (REG-107163-18), Room
5203, Internal Revenue Service, P.O. Box 7604, Ben Franklin Station,
Washington, DC 20044. Submissions may be hand-delivered Monday through
Friday between the hours of 8 a.m. and 4 p.m. to CC:PA:LPD:PR (REG-
107163-18), Courier's Desk, Internal Revenue Service, 1111 Constitution
Avenue NW, Washington, DC 20224 or sent electronically via the Federal
eRulemaking Portal at http://www.regulations.gov (indicate IRS REG-
107163-18).
FOR FURTHER INFORMATION CONTACT: Concerning the proposed regulations,
Amber L. MacKenzie at (202) 317-4086 or Ward L. Thomas at (202) 317-
6173; concerning submission of comments and request for hearing, Regina
Johnson at (202) 317-6901 (not toll-free numbers).
SUPPLEMENTARY INFORMATION:
Background
This document contains proposed regulations amending regulations
under section 6011 of the Internal Revenue Code (Code) to specify the
return to accompany payment of excise taxes under sections 4960, 4966,
4967, and 4968; amending regulations under section 6071 to specify the
time for filing that return; and amending regulations under section
4963 that define the first-tier taxes subject to abatement under
section 4962.
These regulations affect applicable tax-exempt organizations
described in section 4960(c)(1) and their related organizations
described in section 4960(c)(4)(B); applicable educational institutions
described in section 4968(b)(1); sponsoring organizations described in
section 4966(d)(1) that maintain donor advised funds described in
section 4966(d)(2); fund managers of such sponsoring organizations
described in sections 4966(d)(3); and donors, donor advisors and
persons related to a donor or donor advisor of a donor advised fund
described in section 4967(d).
These regulations implement section 1231 of the Pension Protection
Act of 2006, Public Law 109-280, 120 Stat. 780, 1094 (``PPA''), as
amended by section 3(h) of the Tax Technical Corrections Act of 2007,
Public Law 110-172, 121 Stat. 2473, 2475, and sections 13602 and 13701
of the Tax Cuts and Jobs Act, Public Law 115-97, 131 Stat. 2054, 2157,
2167 (2017) (``TCJA'').
The PPA added sections 4966 and 4967 to the Code. These sections
impose excise taxes related to certain distributions from donor advised
funds (defined in section 4966(d)(2)) maintained by organizations that
are defined as sponsoring organizations in section 4966(d)(1).
Section 4966(a)(1) imposes a 20 percent excise tax on each
``taxable distribution'' from a donor advised fund, payable by the
sponsoring organization of the donor advised fund. Section 4966(a)(2)
imposes a separate 5 percent excise tax on the agreement of any fund
manager (as defined in section 4966(d)(3)) to the making of the
distribution, knowing that it is a taxable distribution. Section
4966(b)(1) states that if more than one fund manager is liable for the
tax, all such managers are jointly and severally liable with respect to
the taxable distribution. Section 4966(b)(2) provides that the maximum
amount of tax that may be imposed on all fund managers for any one
taxable distribution is $10,000.
Section 4966(c)(1) defines the term ``taxable distribution'' as any
distribution from a donor advised fund: (A) To any natural person; or
(B) to any other person if (i) the distribution is for any purpose
other than one specified in section 170(c)(2)(B), or (ii) the
sponsoring organization does not exercise expenditure responsibility in
accordance with section 4945(h) with respect to such distribution.
Section 4966(c)(2) excepts from the definition of taxable distribution:
(A) Distributions to any organization described in section
170(b)(1)(A), other than a disqualified supporting organization (as
defined in section 4966(d)(4)); (B) distributions to the sponsoring
organization of such donor advised fund; and (C) distributions to any
other donor advised fund.
Section 4967(a)(1) imposes a tax on the advice of a donor, donor
advisor, or related person, described in subsection (d), if a
distribution from a donor advised fund results in such person (or any
other person described in subsection (d)) receiving, directly or
indirectly, a more than incidental benefit (a ``prohibited benefit'').
The tax, which is equal to 125 percent of the amount of the prohibited
benefit, is paid by any person described in subsection (d) who advises
as to a distribution or who receives a prohibited benefit as a result
of the distribution. Section 4967(c)(1) provides that if more than one
person is liable for the tax under section 4967(a)(1), then all such
persons are jointly and severally liable for the tax.
Section 4967(a)(2) imposes a tax on a fund manager (defined in
section 4966(d)(3)) who agrees to the making of a distribution
described in section 4967(a)(1), knowing that it would confer a more
than incidental benefit on a donor, donor advisor, or related person.
Section 4967(a)(2) states that the tax is equal to 10 percent of the
amount of the prohibited benefit. Section 4967(c)(1) provides that if
more than one fund manager is liable for the tax, all such fund
managers are jointly and severally liable. Section 4967(c)(2) provides
that the maximum amount of tax under section 4967(a)(2) on all fund
managers for any one prohibited benefit transaction is $10,000. Section
4967(b) provides that no tax is imposed under section 4967 if a tax has
been imposed with respect to the distribution under section 4958
(taxing excess benefit transactions).
In 2006, the PPA added section 4966 and section 4967 taxes to the
definitions of ``first tier tax'' in section 4963(a) and ``taxable
event'' in section 4963(c). In 2007, section 4962(b) was amended by the
Tax Technical Corrections Act of 2007, Public Law 110-172, sec. 3(h),
121 Stat. 2473, 2475, to add subchapter G of chapter 42 (i.e., section
4966 and section 4967 taxes) to the definition of ``qualified first
tier tax'' for purposes of tax abatement. Thus under the Code, section
4966 and section 4967 taxes are subject to abatement under the
generally applicable rules. Treas. Reg. Sec. 53.4963-1 sets forth
definitions with respect to abatement of taxes.
The TCJA added sections 4960 and 4968 to the Code. Section 4960
imposes an excise tax equal to the product of the rate of tax under
section 11 and the sum of (1) so much of the remuneration paid (other
than any excess parachute payment) by an applicable tax-exempt
organization for the taxable year with respect to employment of any
covered employee in excess of $1,000,000, plus (2) any excess parachute
payment paid by such an organization to any covered employee. Section
4960(c)(4)(A) provides that remuneration of a covered employee by an
applicable tax-exempt organization includes any remuneration paid with
respect to employment of such employee by any related person or
governmental entity. Section 4960(c)(4)(C) provides that when
remuneration from more than one
[[Page 55655]]
employer is taken into account in determining the tax imposed by
subsection (a), each such employer is liable for a pro rata share of
the tax imposed by subsection (a) based on the ratio of the amount of
remuneration paid by such employer with respect to such employee to the
amount of remuneration paid by all such employers to such employee.
Separately, section 4968 imposes an excise tax on each applicable
educational institution based on the net investment income of such
institution (including certain income of related organizations) for the
taxable year.
Section 6011(a) generally provides that when required by
regulations prescribed by the Secretary, any person liable for any tax
imposed by the Code shall make a return or statement according to the
forms and regulations prescribed by the Secretary. Section 6071
generally provides that when not otherwise provided for under the Code,
return filing dates are prescribed by regulation. Treas. Reg.
Sec. Sec. 53.6011-1 and 53.6071-1 require persons subject to certain
enumerated excise taxes under Chapter 42 of the Code to file a Form
4720 to accompany payment of those excise taxes and provide the time
for filing the return. (Form 4720 is denominated ``Return of Certain
Excise Taxes Under Chapters 41 and 42 of the Internal Revenue Code.'')
Sections 4960, 4966, 4967, and 4968 were added to Chapter 42 of the
Code, but are not enumerated in Treas. Reg. Sec. Sec. 53.6011-1 and
53.6071-1.
Explanation of Provisions
1. Section 4962 Abatement
These proposed regulations add section 4966 and section 4967 taxes
to the definitions of ``first tier tax'' and ``taxable event'' in
Treas. Reg. Sec. 53.4963-1. Qualified first tier taxes are subject to
abatement under section 4962.
2. Requirement To File a Form 4720
These proposed regulations amend Treas. Reg. Sec. 53.6011-1(b) to
provide that persons (including governmental entities) that are liable
for section 4960, 4966, 4967, or 4968 excise taxes are required to file
a return on Form 4720.
3. Deadline for Filing a Form 4720
Under Sec. 53.6071-1(i) of these proposed regulations, a person
required to file a Form 4720 to report an excise tax under section
4960, 4966, 4967, or 4968 must file a Form 4720 by the 15th day of the
fifth month after the end of the person's taxable year during which the
excise tax liability was incurred. Thus, for example, an organization
reporting on a calendar-year basis that incurred excise tax during the
calendar year ending December 31, 2018, would be required to file a
Form 4720 and pay the tax due by May 15, 2019.
4. Effective/Applicability Date
These regulations are proposed to apply as of the date of
publication of the final rule in the Federal Register.
Special Analyses
This regulation is not subject to review under section 6(b) of
Executive Order 12866 pursuant to the Memorandum of Agreement (April
11, 2018) between the Department of the Treasury and the Office of
Management and Budget regarding review of tax regulations. It is hereby
certified that the collection of information in these regulations will
not have a significant economic impact on a substantial number of small
entities. This rule merely provides guidance as to the timing and
filing of Form 4720 for persons liable for the specified excise taxes
and who have a statutory filing obligation. Completing the applicable
portion of the Form 4720 imposes little incremental burden in time or
expense as compared to any other filing method. In addition, a person
may already be required to file the Form 4720 under the existing final
regulations in Sec. Sec. 53.6011-1 and 53.6071-1 if it is liable for
another excise tax for which filing of the Form is required. Therefore,
a regulatory flexibility analysis under the Regulatory Flexibility Act
(5 U.S.C. chapter 6) is not required. Pursuant to section 7805(f) of
the Code, this regulation will be submitted to the Chief Counsel for
Advocacy of the Small Business Administration for comment on its impact
on small entities.
Comments and Requests for Public Hearing
Before these proposed regulations are adopted as final regulations,
consideration will be given to any comments that are timely submitted
to the IRS as prescribed in the preamble under the ADDRESSES section.
All comments submitted will be made available at www.regulations.gov or
upon request.
A public hearing will be scheduled if requested in writing by any
person that timely submits written comments. If a public hearing is
scheduled, notice of the date, time, and place for the hearing will be
published in the Federal Register.
Drafting Information
The principal authors of these regulations are Amber L. MacKenzie
and Ward L. Thomas, Office of Associate Chief Counsel (Tax Exempt and
Government Entities). However, other personnel from the IRS and
Treasury Department participated in their development.
List of Subjects in 26 CFR Part 53
Excise taxes, Foundations, Investments, Lobbying, Reporting and
recordkeeping requirements.
Proposed Amendments to the Regulations
Accordingly, 26 CFR part 53 is proposed to be amended as follows:
PART 53--FOUNDATION AND SIMILAR EXCISE TAXES
0
Paragraph 1. The authority citation for part 53 continues to read, in
part, as follows:
Authority: 26 U.S.C. 7805 * * *
Sec. 53.4963-1 [Amended]
0
Par. 2. Section 53.4963-1 is amended as follows:
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1. Paragraph (a) is amended by removing the language ``4958, 4971'' and
adding ``4958, 4966, 4967, 4971'' in its place.
0
2. Paragraph (c) is amended by removing the language ``4958, 4971'' and
adding ``4958, 4966, 4967, 4971'' in its place.
0
Par. 3. Section 53.6011-1 is amended by:
0
1. Revising the first sentence of paragraph (b).
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2. Removing from the third sentence of paragraph (b) the language
``4958(a), or 4965(a),'' and adding ``4958(a), 4960(a), 4965(a),
4966(a), or 4967(a),'' in its place.
The revision reads as follows:
Sec. 53.6011-1 General requirement of return, statement or list.
* * * * *
(b) Every person (including a governmental entity) liable for tax
imposed by sections 4941(a), 4942(a), 4943(a), 4944(a), 4945(a),
4955(a), 4958(a), 4959, 4960(a), 4965(a), 4966(a), 4967(a), or 4968(a),
and every private foundation and every trust described in section
4947(a)(2) which has engaged in an act of self-dealing (as defined in
section 4941(d)) (other than an act giving rise to no tax under section
4941(a)) shall file an annual return on Form 4720 and shall include
therein the information required by such form and
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the instructions issued with respect thereto. * * *
* * * * *
Sec. 53.6071-1 [Amended]
0
Par. 4. Section 53.6071-1 is amended by:
0
1. Redesignating paragraph (i) as paragraph (j).
0
2. Adding new paragraphs (i) and (j)(3).
The additions read as follows:
Sec. 53.6071-1 Time for filing returns.
* * * * *
(i) Taxes under section 4960, 4966, 4967, or 4968. A person
(including a governmental entity) required by Sec. 53.6011-1(b) to
file a return for a tax imposed by section 4960(a), 4966(a), 4967(a),
or 4968(a) in a taxable year must file the Form 4720 on or before the
15th day of the fifth month after the end of the person's taxable year
(or, if the person has not established a taxable year for Federal
income tax purposes, the person's annual accounting period).
(j) * * *
(3) Paragraph (i) of this section applies on and after the date of
publication of the Treasury decision adopting these rules as final
regulations in the Federal Register.
Kirsten Wielobob,
Deputy Commissioner for Services and Enforcement.
[FR Doc. 2018-24285 Filed 11-5-18; 4:15 pm]
BILLING CODE 4830-01-P