The IRS recently released Rev. Proc. 2009-32, which provides reliance criteria for private foundations and sponsoring organizations that maintain donor advised funds in determining whether a potential grantee is an organization described in Code sections 509(a)(1), (2) or (3), for purposes of the excise taxes imposed on grants to certain supporting organizations under sections 4942, 4945, and 4966. In determining whether a public charity is classified under 509(a)(1), (2), or (3) of the Code, a private foundation or a sponsoring organization that maintains a donor advised fund, acting in good faith, may rely on either:
(1) The grantee’s current IRS letter recognizing the grantee as exempt from federal income tax and indicating the grantee’s public charity classification under § 509(a)(1), (2), or (3); or
(2) Information from the IRS Business Master File (BMF). A grantor may download the BMF directly from the IRS website and store the relevant information in hard copy or electronically. A grantor may also obtain the BMF information from a third party, so long as the following requirements are met:
(i) the third party provides a report to the grantor that includes: (A) the grantee’s name, Employer Identification Number, and public charity classification under § 509(a)(1), (2), or (3); (B) a statement that the information is from the most current update of the BMF and the BMF revision date; and (C) the date and time the information was provided to the grantor; and
(ii) the report is in a form that the grantor can store in hard copy or electronically. The Rev. Proc. supersedes the portions of section 3.01 of Notice 2006-109 that relate to reliance for purposes of determining whether a grantee is a public charity under section 509(a)(1), (2) or (3).
All other parts of Notice 2006-109 remain unchanged and in effect, including the separate requirements for grantors to determine whether a grantee is a Type I, Type II, or functionally integrated Type III supporting organization.