IRS Provides Guidance on Reliance Standards for Equivalency Determinations

The IRS released Revenue Procedure 2017-53 providing guidance to private foundations reflecting both the 2015 final regulations on reliance standards for making good faith determinations and the 2011 final regulations changing the public support calculations. The revenue procedure, which modifies and supersedes Revenue Procedure 92-94, provides guidelines qualified tax practitioners may use for preparing written advice a private foundation ordinarily may rely on in making a good faith determination that a foreign grantee is the equivalent of a US qualified public charity.

Private foundations often wish to make an equivalency determination to demonstrate grants to foreign grantees are qualifying distributions that count toward the minimum charitable distribution requirement under section 4942 and are not taxable expenditures under section 4945. In 2015, Treasury and the Service issued final regulations regarding the requirements for equivalency determinations and indicated they intended to update Revenue Procedure 92-94 to reflect changes made by those regulations, as well as changes in the public support test calculations made final in regulations in 2011. The 2015 regulations provide that, in making a determination, a private foundation ordinarily may rely on current written advice from a qualified tax practitioner concluding that the grantee is a qualifying public charity, provided the written advice contains sufficient facts about the foreign grantee's operations and support for the IRS to determine that the grantee would likely be a qualifying public charity. The revenue procedure provides guidelines tax practitioners may use for preparing written advice that will satisfy this standard. The revenue procedure also provides guidance regarding both the treatment of foreign government support in calculating public support and the ways foreign schools can show racial nondiscrimination for purposes of an equivalency determination.

The revenue procedure also provides that this guidance may be used when providing written advice to sponsoring organizations of donor advised funds making equivalency determinations for purposes of Section 4966.

Tax-Exempt Organizations Affected by Hurricanes Harvey and Irma Granted Tax Relief

The IRS has granted relief to taxpayers in parts of Texas, Florida, Puerto Rico, and the US Virgin Islands, including tax-exempt organizations. Organizations in the disaster areas that have a filing due date after the hurricane hit and before January 31, 2018 may get extra time to file returns. The start date of the relief varies by area:

  • Texas: Aug. 23, 2017
  • Florida: Sept. 4, 2017
  • Puerto Rico and the US Virgin Islands: Sept. 5, 2017

The IRS also announced special relief designed to support leave-based donation programs to aid victims of Hurricanes Irma. Similar relief was granted to aid victims of Hurricane Harvey last month. Under these programs, donated leave will not be included in the income or wages of the employees. Employers will be permitted to deduct the cash payments to charitable organizations providing relief for the victims of the disasters as business expenses.