Private Foundation Disclosure Rules

DEPARTMENT OF THE TREASURY
Internal Revenue Service 26 CFR Part 301 [REG-121946-98] RIN 1545-
AW96

TITLE: Private Foundation Disclosure Rules

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Notice of proposed rulemaking.

SUMMARY: This document contains proposed amendments to the
regulations relating to the public disclosure requirements described
in section 6104(d) of the Internal Revenue Code. The proposed
regulations implement changes made by the Tax and Trade Relief
Extension Act of 1998, which extended fully to private foundations
the same rules regarding public disclosure of annual information
returns that apply to other tax-exempt organizations. The proposed
regulations provide guidance for private foundations required to
make copies of applications for tax exemption and annual information
returns available for public inspection and to comply with requests
for copies of those documents. Final regulations relating to the
public disclosure requirements applicable to tax-exempt
organizations other than private foundations were issued on April 9,
1999.

DATES: Written or electronic comments and requests for a public
hearing must be received by October 12, 1999.

ADDRESSES: Send submissions to: CC:DOM:CORP:R (REG-121946-98), room
5226, Internal Revenue Service, POB 7604, Ben Franklin Station,
Washington, DC 20044. Submissions may be hand delivered Monday
through Friday between the hours of 8 a.m. and 5 p.m. to:

CC:DOM:CORP:R (REG-121946-98), Courier's Desk, Internal Revenue
Service, 1111 Constitution Avenue, NW., Washington, DC.
Alternatively, taxpayers may submit comments electronically via the
Internet by selecting the "Tax Regs" option on the IRS Home Page, or
by submitting comments directly to the IRS Internet site at
http://www.irs.ustreas.gov/tax regs/reglist.html.

FOR FURTHER INFORMATION CONTACT: Concerning the proposed
regulations, Michael B. Blumenfeld, (202) 622-6070 (not a toll-free
number); concerning submissions of comments, LaNita Van Dyke (202)
622-7190 (not a toll-free number).

SUPPLEMENTARY INFORMATION:

Paperwork Reduction Act

The collections of information contained in this notice of proposed
rulemaking have been submitted to the Office of Management and
Budget for review in accordance with the Paperwork Reduction Act of
1995 (44 U.S.C. 3507(d)). Comments on the collections of information
should be sent to the Office of Management and Budget, Attn: Desk
Officer for the Department of the Treasury, Office of Information
and Regulatory Affairs, Washington, DC 20503, with copies to the
Internal Revenue Service, Attn: IRS Reports Clearance Officer,
OP:FS:FP, Washington, DC 20224. Comments on the collections of
information should be received by October 12, 1999.

Comments are specifically requested concerning:

Whether the proposed collections of information are necessary for
the proper performance of the functions of the IRS, including
whether the information will have practical utility; The accuracy of
the estimated burden associated with the proposed collections of
information (see below);

How the quality, utility, and clarity of the information to be
collected may be enhanced; How the burden of complying with the
proposed collections of information may be minimized, including
through the application of automated collection techniques or other
forms of information technology; and Estimates of capital or start-
up costs and costs of operation, maintenance, and purchase of
services to provide information.

The collections of information in these proposed regulations are in
��301.6104(d)-1, 301.6104(d)-2, and 301.6104(d)-3. This information
is required to enable a private foundation to comply with section
6104(d) of the Internal Revenue Code (Code). Under section 6104(d),
a private foundation is required to make its application for tax
exemption and its annual information returns available for public
inspection. In addition, a private foundation is required to comply
with requests made in person or in writing from individuals who seek
a copy of those documents or, in the alternative, to make its
documents widely available. The requirement that a private
foundation make its application for tax exemption and annual
information returns available for public inspection and comply with
requests made in person or in writing from individuals who seek a
copy of those documents or, in the alternative, make the documents
widely available, will enable the public to obtain information about
the private foundation. Under section 6104(d), a private foundation
is permitted to file an application for relief from the requirement
to provide copies if the private foundation reasonably believes it
is the subject of a harassment campaign.

The information a private foundation provides when filing an
application for a determination that it is subject to a harassment
campaign will be used by the IRS to make such determination. The
collection of information is required to obtain relief from the
requirement to comply with requests for copies if such requests are
part of the harassment campaign. The likely respondents and/or
recordkeepers are private foundations. The burden for recordkeeping
and for reporting is reflected below.

Estimated total annual recordkeeping burden: 32,565 hoU.S.

Estimated average annual burden per recordkeeper: 30 minutes.

Estimated number of recordkeepers: 65,065.

Estimated total annual reporting burden: 31 hoU.S.

Estimated average annual reporting burden per respondent: 27
minutes.

Estimated number of respondents: 68.

Estimated annual frequency of responses: on occasion.

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

This document proposes to amend ��301.6104(d)-1 through
301.6104(d)-5 of the Procedure and Administration Regulations (26
CFR Part 301) relating to the section 6104(d) public disclosure
requirements applicable to tax-exempt organizations (organizations
described in section 501(c) or (d) and exempt from taxation under
section 501(a)). The proposed amendments would remove existing
�301.6104(d)-1 (relating to public inspection of private foundation
annual information returns). The proposed amendments also would
revise ��301.6104(d)-2 through 301.6104(d)-5 to apply the provisions
to all tax-exempt organizations, including private foundations, and
redesignate existing ��301.6104(d)-2 through 301.6104(d)-5 as
��301.6104(d)-0 through 301.6104(d)-3, respectively. This regulation
is not subject to the Unfunded Mandates Reform Act of 1995 because
the regulation is an interpretive regulation.

Description of Current Law Disclosure Requirements Applicable to
Private Foundations Section 6104(d), as in effect prior to the
effective date of the Tax and Trade Relief Extension Act of 1998
(Division J of H.R. 4328, the Omnibus Consolidated and Emergency
Supplemental Appropriations Act, 1999)(Public Law 105-277, 112 Stat
2681) (with respect to private foundations), requires a private
foundation to make its annual information returns available for
public inspection at its principal office during regular business
hours for a period of 180 days after the foundation publishes notice
of the availability of its return. A private foundation must publish
such notice not later than the due date of the return (determined
with regard to any extension of time for filing) in a newspaper
having general circulation in the county in which the principal
office of the foundation is located. Section 6104(e), as in effect
prior to the effective date of the Tax and Trade Relief Extension
Act of 1998 (with respect to private foundations), requires a
private foundation to allow public inspection of the foundation's
application for recognition of exemption at the foundation's
principal office (and certain regional or district offices). Section
6104(e) also requires a private foundation to provide copies of its
exemption application upon request. However, the requirement to
provide copies of an exemption application upon request becomes
effective only after the Secretary of the Treasury issues
regulations applicable to private foundations describing how a
private foundation may be relieved of the obligation to provide
copies in response to requests by making its exemption application
widely available or by obtaining an IRS determination that a
particular request is part of a harassment campaign.

Amendments Made by the Tax and Trade Relief Extension Act of 1998
The Tax and Trade Relief Extension Act of 1998, which was enacted on
October 21, 1998, amended section 6104(e) of the Code to subject the
annual information returns filed by private foundations to the same
rules regarding public disclosure that apply to other tax-exempt
organizations. In addition, the Tax and Trade Relief Extension Act
of 1998 repealed existing section 6104(d), and redesignated section
6104(e), as amended, as new section 6104(d). Section 6104(d), as
amended by the Tax and Trade Relief Extension Act of 1998, requires
each tax-exempt organization, including one that is a private
foundation, to allow public inspection at its principal office (and
at certain regional or district offices) and to comply with
requests, made either in person or in writing, for copies of the
organization's application for recognition of exemption and the
organization's three most recent annual information returns.
Congress appears to have intended that nonexempt charitable trusts
described in section 4947(a)(1) and nonexempt private foundations
comply with the expanded public disclosure requirements, just as
such entities are subject to the information reporting requirements
of section 6033 pursuant to section 6033(d).

See Joint Committee on Taxation, General Explanation of Tax
Legislation Enacted in 1998 (JCS-6- 98), November 24, 1998, at 242,
fn. 102.

The Tax and Trade Relief Extension Act of 1998 amendments apply to
requests made after the later of December 31, 1998, or the 60 day
after the Secretary of the Treasury issues th regulations referred
to in section 6104(d)(4) (relating to when documents are made widely
available and when a particular request is considered part of a
harassment campaign). On April 9, 1999, the IRS published in the
Federal Register (64 FR 17279) final regulations under section
6104(d) applicable to tax-exempt organizations other than private
foundations. Accordingly, section 6104(d), as amended by the Tax and
Trade Relief Extension Act of 1998, became effective with respect to
tax-exempt organizations other than private foundations on June 8,
1999.

Explanation of Provisions

The proposed amendments extend the recently-published final
regulations under section 6104(d) to apply to private foundations.
The proposed amendments also modify those regulations in several
respects. The proposed amendments state that the term annual
information return includes any return that is required to be filed
under section 6033. For a private foundation, such returns include
Form 990-PF and Form 4720. Consistent with the statute, the proposed
amendments provide that, unlike other tax-exempt organizations, a
private foundation is required to disclose to the general public the
names and addresses of its contributors. The proposed amendments
also clarify that, for purposes of section 6104(d), the terms tax-
exempt organization and private foundation include nonexempt private
foundations and nonexempt charitable trusts described in section
4947(a)(1) that are subject to the information reporting
requirements of section 6033. Finally, the proposed amendments
remove existing �301.6104(d)-1 and redesignate existing ��301.6104-2
through 301.6104(d)-5, as ��301.6104(d)-0 through 301.6104(d)-3,
respectively.

Until 60 days after these proposed amendments are published as final
regulations in the Federal Register, private foundations continue to
be subject to section 6104(d) and section 6104(e), as in effect
prior to the Tax and Trade Relief Extension Act of 1998, and
existing �301.6104(d)-1. Thereafter, private foundations will
continue to be subject to the public inspection requirements of
section 6104(d), as in effect prior to the Tax and Trade Relief
Extension Act of 1998, and existing �301.6104(d)-1 with respect to
any annual information return the due date (determined with regard
to any extension of time for filing) for which is prior to the
effective date of the final regulations.

Proposed Effective Date

The amendments made by these regulations are proposed to be
effective 60 days after the date these regulations are published as
final regulations in the Federal Register.

Special Analyses

It has been determined that this notice of proposed rulemaking is
not a significant regulatory action as defined in Executive Order
12866. Therefore, a regulatory assessment is not required. Pursuant
to sections 603(a) and 605(b) of the Regulatory Flexibility Act, it
is certified that the collection of information referenced in this
notice of proposed rulemaking will not have a significant economic
impact on a substantial number of small entities. Although a
substantial number of small entities will be subject to the
collection of information requirements in these regulations, the
requirements will not have a significant economic impact on these
entities. The average time required to maintain and disclose the
information required under these regulations is estimated to be 30
minutes for each private foundation. This estimate is based on the
assumption that, on average, a private foundation will receive one
request per year to inspect or provide copies of its application for
tax exemption and its annual information returns. Approximately 0.1
percent of the private foundations affected by these regulations
will be subject to the reporting requirements contained in the
regulations. It is estimated that annually, approximately 65 private
foundations will make its documents widely available by posting them
on the Internet. In addition, it is estimated that annually,
approximately 3 private foundations will file an application for a
determination that they are the subject of a harassment campaign
such that a waiver of the obligation to provide copies of their
applications for tax exemption and their annual information returns
is in the public interest. The average time required to complete,
assemble and file an application describing a harassment campaign is
expected to be 5 hours. Because applications for a harassment
campaign determination will be filed so infrequently, they will have
no effect on the average time needed to comply with the requirements
in these regulations. In addition, a private foundation is allowed
in these regulations to charge a reasonable fee for providing copies
to requesters. Therefore, it is estimated that it will cost a
private foundation less than $10 per year to comply with these
regulations, which is not a significant economic impact.

Pursuant to section 7805(f) of the Internal Revenue Code, this
notice of proposed rulemaking will be submitted to the Chief Counsel
for Advocacy of the Small Business Administration for comment on its
impact on small business.

Comments and Requests for a Public Hearing

Before these proposed regulations are adopted as final regulations,
consideration will be given to any written comments (a signed
original and eight (8) copies) and electronic comments that are
submitted timely to the IRS. The IRS and the Treasury Department
specifically request comments on the clarity of the proposed
regulations and how they may be made easier to understand. All
comments will be available for public inspection and copying.

A public hearing may be scheduled if requested in writing by a
person that timely submits written or electronic 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 author of these regulations is Michael B. Blumenfeld,
Office of Associate Chief Counsel (Employee Benefits and Exempt
Organizations), IRS. Other personnel from the IRS and Treasury
Department also participated in their development.

List of Subjects in 26 CFR Part 301

Employment taxes, Estate taxes, Excise taxes, Gift taxes, Income
taxes, Penalties, Reporting and recordkeeping requirements.

Proposed Amendments to the Regulations

Accordingly, 26 CFR part 301 is proposed to be amended as follows:

PART 301-PROCEDURE AND ADMINISTRATION Paragraph 1. The authority
citation for part 301 is amended by adding entries in numerical
order to read as follows:

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

Section 301.6104(d)-2 also issued under 26 U.S.C. 6104(d)(3);

Section 301.6104(d)-3 also issued under 26 U.S.C. 6104(d)(3); * * *

�301.6104(d)-1 [Removed]

Par. 2. Section 301.6104(d)-1 is removed.

�301.6104(d)-2 [Redesignated as �301.6104(d)-0]

Par. 3. Section 301.6104(d)-2 is redesignated as �301.6104(d)-0.

Par. 4. Newly designated �301.6104(d)-0 is revised to read as
follows:

�301.6104(d)-0 Table of contents.

This section lists the major captions contained in ��301.6104(d)-1
through 301.6104(d)-3 as follows:

�301.6104(d)-1 Public inspection and distribution of applications
for tax exemption and annual information returns of tax-exempt
organizations.

(a) In general.

(b) Definitions.

(1) Tax-exempt organization.

(2) Private foundation.

(3) Application for tax exemption.

(i) In general.

(ii) No prescribed application form.

(iii) Exceptions.

(iv) Local or subordinate organizations.

(4) Annual information return.

(i) In general.

(ii) Exceptions.

(iii) Returns more than 3 years old.

(iv) Local or subordinate organizations.

(5) Regional or district offices.

(i) In general.

(ii) Site not considered a regional or district office.

(c) Special rules relating to public inspection.

(1) Permissible conditions on public inspection.

(2) Organizations that do not maintain permanent offices.

(d) Special rules relating to copies.

(1) Time and place for providing copies in response to requests made
in person.

(i) In general.

(ii) Unusual circumstances.

(iii) Agents for providing copies.

(2) Request for copies in writing.

(i) In general.

(ii) Time and manner of fulfilling written requests.

(A) In general.

(B) Request for a copy of parts of document.

(C) Agents for providing copies.

(3) Fees for copies.

(i) In general.

(ii) Form of payment.

(A) Request made in person.

(B) Request made in writing.

(iii) Avoidance of unexpected fees.

(iv) Responding to inquiries of fees charged.

(e) Documents to be provided by regional and district offices.

(f) Documents to be provided by local and subordinate organizations.

(1) Applications for tax exemption.

(2) Annual information returns.

(3) Failure to comply.

(g) Failure to comply with public inspection or copying
requirements.

(h) Effective date.

(1) In general.

(2) Private foundation annual information returns. �301.6104(d)-2
Making applications and returns widely available.

(a) In general.

(b) Widely available.

(1) In general.

(2) Internet posting.

(i) In general.

(ii) Transition rule.

(iii) Reliability and accuracy.

(c) Discretion to prescribe other methods for making documents
widely available.

(d) Notice requirement.

(e) Effective date. �301.6104(d)-3 Tax-exempt organization subject
to harassment campaign.

(a) In general.

(b) Harassment.

(c) Special rule for multiple requests from a single individual or
address.

(d) Harassment determination procedure.

(e) Effect of a harassment determination.

(f) Examples.

(g) Effective date. �301.6104(d)-3 [Redesignated as �301.6104(d)-1]
Par. 5. Section 301.6104(d)-3 is redesignated as �301.6104(d)-1.

Par. 6. Newly designated �301.6104(d)-1 is amended as follows:

1. Revise the section heading.

1a. Paragraph (a) is amended as follows:

a. Remove the language ", other than a private foundation (as
defined in paragraph (b)(2) of this section)," from the first
sentence.

b. Remove the language ", other than a private foundation," from the
second sentence.

c. Remove the language "��301.6104(d)-4 and 301.6104(d)-5" from the
fourth sentence and add "��301.6104(d)-2 and 301.6104(d)-3" in its
place.

2. In paragraph (b) introductory text, remove the language
"��301.6104(d)-4 and 301.6104(d)-5" and add "��301.6104(d)-2 and
301.6104(d)-3" in its place.

3. In paragraph (b)(1), add a sentence at the end of the paragraph.

4. In paragraph (b)(2), add the language "or a nonexempt charitable
trust described in section 4947(a)(1) or a nonexempt private
foundation subject to the information reporting requirements of
section 6033 pursuant to section 6033(d)" at the end of the
sentence.

5. In paragraph (b)(3)(iii)(B), remove the word "or" at the end of
the paragraph.

6. Redesignate paragraph (b)(3)(iii)(C) as paragraph (b)(3)(iii)(D)
and add a new paragraph (b)(3)(iii)(C).

7. In paragraph (b)(4)(i), remove the last two sentences and add
three sentences in their place.

8. Paragraph (b)(4)(ii) is amended as follows:

a. Remove the language ", and the return of a private foundation"
from the first sentence.

b. Revise the last sentence.

9. Revise paragraph (h).

The revisions and additions read as follows:

�301.6104(d)-1 Public inspection and distribution of applications
for tax exemption and annual information returns of tax-exempt
organizations.

* * * * *

(b) * * *

(1) * * * The term tax-exempt organization also includes any
nonexempt charitable trust described in section 4947(a)(1) or
nonexempt private foundation that is subject to the reporting
requirements of section 6033 pursuant to section 6033(d).

* * * * *

(3)* * *

(iii) * * *

(C) In the case of a tax-exempt organization other than a private
foundation, the name and address of any contributor to the
organization; or

* * * * *

(4) * * * (i) * * * Returns filed pursuant to section 6033 include
Form 990, Return of Organization Exempt From Income Tax, Form 990-
PF, Return of Private Foundation, or any other version of Form 990
(such as Forms 990-EZ or 990-BL, except Form 990-T) and Form 1065.
Each copy of a return must include all information furnished to the
Internal Revenue Service on the return, as well as all schedules,
attachments and supporting documents. For example, in the case of a
Form 990, the copy must include Schedule A of Form 990 (containing
supplementary information on section 501(c)(3) organizations), and
those parts of the return that show compensation paid to specific
persons (currently, Part V of Form 990 and Parts I and II of
Schedule A of Form 990).

(ii) * * * In the case of a tax-exempt organization other than a
private foundation, the term annual information return does not
include the name and address of any contributor to the organization.

* * * * *

(h) Effective date-(1) In general. For a tax-exempt organization,
other than a private foundation, this section is applicable June 8,
1999. Except as provided in paragraph (h)(2) of this section, for a
private foundation, this section is applicable beginning 60 days
after these regulations are published as final regulations in the
Federal Register.

(2) Private foundation annual information returns. This section
applies to any private foundation return the due date for which
(determined with regard to any extension of time for filing) is
after the applicable date for private foundations specified in
paragraph (h)(1) of this section.

�301.6104(d)-4 [Redesignated as �301.6104(d)-2] Par. 7. Section
301.6104(d)-4 is redesignated as �301.6104(d)-2.

Par. 8. Newly designated �301.6104(d)-2 is amended as follows:

1. In paragraph (a), remove the language "�301.6104(d)-3(a)" from
each place it appears and add "�301.6104(d)-1(a)" in each place,
respectively.

2. Revise paragraph (e).

The revision reads as follows:

�301.6104(d)-2 Making applications and returns widely available.

* * * * *

(e) Effective date. For a tax-exempt organization, other than a
private foundation, this section.16 is applicable June 8, 1999. For
a private foundation, this section is applicable beginning 60 days
after these regulations are published as final regulations in the
Federal Register.

�301.6104(d)-5 [Redesignated as �301.6104(d)-3] Par. 9. Section
301.6104(d)-5 is redesignated as �301.6104(d)-3.

Par. 10. Newly designated �301.6104(d)-3 is amended as follows:

1. In paragraph (a), remove the language "�301.6104(d)-3(a)" and add
"�301.6104(d)-1(a)" in its place.

2. Revise paragraph (g).

The revision reads as follows:.�301.6104(d)-3 Tax-exempt
organization subject to harassment campaign.

* * * * *

(g) Effective date. For a tax-exempt organization, other than a
private foundation, this section is applicable June 8, 1999. For a
private foundation, this section is applicable beginning 60 days
after these regulations are published as final regulations in the
Federal Register.

Robert E. Wenzel
Deputy Commissioner of Internal Revenue

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