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Comments Concerning Temporary and Proposed Regulations
Under Section 4958 of the Internal Revenue Code of 1986
April 10, 2001

Introduction

Section 4958 of the Internal Revenue Code of 1986 ("Code") was enacted on July 30, 1996. In response to a public request for comments in advance of the issuance of proposed regulations, the members of the ABA Tax Section’s Committee on Exempt Organizations submitted comments in March of 1997. Proposed regulations were issued on August 4, 1998, and members of the Committee on Exempt Organizations submitted comments on February 24, 1999 ("Proposed Regulation Comments").

The regulations issued in both temporary and proposed form with respect to section 4958 on January 10, 2001 (the "temporary regulations") provide much needed comprehensive guidance and reflect an obviously careful effort to respond to the numerous public comments that were submitted. In this regard, the temporary regulations did not include the provisions of section 53.4945-5 of the regulations issued in proposed form in 1998, reserving for further study the subject of applying taxes under section 4958 to certain types of revenue sharing transactions that violate section 501(c)(3)’s prohibition on private inurement. In general, the temporary regulations provide administrable and understandable rules that are consistent with the statute and its legislative history. In addition, the preamble to the temporary regulations provides additional helpful clarification of the provisions of the temporary regulations. However, as set forth in the detailed comments below, we believe that certain provisions should be reconsidered and that others could benefit from additional clarification.

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