Committee News

The Charitable Planning and Organizations Group


This Issue's Table of Contents

RPPT Spring Meeting

The Group is sponsoring a program at the upcoming RPPT meeting on Possibilities and Pitfalls in Planning for Charitable Giving Post-Pension Protection Act of 2006 on Friday April 27. We are very pleased that Cathy Hughes and Eric San Juan will be joining us from Treasury along with David Dietrich and Jarrett Bostwick.

Planning for Joint Fall CLE Meeting with Tax Section

The Group will also hold a planning meeting during the RPPT meeting on Thursday April 26 from 5:15 to 6:15, to plan for the Fall Joint CLE meeting programs and other programs. We expect to do a joint program with the Exempt Organizations Committee of the Tax Section and welcome ideas for topics. We encourage you to contact Carol Kroch at or Mary Lee Turk at with program ideas.

Comments on IRS Notice 2007-21

On April 13, members of the Group submitted comments to the Service. We are all grateful to Christopher Hoyt who was the principal author of the comments. Chris's executive summary below summarizes the comments:


The Task Force concluded that donor advised funds serve the public good and should be encouraged. The sanctions that Congress enacted in 2006 to prevent non-charitable distributions from donor advised funds should provide greater assurance that the resources in these funds will be used for charitable purposes.

The Pension Protection Act of 2006[1] (the "PPA") enacted Code Sections[2] 4966 and 4967 and amended Code Section 4958 to define and regulate donor advised funds administered by sponsoring charitable organizations. That legislation required a study of donor advised funds.

These comments are in response to the Internal Revenue Service's (the "Service") request in Notice 2007-21[3] for "comments on the specific issues identified ... and other issues relevant to the study." With respect to the specific issues that the Service identified in the notice, the Task Force concluded that current law adequately answers most of those questions. The Task Force would not be adverse to a requirement that a sponsoring organization be required to distribute a minimum of 5% of the total value of all assets in all donor advised funds at the organization. It is the view of the Task Force that there should not be a minimum distribution requirement imposed on each donor advised fund.

With respect to the other issues, we would like to alert you to the need to promptly resolve four important legal questions. The administrators of donor advised funds frequently confront these four situations for which there is no clear answer in the legislation or in the technical explanation of the legislation by the Joint Committee on Taxation.[4] With the enactment of severe penalties for certain grants from donor advised funds, the stakes are high and guidance is needed. The Task Force recommends that the following four scenarios be permissible actions that will not trigger the 125% penalty tax of Section 4967 or any other penalty that may apply to donor advised funds:

* A distribution from a donor advised fund to satisfy a charitable pledge made by the person who recommends the distribution from the fund.

* A distribution from a donor advised fund to pay the charitable portion of a bifurcated grant, such as when an individual sponsors a table at a fund-raising dinner and pays the non-charitable meal portion and requests a grant from a donor advised fund to pay the charitable portion.

* A fund established solely for the benefit of a public charity or governmental entity, that ordinarily would fall outside the definition of a donor advised fund, should be permitted to make disbursements to individuals or other parties pursuant to written instructions received from that public charity or governmental entity; such disbursements should not convert it into a donor advised fund.

* With respect to a scholarship fund at a sponsoring organization which receives contributions from a tax-exempt membership organization, such as a Section 501(c)(4) social welfare organization, members of that organization who are otherwise unrelated should be able to comprise a majority of the scholarship selection committee.

We strongly recommend that the guidance issued by the Service be clear and easy to comply with. This is a practical necessity. Many donor advised funds are at small community foundations that have limited access to charitable legal specialists. Donor advised funds have much smaller balances and make smaller grants than private foundations. One study found that 18% of the donor advised funds at community foundations had balances under $10,000 and 58% had balances under $50,000.[5] Several sponsoring organizations, including the nation's largest, permit a person to establish a donor advised fund with as little as $5,000 and permit charitable grants as low as $100. In order for these small grants to be processed efficiently, the laws for donor advised funds need to be clearer and simpler than the very complicated and technical laws that apply to private foundations.

We appreciate the opportunity to comment on the new laws governing donor advised funds. Our hope is that additional guidance on the application of Code Sections 170, 4966, 4967 and 4958 will provide sufficient clarity to guide tax professionals, sponsoring organizations and donors. We appreciate your consideration of our comments and welcome the opportunity to discuss them further with you.


[1] The Pension Protection Act of 2006, Pub. L. No. 109-280, 120 Stat. 780 (2006).

[2] References in these comments to Code Sections are to sections of the Internal Revenue Code of 1986 (the "Code"), as amended and, if preceded by "Treas. Reg. Section," to sections of the Treasury Regulations under the Code.

[3] Published in Internal Revenue Bulletin 2009-9.

[4] Joint Committee on Taxation, Technical Explanation of H.R. 4, The "Pension Protection Act of 2006," as Passed by the House on July 28, 2006 and as Considered by the Senate on August 3, 2006, (JCX-38-06), August 3, 2006, at 350.

[5] Statement of Jane G. Gravelle of the Congressional Research Service, Senate Finance Committee Hearings on Charities and Charitable Giving: Proposals for Reform (April 5, 2005), page 5,


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