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Recent Priority Guidance Plan Shows Increased Focus on DAFs by IRS

The US Department of the Treasury and the Internal Revenue Service issued its most recent Priority Guidance Plan Joint Statement (the Plan) on November 4, 2022. The Plan details more than 200 priorities for the 12-month period beginning July 1, 2022, and ending June 30, 2023 (the plan year). 

Many of these priorities have been languishing for years. However, the Plan this year includes three new priorities focused on donor advised funds (DAFs): 

  1. Regulations under §4967 regarding prohibited benefits, including excise taxes on donors, donor advisors, related persons, and fund management;

  2. Regulations under §4958 regarding DAFs and supporting organizations; and

  3. Guidance regarding the public-support computation with respect to distributions from DAFs.

The IRS also expanded last year’s priority that focused on regulations regarding excise taxes on DAFs and fund management to include regulations under Section 4966 more generally. 

The Plan shows a renewed focus on projects relating to DAFs and private foundations and covers similar principles as those the House proposed in February 2022 under the Accelerating Charitable Efforts Act (ACE Act). The House bill followed closely the Senate bill that was originally introduced in June 2021. If the ACE Act were passed, it would implement sweeping changes to the tax rules surrounding DAFs and private foundations. The ACE Act was designed to encourage DAFs and private foundations to distribute charitable funds more rapidly by, for illustration, modifying the rules relating to the timing of charitable deductions on contributions to DAFs and the types of distributions that would count towards a private foundation’s qualifying distributions in a given year.

The Plan also continues to include priorities related to, among other areas, group exemption letters, final regulations on supporting organizations (proposed regulations were published back in 2016), and allocating expenses and addressing net operating losses under the unrelated business taxable income (UBTI) siloing rules of Section 512(a)(6), and private foundation investments in partnerships in which disqualified persons are also partners.        

The Treasury and IRS intend to periodically update the 2022-2023 plan to reflect additional items that become priorities during the plan year and to capture new projects that may result from developing legislation. 

The periodic updates incorporate comments received from taxpayers and tax practitioners who are impacted by the tax rules. The Treasury and IRS, therefore, invite the public to continue providing them with their comments and suggestions throughout the plan year. We will continue to monitor the Plan and the ACE Act and will report on any notable updates. 

© 2022 ArentFox Schiff LLPNational Law Review, Volume XII, Number 325
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About this Author

Partner

Shira partners with tax-exempt nonprofit organizations to help them make critical business and legal decisions, manage risk, and achieve their mission goals in compliance with applicable federal tax and state nonprofit laws.

Shira advises tax-exempt organizations and their for-profit affiliates on a wide range of operational, programmatic, transactional, and governance matters that are regulated under the Internal Revenue Code and the state charitable and nonprofit laws. She counsels public charities, private foundations, social welfare...

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Tracy L. McLaughlin Attorney and Financial Planner Arent Fox
Associate

Tracy L. Adamovich is a member of the firm’s Private Clients, Trusts and Estates Group. An attorney and Certified Financial Planner™, she assists clients with general estate planning, elder law, and special needs planning.

Before joining Schiff Hardin, Tracy was a financial advisor with a registered investment advisory firm. Drawing on this experience, she understands how the estate plan fits within a client’s overall financial strategy. She was also an associate in the New York office of an elite international law firm. Tracy is a decorated...

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