Comments on Notice 2017-73, Request for Comments on Application of Excise Taxes with Respect to Donor Advised Funds in Certain Situations

According to the legislative history of section 4967, Congress intended that application of the "more than incidental benefit" standard under section 4967 turn on whether a Donor/Advisor making a direct payment to a charity would have received a benefit reducing or eliminating a charitable contribution deduction to which the Donor/Advisor otherwise would have been entitled.5 This legislative history supports permitting bifurcation because the portion of a bifurcated distribution from a donor advised fund would be fully deductible if paid directly by a Donor/Advisor. [...]as a general matter, we do not see why, absent clear abuse, a donor advised fund's grant to an organization seeking to be classified as publicly supported would be treated differently from a grant from any other public charity. [...]use of sponsoring organizations by small private foundations can create cost savings and efficiency in the grantmaking process. [...]given the restrictions on the use of money held in donor advised funds as compared to money held by private foundations (i.e., the excise tax regime under section 4967 and the excess benefit transaction rules under section 4958(c)(2)), we do not view the termination of a private foundation into a donor advised fund as creating a material risk of abuses. (b)The Treatment of Grants by Private Foundations to Donor Advised Funds for Purposes of Section 4942.