Section 6. REQUEST FOR COMMENTS

The IRS and the Department of Treasury request comments regarding this notice and suggestions for future guidance with respect to changes in requirements for donor advised funds and supporting organizations or other changes affecting tax-exempt organizations under the PPA.

Comments should refer to Notice 2006–109 and be submitted by February 1, 2007, to:

Internal Revenue Service SE:T:EO:RA:G (Notice 2006–109) P.O. Box 7604 Ben Franklin Station Washington, DC 20044

Submissions may be hand delivered Monday through Friday between the hours of 8 a.m. and 4:00 p.m. to:

SE:T:EO:RA:T:G (Notice 2006–109) Courier’s Desk Internal Revenue Service 1111 Constitution Ave., N.W. Washington, DC 20224

Alternatively, taxpayers may submit comments electronically to eoppa@irs.gov. Please include “Notice 2006–109” in the subject line of any electronic communications.

All comments will be available for public inspection and copying.

donor advised fund any employer-sponsored disaster relief fund that meets the following requirements:

a. the fund serves a single identified charitable purpose, which is to provide relief from one or more qualified disasters within the meaning of section 139(c)(1), (2), or (3); ¹

b. the fund serves a large or indefinite class (a “charitable class”);

c. recipients of grants from the fund are selected based on objective determinations of need;

d. the selection of recipients of grants from the fund is made using either an independent selection committee or adequate substitute procedures to ensure that any benefit to the employer is incidental and tenuous. The selection committee is independent if a majority of the members of the committee consists of persons who are not in a position to exercise substantial influence over the affairs of the employer;

e. no payment is made from the fund to or for the benefit of:

i. any director, officer, or trustee of the sponsoring organization of the fund, or

ii. members of the fund’s selection committee; and

f. the fund maintains adequate records that demonstrate the recipients’ needs for the disaster relief assistance provided.

Satisfaction of these requirements does not affect the determination of whether any payments made from the fund might result in taxable compensation to the employees.

.02 Applicability Date for Educational Grants

As provided in Section 2.02 above, under new section 4966, distributions to natural persons from a donor advised fund

are subject to an excise tax. The PPA provides that section 4966 applies to certain distributions (including certain educational grants) made in taxable years beginning after August 17, 2006. The excise tax applies irrespective of whether the grant is excludable from the recipient’s income as a scholarship or fellowship under section 117. The IRS and Department of Treasury understand that certain educational grants may have been committed to an individual on or before the date of enactment, the payments of which extend beyond August 17, 2006. Pursuant to this notice, section 4966(c)(1)(A) shall not apply to payments made after August 17, 2006, with respect to an educational grant, if the payment is made pursuant to a grant commitment entered into on or before August 17, 2006. A commitment will be considered entered into on or before August 17, 2006, if:

a. the educational grant was awarded on an objective and nondiscriminatory basis and is reasonable in amount in light of the purposes of the educational grant;

b. the educational grant was not awarded to, nor are payments made pursuant to that grant, to a donor, donor advisor, or any person related to a donor or donor advisor (as described in sections 4967(d) and 4958(f)(7));

c. on or before August 17, 2006: (1) (a) the name of the educational grant recipient, the nature of the educational grant, the amount of the educational grant, the date on which it was awarded, and the educational grant period, were entered on the records of the sponsoring organization or were otherwise adequately evidenced, or (b) notice of the payments to be received was communicated to the payee in writing, and (2) the sponsoring organization keeps a record of such information or notice for a period that ends no earlier than three years after the close of the taxable year in which the last payment is made under the grant; and

1 Under sections 139(c)(1), (2) and (3), a qualified disaster means a disaster that results from a terroristic or military action (as defined in section 692(c)(2)), a Presidentially declared disaster (as defined in section 1033(h)(3)), and a disaster that results from an accident involving a common carrier or from any other event which the Secretary determines to be of a catastrophic nature.

December 18, 2006 1126 2006–51 I.R.B.