Non-precedential Guidance

Note: The following Private Letter Rulings (PLR) and Technical Advice Memorandums (TAM) discuss Section 4958 issues. These rulings are based

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solely on the facts presented by the taxpayer and applies only to those specific set of facts. Per Section 6110(k)(3), these documents may not be cited as precedent by IRS or other taxpayers. However, the information in these rulings provide the government’s position on issues and can assist with developing a fact pattern for a revenue agent’s report.

(1) PLR 202133014 (August 20, 2021) ruled, in part, that the taxpayer’s sale of

subsidiary shares to Organization at fair market value and taxpayer’s restricted grant to Organization of certain assets and the remaining subsidiary shares will not result in an excess benefit transaction under Section 4958(c)(1).

(2) PLR 201825004 (June 22, 2018) provided, based on the facts presented, the

foundation’s reclassification to a private foundation and the payments made to the beneficiaries pursuant to the settlement agreement will not constitute an excess benefit transaction under Section 4958.

(3) PLR 201336020 (September 6, 2013) responds to the taxpayer’s request for a

ruling about whether a particular person was a disqualified person. The doctor never acted as a department head, didn’t manage any substantial part of the hospital's operations, and didn’t participate in any management decisions affecting either the hospital or a hospital department. The ruling stated that the doctor, at all times relevant to the transaction, was not a disqualified person to the taxpayer or its affiliates within the meaning of Section 4958(f)(1) at any time on or after the effective date of his employment agreement with the taxpayer.

(4) PLR 201133013 (August 19, 2011) provides guidance to a taxpayer that is exempt

under Section 501(c)(3) with a foundation status of 509(a)(3) but wishes to convert to a private foundation. In part, the ruling provides that the conversion should not give rise to excise taxes under Section 4958 because the supported charity, which will receive funds as part of the conversion, is not a disqualified person and the conversion does not involve the transfer of funds to a disqualified person.

(5) PLR 201133012 (August 19, 2011) provides guidance to a supported organization

where the supporting organization wishes to convert to a private foundation. The taxpayer requested a ruling regarding the effect under Section 4958 on the supported organization or any of its directors, officers or employees who were involved in the conversion and related transactions. Based on the facts, the supported organization is not a disqualified person, nor does the conversion transfer funds to a disqualified person, and therefore, the conversion does not give rise to an excise tax liability under Section 4958.

(6) TAM 200435020 (August 27, 2004) provides that A and his relatives expended

funds of X, and used X assets, in a variety of ways. The ruling provided, in part, that A was liable for excise tax under Section 4958. See also TAMs 200435018, 200435019, 200435021 and 200435022 issued to A’s relatives.

(7) PLR 200421010 (May 21, 2004) is a request that, in part, asks if the participation

of T, C, D1 and D2, with S1 and S2, in an arrangement providing for joint use of office space would be an excess benefit transaction under Section 4958. Based on the representations that expenses will be allocated and paid at fair market value to

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S1, the participation of T, C, D1 and D2 with S1 and S2 will not result in excess benefit transactions between the parties. The ruling also provides that the joint utilization of common employee services, including secretary, receptionist, accounting staff, administrative assistant, and insurance doesn’t constitute an excess benefit transaction under the provided fact pattern.

(8) PLR 200335037(August 29, 2003) stated that the benefit received by P & Q from

grants made to M by B & C were not excess benefit transaction in part because P & Q were not disqualified persons under Section 4958. The ruling also stated that any benefit received by P & Q would be too incidental and tenuous to be quantifiable under Section 4958.

(9) PLR 200332018 (August 8, 2003) provides M, a private foundation, and N, a

supporting organization, created a program to award scholarships to students in State X. In addition, M and N involved State X community foundations in the scholarship program process by allowing the community foundations to participate in the scholarship program selection process. The ruling provides that when a family member of a director or officer of a community foundation is selected as a scholarship recipient by N, it is not an excess benefit transaction if the director or officer recuses him or herself from the selection process.

(10) PLR 200247055 (November 22, 2002) stated that F, an exempt hospital, is

operating a free transportation service that is open to the public, meets a need for patients who are living in remote areas and in need of transportation to the hospital or other facilities in the service area and doesn’t restrict the eligibility requirement to certain classes of individuals. Board members or others in a position of authority in relation to F can use the bus service on the same basis as any other member of the public. Under the circumstances in the ruling, the disqualified persons are not receiving an excess benefit from the use of the bus service where the use is to the same level as similarly situated members of the public.

(11) PLR 200243057 (October 25, 2002) provides an analysis of multiple types of

excess benefit transactions between C, a Section 501(c)(3) organization, founded by B. C’s purpose was to allow individuals to donate their used vehicles for a tax deduction. C operated on the same premises of F, which was a used car lot owned by D, son of B. Excess benefit transactions included payments for compensation, undocumented loans, rent, and insurance as well as the value of furnishing an automobile and payment more than fair market value for towing.