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exceed 125 percent of the maximum authorized rate of $35 provided by section 5702(a) of title 5, U.S.C., notwithstanding the provision in section 5702(c) allowing higher rates in designated geographical areas. §53.4941(d)-3. (Sec. 4941, ’86 Code.) Rev. Rul. 77-251, 1977-2 C.B. 389. 214.121 Self-dealing; use of private road by disqualified person. The use of a private foundation museum’s private road for access to the adjacent headquarters and manufacturing plant of a corporation (a disqualified person) during the same hours the road is used by the general public as a thoroughfare connecting two public streets is not an act of self-dealing. §§53.4941(d)–3. (Sec. 4941, ’86 Code.) Rev. Rul. 76-459, 1976-2 C.B. 369. 214.122 Status; community trusts; reliance period extended. The reliance period contained in reg. 1.508–1(b)(4)(i) that permits grantors, contributors, and distributors to rely on the claimed public charity status of community trusts is extended. §§1.170A-1, 1.508–1. (Sec. 601.201, S.P.R.; Secs. 170, 508, ’86 Code.) Rev. Proc. 77-20, 1977-1 C.B. 585. 214.123 Status; nonexempt charitable trusts. A nonexempt charitable trust described in section 4947(a)(1) that is a private foundation must terminate its private foundation status pursuant to section 507 before it can be excluded from such status under section 509(a)(3). §1.509(a)-4. (Sec. 509, ’86 Code.) Rev. Rul. 76-92, 1976-1 C.B. 160. 214.124 Status; section 508(b) presumption; untimely notification. An organization formed before October 9, 1969 is not precluded from classification as other than a private foundation merely because it failed to notify the Service by the March 22, 1973 deadline given in the regulations that it is not a private foundation as required by section 508(b); its status as other than a private foundation may be established by submitting a request for a determination letter to the local District Director. §§1.508–1, 1.509(a)–1. (Secs. 508, 509; ’86 Code.) Rev. Rul. 73-504, 1973-2 C.B. 190. 214.125 Status; support received prior to change in operations. Support received by an organization prior to changes made in its operations to enable it to qualify under section 501(c)(3) is not taken into account in determining its foundation status. §§1.170A-9, 1.509(a)–3. (Secs. 170, 509; ’86 Code.) Rev. Rul. 77-116, 1977-1 C.B. 155. 214.126 Status; support received prior to incorporation. An organization that filed an application for recognition of exemption under section 501(c)(3) in May 1976, following its incorporation in November 1975 to succeed an unincorporated association that had operated for three years without filing an application, will be recognized as exempt from the date of incorporation. An advance ruling concerning the organization’s private foundation may be requested on the basis of support received since incorporation. §§1.508-1, 1.509(a)-3. (Secs. 508, 509; ’86 Code.) Rev. Rul. 77-469, 1977-2 C.B. 196. 214.127 Status; untimely notification. A corporation that states it is a private foundation when it files an application for recognition of exemption subsequent to the 15 month deadline provided by regulation is treated as an organization described in section 501(c)(3) and as a private foundation only from the date it files its application. §§1.508-1, 1.509(a)-1. (Secs. 508, 509; ’86 Code.) Rev. Rul. 77-207, 1977-1 C.B. 152. 214.128 Status; untimely notification. A corporation that states it is a publicly supported charity when it files its application for recognition of exemption subsequent to the 15 month deadline provided by regulation cannot be treated as an organization described in section 501(c)(3) before the date it files its application; financial support received prior to that date may not be used for purposes of determining whether the organization is publicly supported. §§1.508–1, 1.509(a)–1. (Secs. 508, 509; ’86 Code.) Rev. Rul. 77-208, 1977-1 C.B. 153. 214.129 Status after distribution of assets. A private foundation may terminate its private foundation status under section 507(b)(1)(A) by distributing its total net assets to a public charity, in existence 20 months, formed from the consolidation of two public charities each of which would have been in existence for 60 months at the time of distribution had they not been consolidated. §1.507-2. (Sec. 507, ’86 Code.) Rev. Rul. 75-289, 1975-2 C.B. 215. 214.130 Status after termination. A corporation that remains in existence after terminating its private foundation status under section 507(b)(1)(A) must, unless specifically excepted by section 508(c), file an Application for Recognition of Exemption if it wishes to be treated as an organization described in section 501(c)(3). §§1.507-2, 1.508-1, 1.509(c)-1. (Secs. 507, 508, 509; ’86 Code.) Rev. Rul. 74-490, 1974-2 C.B. 171. 214.131 Status termination; advance ruling; supporting organization. A private foundation that has commenced a 60-month termination period has received an advance ruling that it can reasonably be expected to satisfy the requirements of section 507(b)(1)(B)(i) by operating as a public charity during the period. A private foundation that supports only such organization and otherwise qualifies under reg. 1.509(a)-4 may be given an advance ruling that it can reasonably be expected to operate as a section 509(a)(3) organization and satisfy the requirements of section 507(b)(1)(B)(i) during its own 60-month termination period. §§1.507–2, 1.509(a)–4. (Secs. 507, 509; ’86 Code.) Rev. Rul. 78-386, 1978-2 C.B. 179. 214.132 Status termination; change in accounting period. A private foundation that gave notice that it was terminating its private foundation status by operating as a public charity for a 60-month period beginning with the first day of its next taxable year and that is was changing its annual accounting period from a calendar to a fiscal year pursuant to reg. 1.442–1(c)(2) may begin the 60-month period on the earlier fiscal year date. §§1.442-1, 1.507-2. (Secs. 442, 507; ’86 Code.) Rev. Rul. 77-113, 1977-1 C.B. 152. 214.133 Support by foreign government. An exempt organization organized in a foreign country and receiving a substantial portion of its support from a foreign government is not a private foundation. §1.509(a)-2. (Sec. 509, ’86 Code.) Rev. Rul. 75-435, 1975-2 C.B. 215. 214.134 Support of foreign organization. An organization that is organized and operated in support of a foreign, rather than a domestic, organization meeting the requirements of section 509(a)(1) and (a)(2) and that otherwise meets the requirements of section 509(a)(3) qualifies as an organization described in that section. §1.509(a)-4. (Sec. 509, ’86 Code.) Rev. Rul. 74-229, 1974-1 C.B. 142. Exempt organizations 214.135 Support requirement; organization for the benefit of a state university. The substantial support tests of section 170(b)(1)(A)(vi) also apply to allow an organization organized and operated exclusively for the benefit of a state university, otherwise described in section 170(b)(1)(A)(iv), to meet the substantial support test of section 170(b)(1)(A)(iv), provided the sources of support of the organization do not include support from sources permitted by section 170(b)(1)(A)(vi), but not permitted by section 170(b)(1)(A)(iv). 1.170A-9, 1.509(a)–2. (Secs. 170, 509; ’86 Code.) Rev. Rul. 82–132, 1982–2 C.B. 107. 214.136 Supporting organization. A newly created nonprofit organization is to pay its future income until a specific amount has been paid to specified organizations described in section 509(a)(1) or (a)(2) that appoint a majority of its governing body. The organization will dissove after the specific amount has been paid and will distribute its assets to such specified organizations that a contributor named in its articles of organization selects. The organization is a private foundation and not a supporting organization. §1.509(a)-4. (Sec. 509, ’86 Code.) Rev. Rul. 79-197, 1979-1 C.B. 204. 214.137 Supporting organization; charitable trust granting scholarships. An exempt charitable trust whose sole purpose is to grant scholarships to students graduating from the public high schools in a city and that is trusteed by the city council with its funds managed by the city treasurer is a supporting organization and is not a private foundation. §1.509(a)-4. (Sec. 509, ’86 Code.) Rev. Rul. 75–436, 1975-2 C.B. 217. 214.138 Supporting organization; charitable trust granting scholarships. An exempt charitable trust whose sole purpose is to grant scholarships to students graduating from both public and private high schools in a city and whose trustees are officers of, or are elected by the membership of, a local civic league exempt under section 501(c)(4) is a supporting organization and thus not a private foundation. §1.509(a)-4. (Sec. 509, ’86 Code.) Rev. Rul. 76-401, 1976-2 C.B. 175. 214.139 Supporting organization; charitable trust granting scholarships for county students. An exempt charitable trust established solely to provide college scholarships to county high school graduates that is trusteed by an independent bank trustee is a private foundation and not a supporting organization. §1.509(a)–4. (Sec. 509, ’86 Code.) Rev. Rul. 75-437, 1975-2 C.B. 218. 214.140 Supporting organization; community trust. A community trust described in reg. 1.170A-9(e)(11) that was created by a community chest to hold permanently endowed charitable funds and to distribute income to support local charitable organizations that are public charities is a supporting organization and is not a private foundation, even if the publicly supported charities are not specified by name. §1.509(a)-4. (Sec. 509, ’86 Code.) Rev. Rul. 81-43, 1981-1 C.B. 350. 214.141 Supporting organization; control of board by disqualified person. An organization that is exempt under section 501(c)(3) makes distributions to a university. The organization is controlled by a four member board of directors, one of whom is a substantial contributor to the organization and a disqualified person. Two other directors are employees of a corporation, also a disqualified person, in which more than 35 percent of the voting power is owned by the substantial contributor. The remaining director is chosen by the university. None of the directors has a veto power. The organization is not a supporting organization within the meaning of section 509(a)(3). §1.509(a)-4. (Sec. 509, ’86 Code.) Rev. Rul. 80-207, 1980-2 C.B. 193.
Exempt organizations 214.142 Supporting organization; integral part test. Reports of the type described in the example in reg. 1.509(a)-4(i)(3)(iii)(d), submitted by the trustee to each of the beneficiaries of a charitable trust, will not alone satisfy the attentiveness requirement of the integral part test. §1.509(a)-4. (Sec. 509, ’86 Code.) Rev. Rul. 76-32, 1976-1 C.B. 160. 214.143 Supporting organization; integral part test. An exempt trust whose trust instrument designates a bank as sole trustee and provides that 75 percent of the trust income be distributed annually to a specified church with the remaining 25 percent to accumulate until the original corpus doubles, at which time the entire annual income is to be distributed to the church, does not satisfy the “substantially all” requirement of the integral part test set forth in reg. 1.509(a)-4(i)(3)(iii)(a) and is not a supporting organization. §1.509(a)-4. (Sec. 509, ’86 Code.) Rev. Rul. 76-208, 1976-1 C.B. 161. 214.144 Supporting organization; organizational test. The trust’s articles of organization, the decedent’s will, require that the net income of the trust be used “for the purpose of paying for the education at Yale College of such graduates of Duxbury, Massachusetts, High School, or bona fide residents of Duxbury.” The organizational test of section 509(a)(3) is met. §1.509(a)–4. (Sec. 509, ’86 Code.) Warren M. Goodspeed Scholarship Fund, 70 T.C. 515, Nonacq., 1981-1 C.B. 2. 214.145 Taxable expenditure; awards including travel or study. Grants made by a private foundation primarily in recognition of past achievement, with the funds being unrestricted, or earmarked for subsequent travel or study and meeting the requirements of section 4945(g), are not taxable expenditures. §53.4945-4. (Sec. 4945, ’86 Code.) Rev. Rul. 77-380, 1977-2 C.B. 419. 214.146 Taxable expenditure; compensation to research assistants by an individual grantee. The payment of compensation to research assistants by an individual grantee of a private foundation, where the grantee controls the selection of these persons independently of the grantor private foundation and where the private foundation’s grant-making procedures satisfy the requirements of section 4945(g), does not constitute a grant within the meaning of section 4945(d)(3). §53.4945-4. (Sec. 4945, ’86 Code.) Rev. Rul. 81–293, 1981–2 C.B. 218. 214.147 Taxable expenditure; craft competition. An unconditional and unrestricted grant by a private foundation to the winner of a competition conducted among students attending schools specializing in teaching a special craft is not a taxable expenditure. Rev. Rul. 75–393 modified. §53.4945-4. (Sec. 4945, ’86 Code.) Rev. Rul. 76-460, 1976-2 C.B. 371. 214.148 Taxable expenditure; educational grants; request for approval. A private foundation submitted a request for approval of its grantmaking procedures to the Service, did not receive a reply within 45 days, and considered the procedures to be approved under reg. 53.4945-4(d)(3). Later, the foundation was notified by the Service that its grant-making program did not conform to the requirements of section 4945(g). After receipt of the disapproval notification, the remaining installments of fixed-sum grants awarded during the period the foundation’s procedures were deemed approved are not taxable expenditures; however, the renewals of any grants awarded during such period are taxable expenditures. §53.4945-4. (Sec. 4945, ’86 Code.) Rev. Rul. 81-46, 1981-1 C.B. 514. 214.149 Taxable expenditure; educational loans. Long-term, low-interest educational loans made by a private foundation under a program that specifically limits the use of the funds to furtherance of the recipient’s education at an educational institution described in section 170(b)(1)(A)(ii) are individual grants. §53.4945-4. (Sec. 4945, ’86 Code.) Rev. Rul. 77-434, 1977-2 C.B. 420. 214.150 Taxable expenditure; educational loans; employer-related. Guidelines are provided for determining whether educational loans made by private foundations under employer-related loan programs are taxable expenditures. Modified by Rev. Proc. 83-36. §§53.4945-4, 301.7805-1. (Sec. 601.602, S.P.R.; Secs. 4945, 7805, ’86 Code.) Rev. Proc. 80-39, 1980-2 C.B. 772. 214.151 Taxable expenditure; employer-related educational grant and loan programs. Procedures are provided for determining whether children of employees are eligible recipients of employer-related educational grants or loans of a private foundation for purposes of the 10 percent tests of Rev. Procs. 76-47 and 80-39. Rev. Procs. 76-47 and 80-39 clarified. §§1.117-1, 53.4945-4. (Sec. 601.602, S.P.R.; Secs. 117, 4945, ’86 Code.) Rev. Proc. 85-51, 1985-2 C.B. 717. 214.152 Taxable expenditure; employer-related educational loans; scholarship and fellowship grants. Publicizing a private foundation’s employer-related grant or loan program in the employer’s newsletter, distributed to all employees of the company, will not violate the requirements of Rev. Procs. 76-47 or 80-39 if the foundation is clearly identified as the grantor of the awards. Rev. Procs. 76-47 and 80-39 clarified. §§1.117-1, 53.4945-4. (Sec. 601.602, S.P.R.; Secs. 117, 4945, ’86 Code.) Rev. Proc. 81-65, 1981-2 C.B. 690. 214.153 Taxable expenditure; grant to another organization omitted from return. A private foundation that failed to list on its original annual information return a grant to an organization not described in either section 509(a)(1), (2), or (3), but corrected the omission on an amended return filed after the due date, has failed to exercise the expenditure responsibility requirements of section 4945(h)(3) with respect to the grant, and the grant is a taxable expenditure. §53.4945–5. (Sec. 4945, ’86 Code.) Rev. Rul. 77-213, 1977–1 C.B. 357. 214.154 Taxable expenditure; grant to instrumentality of political subdivision. A grant for exclusively charitable purposes made by a private foundation to a wholly owned instrumentality of a political subdivision of a state is not a taxable expenditure under section 4945(d)(4) even if the foundation does not exercise expenditure responsibility over the grant. §53.4945–5. (Sec. 4945, ’86 Code.) Rev. Rul. 81-125, 1981-1 C.B. 515. 214.155 Taxable expenditure; literary awards. An award by a private foundation to the person who has written the best work of literary criticism during the preceding year, whether it is an article, essay, treatise, or book, is not a taxable expenditure. §53.4945-4. (Sec. 4945, ’86 Code.) Rev. Rul. 75-393, 1975-2 C.B. 451. 214.156 Taxable expenditure; loan to disqualified person. A loan by a private foundation to a disqualified person that constitutes an act of selfdealing but otherwise is a permissible expenditure, is not a taxable expenditure. §53.4945-6. (Sec. 4945, ’86 Code.) Rev. Rul. 77-161, 1977-1 C.B. 358. 214.157 Taxable expenditure; payments to consultants. Payments to consultants by a private foundation for personal services performed in the development of model curricula and design of educational materials to aid the foundation in its program activity of assisting educators to employ improved educational methods are not grants within the meaning of section 4945(d)(3). §53.4945-4. (Sec. 4945, ’86 Code.) Rev. Rul. 74-125, 1974–1 C.B. 327. 214.158 Taxable expenditure; payments to students. Grants made on an objective and nondiscriminatory basis by a private foundation to worthy college students who acknowledge that they plan to teach in a particular State after graduation satisfy the requirements of section 4945(g) and are not taxable expenditures under section 4945(d)(3); however, they are grants to achieve specific objectives as described in section 4945(g)(3) rather than grants constituting scholarships as described in section 4945(g)(1). §53.4945-4. (Secs. 117, 4945; ’86 Code.) Rev. Rul. 77-44, 1977-1 C.B. 353. 214.159 Taxable expenditure; scholarship grants. A private foundation that made grants to individuals after 45 days from the date it submitted an exemption application in accordance with procedures fully disclosed in its application did not make taxable expenditures under section 4945, even though the foundation did not specifically request advance approval of its procedures. §53.4945-4. (Sec. 4945, ’86 Code.) Rev. Rul. 86-77, 1986-1 C.B. 334. 214.160 Taxable expenditure; scholarship grants. Grants awarded by a private foundation under an employer-related program are scholarships under section 117(a), even though the grants will be awarded without regard to the percentage guidelines of section 4.08 of Rev. Proc. 76-47. Therefore, grants awarded under the program will be described in section 4945(g)(1) and will not be taxable expenditures under section 4945(d)(3). §1.117-1, 53.4945-4. (Secs. 117, 4945; ’86 Code.) Rev. Rul. 86-90, 1986-2 C.B. 184. 214.161 Taxable expenditure; scholarships; deceased or retired employees. For purposes of sections 117(a) and 4945(g)(1), a private foundation’s scholarship program for children of deceased or retired employees of a particular company is an “employer-related grant program” to which the guidelines of Rev. Proc. 76-47 apply. §§1.117-1, 53.4945-4, (Secs. 117, 4945; ’86 Code.) Rev. Rul. 79-365, 1979-2 C.B. 389. 214.162 Taxable expenditure; scholarships and fellowships. Guidelines are provided to determine whether a grant made by a private foundation under an employer-related grant program to an employee to which the program relates is a taxable expenditure or a scholarship or fellowship grant. Amplified by Rev. Proc. 77–32. Clarified by Rev. Proc. 81–65. Modified by Rev. Proc. 83-36. §§1.117-1, 53.4945-4. (Sec. 601.602, S.P.R.; Secs. 117, 4945, ’86 Code.) Rev. Proc. 76-47, 1976–2 C.B. 670. 214.163 Taxable expenditure; scholarships and fellowships. Rules are provided under which private foundations may continue to rely on ruling letters issued prior to December 27, 1976, approving their employer-related scholarship programs. Rev. Proc. 76-47 amplified. §§53.4945-4, 301.7805-1. (Sec. 601.201, S.P.R.; Secs. 4945, 7805, ’86 Code.) Rev. Proc. 77-32, 1977–2 C.B. 541. 214.164 Taxable expenditure; scholarships and fellowships; employer-related. A private foundation that was created and funded by a forprofit company grants scholarships, based on objective standards, for the education of children
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