Internal Revenue Bulletin 2018-33 (PDF rendition): IRS Notices

Preserve advance releases and the authoritative Internal Revenue Bulletin rendition; directory timestamps are file-publication metadata, not legal effective dates. HTML bulletins begin June 2003; earlier available issues require full PDF parsing. Whole bulletin rendition: numbered items are identified below; other legal material and publisher context remain included. This is not a new standalone advance release.

# INTERNAL REVENUE BULLETIN

IRS

Bulletin No.

2018-33

August 13, 2018

## HIGHLIGHTS OF THIS ISSUE

These synopses are intended only as aids to the reader in
identifying the subject matter covered. They may not be
relied upon as authoritative interpretations.

## Employee Plans

### T.D. 9835, page 288.

The regulations under sections 401(k) and 401(m) are
amended to provide that an employer contribution to a plan
may be a qualified matching contribution or qualified nonelec-
tive contribution if it satisfies applicable nonforfeitability re-
quirements and distribution limitations at the time it is allocated
to a participant's account, but need not meet these require-
ments or limitations when it is contributed to the plan.

## Exempt Organizations

NOT 2018-58, page 305.

This notice announces that Treasury and the IRS intend to issue
regulations providing clarification regarding (1) the special
rules for contributions of refunded qualified higher education
expenses to a qualified tuition program; (2) the new rules
permitting a rollover from a qualified tuition program to an
ABLE account under IRC § 529A: and (3) the new rules treating
certain elementary or secondary school expenses as qualified
higher education expenses.

## Income Tax

### T.D. 9836, page 291.

These final regulations provide guidance regarding substantia-
tion and reporting requirements for cash and noncash charita-
ble contributions. The final regulations reflect the enactment of
provisions under the American Jobs Creation Act of 2004 and
the Pension Protection Act of 2006.

Finding Lists begin on page ii.

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## The IRS Mission

Provide America's taxpayers top-quality service by helping
them understand and meet their tax responsibilities and en-
force the law with integrity and fairness to all.

## Introduction

The Internal Revenue Bulletin is the authoritative instrument of
the Commissioner of Internal Revenue for announcing official
rulings and procedures of the Internal Revenue Service and for
publishing Treasury Decisions, Executive Orders, Tax Conven-
tions, legislation, court decisions, and other items of general
interest. It is published weekly.

It is the policy of the Service to publish in the Bulletin all
substantive rulings necessary to promote a uniform application
of the tax laws, including all rulings that supersede, revoke,
modify, or amend any of those previously published in the
Bulletin. All published rulings apply retroactively unless other-
wise indicated. Procedures relating solely to matters of internal
management are not published; however, statements of inter-
nal practices and procedures that affect the rights and duties
of taxpayers are published.

Revenue rulings represent the conclusions of the Service on
the application of the law to the pivotal facts stated in the
revenue ruling. In those based on positions taken in rulings to
taxpayers or technical advice to Service field offices, identify-
ing details and information of a confidential nature are deleted
to prevent unwarranted invasions of privacy and to comply with
statutory requirements.

Rulings and procedures reported in the Bulletin do not have the
force and effect of Treasury Department Regulations, but they
may be used as precedents. Unpublished rulings will not be
relied on, used, or cited as precedents by Service personnel in
the disposition of other cases. In applying published rulings and
procedures, the effect of subsequent legislation, regulations,
court decisions, rulings, and procedures must be considered,
and Service personnel and others concerned are cautioned

against reaching the same conclusions in other cases unless
the facts and circumstances are substantially the same.

The Bulletin is divided into four parts as follows:

### Part I .- 1986 Code.

This part includes rulings and decisions based on provisions of
the Internal Revenue Code of 1986.

### Part II .- Treaties and Tax Legislation.

This part is divided into two subparts as follows: Subpart A, Tax
Conventions and Other Related Items, and Subpart B, Legisla-
tion and Related Committee Reports.

Part III .- Administrative, Procedural, and Miscellaneous.
To the extent practicable, pertinent cross references to these
subjects are contained in the other Parts and Subparts. Also
included in this part are Bank Secrecy Act Administrative Rul-
ings. Bank Secrecy Act Administrative Rulings are issued by
the Department of the Treasury's Office of the Assistant Sec-
retary (Enforcement).

### Part IV .- Items of General Interest.

This part includes notices of proposed rulemakings, disbar-
ment and suspension lists, and announcements.

The last Bulletin for each month includes a cumulative index for
the matters published during the preceding months. These
monthly indexes are cumulated on a semiannual basis, and are
published in the last Bulletin of each semiannual period.

The contents of this publication are not copyrighted and may be reprinted freely. A citation of the Internal Revenue Bulletin as the source would be appropriate.

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## Part I. Rulings and Decisions Under the Internal Revenue Code of 1986

26 CFR 1.401(k)-1, 26 CFR 1.401(k)-6, 26 CFR
1.401(m)-1, 26 CFR 1.401(m)-5

### T.D. 9835

### DEPARTMENT OF THE TREASURY

### Internal Revenue Service 26 CFR Part 1

Definitions of Qualified Matching
Contributions and Qualified Nonelective
Contributions

AGENCY: Internal Revenue Service
(IRS), Treasury.

ACTION: Final regulations.

SUMMARY: This document contains
final regulations that amend the defini-
tions of qualified matching contributions
(QMACs) and qualified nonelective con-
tributions (QNECs) under regulations re-
garding certain qualified retirement plans
that contain cash or deferred arrangements
under section 401(k) or that provide for
matching contributions or employee con-
tributions under section 401(m). Under
these regulations, an employer contribu-
tion to a plan may be a QMAC or QNEC
if it satisfies applicable nonforfeitability
requirements and distribution limitations
at the time it is allocated to a participant's
account, but need not meet these require-
ments or limitations when it is contributed
to the plan. These regulations affect partic-
ipants in, beneficiaries of, employers main-
taining, and administrators of tax-qualified
plans that contain cash or deferred arrange-
ments or provide for matching contributions
or employee contributions.

DATES: Effective date. These regulations
are effective July 20, 2018.

Applicability date. These regulations ap-
ply to plan years beginning on or after
July 20, 2018. However, taxpayers may
apply these regulations to earlier periods.

FOR FURTHER INFORMATION CON-
TACT: Angelique Carrington at (202)
317-4148 (not a toll-free number).

### SUPPLEMENTARY INFORMATION: Background

Section 401(k)(1) provides that a
profit-sharing or stock bonus plan, a pre-
ERISA money purchase plan, or a rural
cooperative plan will not be considered as
failing to satisfy the requirements of sec-
tion 401(a) merely because the plan in-
cludes a qualified cash or deferred ar-
rangement (CODA). To be considered a
qualified CODA, a plan must satisfy sev-
eral requirements, including: (i) under
section 401(k)(2)(B), amounts held by the
plan's trust that are attributable to em-
ployer contributions made pursuant to an
employee's election must satisfy certain
distribution limitations; (ii) under section
401(k)(2)(C), an employee's right to such
employer contributions must be nonfor-
feitable; and (iii) under section 401(k)(3),
such employer contributions must satisfy
certain nondiscrimination requirements.

Under section 401(k)(3)(D)(ii), the em-
ployer contributions taken into account
for purposes of applying the nondiscrim-
ination requirements may, under such
rules as the Secretary may provide and at
the election of the employer, include
matching contributions within the mean-
ing of section 401(m)(4)(A) that meet the
distribution limitations and nonforfeitabil-
ity requirements of section 401(k)(2)(B)
and (C) (also referred to as qualified
matching contributions or QMACs) and
qualified nonelective contributions within
the meaning of section 401(m)(4)(C)
(QNECs). Under section 401(m)(4)(C), a
QNEC is an employer contribution, other
than a matching contribution, with respect
to which the distribution limitations and
nonforfeitability requirements of section
401(k)(2)(B) and (C) are met.

Under § 1.401(k)-1(b)(1)(ii), a CODA
satisfies the applicable nondiscrimination
requirements if it satisfies the actual de-
ferral percentage (ADP) test of section
401(k)(3), described in § 1.401(k)-2. The
ADP test limits the disparity permitted
between the percentage of compensation
made as employer contributions to the
plan for a plan year on behalf of eligible
highly compensated employees and the

percentage of compensation made as em-
ployer contributions on behalf of eligible
nonhighly compensated employees. If the
ADP test limits are exceeded, the em-
ployer must take corrective action to en-
sure that the limits are met. In determining
the amount of employer contributions
made on behalf of an eligible employee,
employers are allowed to take into ac-
count certain QMACs and QNECs made
on behalf of the employee by the em-
ployer.

In lieu of applying the ADP test, an
employer may choose to design its plan to
satisfy an ADP safe harbor, including the
ADP safe harbor provisions of section
401(k)(12), described in § 1.401(k)-3.
Under § 1.401(k)-3, a plan satisfies the
ADP safe harbor provisions of section
401(k)(12) if, among other things, it sat-
isfies certain contribution requirements.
With respect to the safe harbor under sec-
tion 401(k)(12), an employer may choose
to satisfy the contribution requirement by
providing a certain level of QMACs or
QNECs to eligible nonhighly compen-
sated employees under the plan.

A defined contribution plan that pro-
vides for matching or employee after-tax
contributions must satisfy the nondiscrimi-
nation requirements under section 401(m)
with respect to those contributions for each
plan year. Under § 1.401(m)-1(b)(1), the
matching contributions and employee con-
tributions under a plan satisfy the nondis-
crimination requirements for a plan year if
the plan satisfies the actual contribution per-
centage (ACP) test of section 401(m)(2) de-
scribed in § 1.401(m)-2.

The ACP test limits the disparity per-
mitted between the percentage of compen-
sation made as matching contributions
and after-tax employee contributions for
or by eligible highly compensated em-
ployees under the plan and the percentage
of compensation made as matching con-
tributions and after-tax employee contri-
butions for or by eligible nonhighly com-
pensated employees under the plan. If the
ACP test limits are exceeded, the em-
ployer must take corrective action to en-
sure that the limits are met. In determining
the amount of employer contributions

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made on behalf of an eligible employee,
employers are allowed to take into ac-
count certain QNECs made on behalf of
the employee by the employer. Employers
must also take into account QMACs made
on behalf of the employee by the em-
ployer unless an exclusion applies (in-
cluding an exclusion for QMACs that are
taken into account under the ADP test).

If an employer designs its plan to sat-
isfy the ADP safe harbor of section
401(k)(12), it may avoid performing the
ACP test with respect to matching contri-
butions under the plan, as long as the
additional requirements of the ACP safe
harbor of section 401(m)(11) are met.

As defined in § 1.401(k)-6, QMACs
and QNECs must satisfy the nonforfeitabil-
ity requirements of § 1.401(k)-1(c) and the
distribution limitations1 of § 1.401(k)-1(d)
"when they are contributed to the plan."
Similarly, under the independent definitions
in § 1.401(m)-5, QMACs and QNECs must
satisfy the nonforfeitability requirements of
§ 1.401(k)-1(c) and the distribution limita-
tions of § 1.401(k)-1(d) "at the time the
contribution is made." In general, contribu-
tions satisfy the nonforfeitability require-
ments of § 1.401(k)-1(c) if they are imme-
diately nonforfeitable within the meaning of
section 411, and contributions satisfy the
distribution limitations of § 1.401(k)-1(d) if
they may not be distributed before the em-
ployee's death, disability, severance from
employment, attainment of age 591/2, or
hardship, or upon the termination of the
plan.

Before 2017, the Department of the
Treasury (Treasury Department) and the
Internal Revenue Service (IRS) received
comments with respect to the definitions
of QMACs and QNECs in §§ 1.401(k)-6
and 1.401(m)-5. In particular, comment-
ers asserted that employer contributions
should qualify as QMACs and QNECs as
long as they satisfy applicable nonforfeit-
ability requirements at the time they are
allocated to participants' accounts, rather
than when they are first contributed to the
plan. Commenters pointed out that interpret-
ing sections 401(k)(3)(D)(ii) and 401(m)-
(4)(C) to require satisfaction of applicable
nonforfeitability requirements at the time

amounts are first contributed to the plan
would preclude plan sponsors with plans
that permit the use of amounts in plan for-
feiture accounts to offset future employer
contributions under the plan from applying
such amounts to fund QMACs and QNECs.
This is because the amounts would have
been allocated to the forfeiture accounts
only after a participant incurred a forfeiture
of benefits and, thus, generally would have
been subject to a vesting schedule when
they were first contributed to the plan. Com-
menters requested that QMAC and QNEC
requirements not be interpreted to prevent
the use of plan forfeitures to fund QMACs
and QNECs. The commenters urged that
the nonforfeitability requirements under
§ 1.401(k)-6 should apply when QMACs
and QNECs are allocated to participants'
accounts and not when the contributions are
first made to the plan.

In considering the comments, the Trea-
sury Department and the IRS took into
account that the nonforfeitability require-
ments applicable to QMACs and QNECs
are intended to ensure that QMACs and
QNECS provide nonforfeitable benefits
for the participants who receive them. In
accordance with that purpose, the Trea-
sury Department and the IRS concluded
that it is sufficient to require that amounts
allocated to participants' accounts as
QMACs and QNECs be nonforfeitable at
the time they are allocated to participants'
accounts, rather than when such contribu-
tions are made to the plan.

Accordingly, on January 18, 2017, the
Treasury Department and the IRS issued a
notice of proposed rulemaking (REG-
131643-15), which was published in the
Federal Register (82 FR 5477). Under
the notice of proposed rulemaking, the
Treasury Department and the IRS pro-
posed to amend § 1.401(k)-6 to provide
that amounts used to fund QMACs and
QNECs must be nonforfeitable and sub-
ject to distribution limitations in accor-
dance with § 1.401(k)-1(c) and (d) when
allocated to participants' accounts, and to
no longer require that amounts used to
fund QMACs and QNECs satisfy the non-
forfeitability requirements and distribu-
tion limitations when they are first con-

tributed to the plan. As a result, forfeitures
would be permitted to be used to fund
QMACs and QNECs. No public hearing
on the notice of proposed rulemaking was
requested or held. Several comments on
the proposed rules were submitted, and,
after consideration of all the comments,
the proposed regulations are adopted
without substantive modification.

This document contains amendments
to 26 CFR part 1.

#### Explanation of Provisions

This document contains final regulations
that amend the definitions of QMACs and
QNECs to provide that employer contribu-
tions to a plan are QMACs or QNECs if
they satisfy applicable nonforfeitability re-
quirements and distribution limitations at
the time they are allocated to participants'
accounts. Accordingly, these regulations
permit forfeitures of prior contributions to
be used to fund QMACs and QNECs.

The Treasury Department and the IRS
received five comments in response to the
notice of proposed rulemaking that raised
issues relating to the modification of the
QMAC and QNEC definitions, including
issues with respect to plan amendments
and the pre-approved plan program,
as described in Rev. Proc. 2015-36,
2015-27 I.R.B. 20, Part III of Rev. Proc.
2016-37, 2016-29 I.R.B. 136, and Rev.
Proc. 2017-41, 2017-29 I.R.B. 92. The
Treasury Department and the IRS deter-
mined that the comments relating to the
pre-approved plan program are outside
the scope of these regulations, which
relate solely to the modification of the
definitions of QMACs and QNECs.
These comments have been shared with
IRS Tax Exempt and Government Enti-
ties, Employee Plans, which administers
the pre-approved plan program.

The comments also included questions
relating to the application of section
411(d)(6) in cases in which a plan sponsor
seeks to amend its plan to apply the rules
in this regulation. The application of sec-
tion 411(d)(6) is generally outside the
scope of these regulations. However, if a
plan sponsor adopts a plan amendment to

1The existing definitions of QMACs and QNECs in §§1.401(k)-6 and 1.401(m)-5 refer to the distribution requirements of §1.401(k)-1(d). Section 1.401(k)-1(d) is more appropriately
characterized as providing distribution limitations (consistent with the heading of §1.401(k)-1d)). Accordingly, this preamble refers to distribution limitations rather than distribution
requirements, and, as noted in the Explanation of Provisions section of this preamble, the definitions of QMACs and QNECs in §§1.401(k)-6 and 1.401(m)-5 are amended in the final
regulations to refer to distribution limitations.

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define QMACs and QNECs in a manner
consistent with these final regulations and
applies that amendment prospectively to
future plan years, section 411(d)(6) would
not be implicated. Moreover, in the com-
mon case of a plan that provides that
forfeitures will be used to pay plan ex-
penses incurred during a plan year and
that any remaining forfeitures in the plan
at the end of the plan year will be allo-
cated pursuant to a specified formula
among active participants who have com-
pleted a specified number of hours of
service during the plan year, section
411(d)(6) would not prohibit a plan
amendment adopted before the end of the
plan year that permits the use of forfei-
tures to fund QMACs and QNECs (even
if, at the time of the amendment, one or
more participants had already completed
the specified number of hours of service).
This is because all conditions for receiv-
ing an allocation will not have been satis-
fied at the time of the amendment, since
one of the conditions for receiving an al-
location is that plan expenses at the end of
the plan year are less than the amount
of forfeitures. See § 1.411(d)-4, Q&A-
1(d)(8) (features that are not section
411(d)(6) protected benefits include "[t]he
allocation dates for contributions, forfei-
tures, and earnings, the time for making
contributions (but not the conditions for
receiving an allocation of contributions or
forfeitures for a plan year after such con-
ditions have been satisfied), and the valu-
ation dates for account balances").

These regulations are substantively the
same as the proposed regulations. How-
ever, the Treasury Department and the
IRS have determined that the distribution
requirements referred to in the existing
definitions of QMACs and QNECs in
§§ 1.401(k)-6 and 1.401(m)-5 are more
appropriately characterized as distribution
limitations (consistent with the heading of
§ 1.401(k)-1(d)), and, accordingly, these
definitions have been amended to refer to
distribution limitations.

#### Effective/Applicability Date

These regulations are effective on July
20, 2018. These regulations apply to plan
years beginning on or after July 20, 2018.
However, taxpayers may apply these reg-
ulations to earlier periods.

#### Special Analyses

This regulation is not subject to review
under section 6(b) of Executive Order
12866 pursuant to the Memorandum of
Agreement (April 11, 2018) between the
Department of the Treasury and the Office
of Management and Budget regarding re-
view of tax regulations. Because the reg-
ulation does not impose a collection of
information on small entities, the Regula-
tory Flexibility Act (5 U.S.C. chapter 6)
does not apply. Pursuant to section
7805(f) of the Internal Revenue Code, the
notice of proposed rulemaking preceding
these regulations was submitted to the
Chief Counsel for Advocacy of the Small
Business Administration for comment on
its impact on small business.

### Statement of Availability of IRS Documents

IRS Revenue Procedures, Revenue
Rulings, notices and other guidance cited
in this preamble are published in the In-
ternal Revenue Bulletin (or Cumulative
Bulletin) and are available from the Su-
perintendent of Documents, U.S. Govern-
ment Publishing Office, Washington, DC
20402, or by visiting the IRS website at
http://www.irs.gov.

#### Drafting Information

The principal author of these regula-
tions is Angelique Carrington, Office of
Associate Chief Counsel (Tax Exempt
and Governmental Entities). However,
other personnel from the IRS and Trea-
sury Department participated in the devel-
opment of these regulations.

#### List of Subjects in 26 CFR Part 1

Income taxes, Reporting and record-
keeping requirements.

#### Adoption of Amendments to the Regulations

Accordingly, 26 CFR part 1 is
amended as follows:

PART 1-INCOME TAXES

Paragraph 1. The authority citation for
part 1 continues to read in part as follows:
Authority: 26 U.S.C. 401(m)(9) and 26
U.S.C. 7805. * * *

Par. 2. Section 1.401(k)-1 is amended
by adding paragraph (g)(5) to read as fol-
lows:

§ 1.401(k)-1 Certain cash or deferred
arrangements.

* * * * *

(g) * * *

(5) Applicability date for definitions of
qualified matching contributions (QMACs)
and qualified nonelective contributions
(QNECs). The revisions to the second sen-
tence in the definitions of QMACs and
QNECs in § 1.401(k)-6 apply to plan years
ending on or after July 20, 2018.

Par. 3. Section 1.401(k)-6 is amended
by revising the second sentence in the
definitions of Qualified matching contri-
butions (QMACs) and Qualified nonelec-
tive contributions (QNECs) to read as fol-
lows:

§ 1.401(k)-6 Definitions.

* * * * *

Qualified matching contributions
(QMACs). * * * Thus, the matching
contributions must satisfy the nonfor-
feitability requirements of § 1.401(k)-
1(c) and be subject to the distribution
limitations of § 1.401(k)-1(d) when
they are allocated to participants' ac-
counts. * * *

Qualified nonelective contributions
(QNECs). * * * Thus, the nonelective
contributions must satisfy the nonfor-
feitability requirements of § 1.401(k)-
1(c) and be subject to the distribution
limitations of § 1.401(k)-1(d) when
they are allocated to participants' ac-
counts.

* * * * *

Par. 4. Section 1.401(m)-1 is amended
by adding paragraph (d)(4) to read as fol-
lows:

§ 1.401(m)-1 Employee contributions
and matching contributions.

* * * * *

(d) * * *

(4) Effective date for definitions of
qualified matching contributions (QMACs)
and qualified nonelective contributions
(QNECs). The revisions to the definitions
of QMACs and QNECs in § 1.401(m)-5
apply to plan years ending on or after July
20, 2018.

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Par. 5. Section 1.401(m)-5 is amended
by revising the definitions of Qualified
matching contributions (QMACs) and
Qualified nonelective contributions
(QNECs) to read as follows:

§ 1.401(m)-5 Definitions.

* * * * *

Qualified matching contributions
(QMACs). Qualified matching contribu-
tions or QMACs means qualified match-
ing contributions or QMACs as defined
in § 1.401(k)-6.

Qualified nonelective contributions
(QNECs). Qualified nonelective contribu-
tions or QNECs means qualified nonelec-
tive contributions or QNECs as defined in
§ 1.401(k)-6.

Kirsten Wielobob
Deputy Commissioner for Services and
Enforcement.
Approved: July 13, 2018

David J. Kautter
Assistant Secretary of the Treasury (Tax
Policy).

(Filed by the Office of the Federal Register on July 19, 2018,
8:45 a.m., and published in the issue of the Federal Register
for July 20, 2018, 83 F.R. 34469)

### T.D. 9836

DEPARTMENT OF THE
TREASURY
Internal Revenue Service
26 CFR Part 1 and 602

Substantiation and Reporting
Requirements for Cash and
Noncash Charitable
Contribution Deductions

AGENCY: Internal Revenue Service
(IRS), Treasury.

ACTION: Final regulations.

SUMMARY: These final regulations pro-
vide guidance concerning substantiation
and reporting requirements for cash and
noncash charitable contributions. The fi-
nal regulations reflect the enactment of
provisions of the American Jobs Creation

Act of 2004 and the Pension Protection
Act of 2006. These regulations provide
guidance to individuals, partnerships,
and corporations that make charitable
contributions.

DATES: Effective date: These regulations
are effective on July 30, 2018.

Applicability dates: For dates of
applicability, see §§ 1.170A-1(k), 1.170A-
14(j), 1.170A-15(h), 1.170A-16(g), 1.170A-
17(c), 1.170A-18(d), 1.664-1(f), and
1.6050L-1(h).

FOR FURTHER INFORMATION CON-
TACT: Charles Gorham at (202) 317-5091
or Karin Gross at (202) 317-4609 (not
toll-free numbers).

### SUPPLEMENTARY INFORMATION: Paperwork Reduction Act

The collections of information con-
tained in these final regulations have been
reviewed and approved by the Office of
Management and Budget in accordance
with the Paperwork Reduction Act of
1995 (44 U.S.C. 3507(d)) under control
number 1545-1953.

The collections of information in these
final regulations are in §§ 1.170A-15(a)
and (d)(1); 1.170A-16(a), (b), (c), (d), (e),
and (f); and 1.170A-18(a)(2) and (b).
These collections of information are re-
quired to obtain a benefit and will enable
the IRS to determine if a taxpayer is en-
titled to a claimed deduction for a chari-
table contribution.

An agency may not conduct or spon-
sor, and a person is not required to re-
spond to, a collection of information un-
less it displays a valid control number.

Books or records relating to a collec-
tion of information must be retained as
long as their contents may become mate-
rial in the administration of any internal
revenue law. Generally, tax returns and
return information are confidential, as re-
quired by section 6103.

#### Background

This document contains amendments
to the Income Tax Regulations, 26 CFR
parts 1 and 602, relating to substantiating
and reporting deductions for charitable
contributions under section 170 of the In-
ternal Revenue Code. These final regula-

tions reflect amendments to section 170
made by section 883 of the American Jobs
Creation Act of 2004, Public Law 108-
357 (118 Stat. 1418, 1631) (Jobs Act), and
sections 1216, 1217, and 1219 of the Pen-
sion Protection Act of 2006, Public Law
109-280 (120 Stat. 780, 1079-83)
(PPA), which added new rules for sub-
stantiating charitable contributions. The
final regulations also update cross-
references to the section 170 regulations
in other regulations.

Section 170(f)(8), which has been in
the Code since 1993, provides that no
deduction shall be allowed for any contri-
bution of $250 or more, cash or noncash,
unless the taxpayer substantiates the con-
tribution with a contemporaneous written
acknowledgment of the contribution by
the donee organization. The contempora-
neous written acknowledgment must in-
clude: (1) the amount of cash and a de-
scription (but not value) of any property
other than cash contributed; (2) a state-
ment of whether the donee organization
provided any goods or services in consid-
eration, in whole or in part, for any such
cash or property; and (3) a description and
good faith estimate of the value of any
such goods or services or, if such goods or
services consist solely of intangible reli-
gious benefits, a statement to that effect.

Section 170(f)(11), as added by section
883 of the Jobs Act, restates, in part, sec-
tion 155(a) of the Deficit Reduction Act
of 1984 and contains reporting and sub-
stantiation requirements relating to the
allowance of deductions for noncash
charitable contributions. Under section
170(f)(11)(C), taxpayers are required to
obtain a qualified appraisal for donated
property for which a deduction of more
than $5,000 is claimed.

Under section 170(f)(11)(D), a quali-
fied appraisal must be attached to any tax
return claiming a deduction of more than
$500,000. Section 170(h)(4)(B), as added
by section 1213 of the PPA, adds the
requirement that a qualified appraisal
must be included with the taxpayer's re-
turn for the taxable year of the contribu-
tion for any contribution of a qualified real
property interest that is a restriction as to
the exterior of a building described in
section 170(h)(4)(C)(ii).

Section 170(f)(11)(E), as amended by
section 1219 of the PPA, provides statu-

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tory definitions of qualified appraisal and
qualified appraiser for appraisals pre-
pared with respect to returns filed after
August 17, 2006.

Section 170(f)(11)(E)(i) provides that
the term qualified appraisal means an ap-
praisal that is (1) treated as a qualified
appraisal under regulations or other guid-
ance prescribed by the Secretary, and (2)
conducted by a qualified appraiser in ac-
cordance with generally accepted ap-
praisal standards and any regulations or
other guidance prescribed by the Secre-
tary.

Section 170(f)(11)(E)(ii) provides that
the term qualified appraiser means an in-
dividual who (1) has earned an appraisal
designation from a recognized profes-
sional appraiser organization or has other-
wise met minimum education and experi-
ence requirements set forth in regulations
prescribed by the Secretary, (2) regularly
performs appraisals for which the individ-
ual receives compensation, and (3) meets
such other requirements as may be pre-
scribed by the Secretary in regulations or
other guidance. Section 170(f)(11)(E)(iii)
provides that an individual will not be
treated as a qualified appraiser with re-
spect to any specific appraisal unless that
individual (1) demonstrates verifiable ed-
ucation and experience in valuing the type
of property subject to the appraisal, and
(2) has not been prohibited from practic-
ing before the IRS by the Secretary under
section 330(c) of Title 31 of the United
States Code at any time during the 3-year
period ending on the date of the appraisal.

On October 19, 2006, the Treasury De-
partment and the IRS released Notice 2006-
96, 2006-2 CB 902 (see § 601.601(d)
(2)(ii)(b)), which provides transitional guid-
ance on the definitions of qualified ap-
praisal and qualified appraiser that apply on
and after the effective date of the PPA def-
initions.

Section 170(f)(16) as added by section
1216 of the PPA generally provides that
no deduction is allowed for a contribution
of clothing or a household item unless the
clothing or household item is in good used
condition or better.

Section 170(f)(17) as added by section
1217 of the PPA imposes a recordkeeping
requirement for all cash contributions, re-
gardless of amount. Specifically, section
170(f)(17) requires a donor to maintain as

a record of any cash, check, or other mon-
etary gift (1) a bank record, or (2) a writ-
ten communication from the donee. The
record must show the name of the donee
organization, the date of the contribution,
and the amount of the contribution.

On December 2, 2006, the Treasury
Department and the IRS released Notice
2006-110, 2006-2 CB 1127 (see
§ 601.601(d)(2)(ii)(b)), which provides
rules under section 170(f)(17) for substan-
tiating charitable contributions made by
payroll deduction.

On January 8, 2008, the Treasury De-
partment and the IRS released Notice 2008-
16, 2008-1 CB 315 (see § 601.601(d)
(2)(ii)(b)), which provides rules under sec-
tion 170(f)(17) for substantiating a one-
time, lump-sum charitable contribution of a
cash, check, or other monetary gift made
through the Combined Federal Campaign
(CFC) or a similar program. Taxpayers may
rely on Notice 2006-96, Notice 2006-110,
and Notice 2008-16 prior to the effective
date of these final regulations.

On August 7, 2008, the Treasury De-
partment and the IRS provided guidance
on complying with section 170 as
amended by the Jobs Act and the PPA in
a notice of proposed rulemaking (REG-
140029-07) in the Federal Register (73
FR 45908). The Treasury Department and
the IRS received comments responding to
the notice of proposed rulemaking, and a
public hearing was held on January 23,
2009. Copies of the comments received
are available for public inspection at
www.regulations.gov or upon request. Af-
ter consideration of the comments re-
ceived, the Treasury Department and the
IRS adopt the proposed regulations as re-
vised by this Treasury decision. The revi-
sions are discussed in this preamble.

#### Explanation of Provisions and Summary of Comments

The final regulations implement
changes made by the Jobs Act and PPA to
the substantiation and reporting rules for
charitable contributions under section
170. The final regulations set forth the
substantiation requirements for contribu-
tions of more than $500 under section
170(f)(11)(B) through (D) (added by the
Jobs Act); the new definitions of qualified
appraisal and qualified appraiser applica-
ble to noncash contributions under section

170(f)(11)(E) (added by the PPA); sub-
stantiation requirements for contribu-
tions of clothing and household items
under section 170(f)(16) (added by the
PPA); and recordkeeping requirements
for all cash contributions under section
170(f)(17) (added by the PPA).

The final regulations also update cross-
references to the section 170 regulations
in other regulations.

##### I. Cash, Check, or Other Monetary Gift Substantiation Requirements

Section 1.170A-15 implements the re-
quirements of section 170(f)(17) for cash,
check, or other monetary gift contribu-
tions, as added by the PPA, and clarifies
that these rules supplement the substanti-
ation rules in section 170(f)(8).

#### A. Contributions made to a distributing organization

A donor may make a charitable contri-
bution of cash, check, or other monetary
gift to an organization that collects contri-
butions and distributes them to ultimate
recipient organizations (pursuant to the
donor's instructions or otherwise). The fi-
nal regulations adopt the general rule of
the proposed regulations that treats as a
donee for purposes of sections 170(f)(8)
and 170(f)(17) an organization described
in section 170(c) or a Principal Combined
Fund Organization (PCFO) for purposes
of the Combined Federal Campaign
(CFC) and acting in that capacity. The
CFC is a workplace giving campaign es-
tablished by Executive Order 10728, as
amended by Executive Orders 10927,
12353, and 12404, and administered by
the United States Office of Personnel
Management (OPM). A PCFO adminis-
ters the local campaign and acts as a fiscal
agent for the CFC.

#### 1. Blank Pledge Card is Not Substantiation

Some commenters asked whether a
blank pledge card provided by a donee
organization but filled out by the donor
constitutes adequate substantiation for a
contribution of cash to a distributing

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organization. Section 170(f)(17) requires
a taxpayer to maintain as a record of a
contribution of a cash, check, or other
monetary gift either a bank record or a
written communication from the donee
that shows the name of the donee organi-
zation, the date of the contribution, and
the amount of the contribution. The pro-
posed and final regulations at § 1.170A-
15(b)(2) provide that a bank record in-
cludes a statement from a financial
institution, an electronic fund transfer re-
ceipt, a canceled check, a scanned image
of both sides of a canceled check obtained
from a bank website, or a credit card state-
ment. In addition, the proposed and final
regulations provide that a written commu-
nication includes an email. Because a
blank pledge card provided by the donee
organization to a donor does not show the
information required under section
170(f)(17), it is not sufficient substantia-
tion for a cash, check, or other monetary
gift.

#### 2. Name of Donee for Purposes of CFC

One commenter noted that because the
CFC generally does not include the name
of the donee organization on its pledge
cards, and a PCFO for purposes of
the CFC often is a potential ultimate re-
cipient of a contribution to the CFC, in-
cluding the name of the PCFO on the
pledge card could unduly influence donors
to contribute to the PCFO rather than to
other eligible donees. The commenter
asked that the name of the local CFC
campaign be treated as the name of the
donee organization. The Treasury Depart-
ment and the IRS agree with this com-
ment. Accordingly, § 1.170A-15(d)(2)(ii)
provides that the name of the local CFC
may be used instead of the name of the
PCFO and may be treated as the donee
organization for purposes of sections
170(f)(8) and 170(f)(17) and § 1.170A-
15(d)(1)(ii).

#### B. Compliance with 170(f)(8) and 170(f)(17) in a Single Document

Some commenters asked if a single
written acknowledgment can be used to
satisfy the substantiation rules under sec-
tions 170(f)(8) and 170(f)(17). Section
170(f)(8) does not require that a contem-

poraneous written acknowledgment by
the donee organization include the date
of the contribution. In addition, section
170(f)(17) does not require that a writ-
ten communication from the donee in-
clude a statement of whether any goods
or services were provided in exchange
for the contribution. Although there are
different requirements under sections
170(f)(8) and 170(f)(17), § 1.170A-
15(a)(3) of the final regulations provides
that a single written acknowledgment
that satisfies all substantiation require-
ments under both sections 170(f)(8) and
170(f)(17) is adequate substantiation for
contributions of a cash, check, or other
monetary gift.

##### II. Noncash Substantiation Requirements

Section 1.170A-16 implements the re-
quirements of section 170(f)(11) for non-
cash contributions, as added by the Jobs
Act, and clarifies that these rules are in
addition to the requirements in section
170(f)(8).

Proposed and final § 1.170A-16 pro-
vide that a donor who claims a deduction
for a noncash contribution of less than
$250 is required only to obtain a receipt
from the donee or keep reliable records. A
donor who claims a noncash contribution
of at least $250 but not more than $500 is
required only to obtain a contemporane-
ous written acknowledgment, as provided
under section 170(f)(8) and § 1.170A-
13(f). For claimed noncash contributions
of more than $500 but not more than
$5,000, the donor must obtain a contem-
poraneous written acknowledgment and
must also file a completed Form 8283
(Section A), "Noncash Charitable Contri-
butions," with the return on which the
deduction is claimed. For claimed non-
cash contributions of more than $5,000, in
addition to a contemporaneous written ac-
knowledgment, the donor generally must
obtain a qualified appraisal and must also
complete and file either Section A or Sec-
tion B of Form 8283 (depending on the
type of property contributed) with the re-
turn on which the deduction is claimed.
For claimed noncash contributions of
more than $500,000, the donor must also
attach a copy of the qualified appraisal to
the return for the taxable year in which the
contribution is made.

Section 170(f)(11)(F) provides that
for purposes of the $500, $5,000, and
$500,000 thresholds in section 170(f)(11),
similar items contributed during the tax-
able year are treated as one property. In
determining whether a contribution meets
the $250 threshold, § 1.170A-13(f)(1)
provides that separate contributions made
during the tax year, regardless of whether
the sum of those contributions equal or
exceed $250, are not combined. The pro-
posed and final regulations also provide
that the requirements for substantiation
that must be submitted with a return also
apply to the return for any carryover year
under section 170(d).

###### A. Reasonable Cause Exception

In light of recent case law (see Crimi v.
Commissioner, T.C. Memo. 2013-51), the
paragraph relating to the reasonable cause
exception set forth in proposed regulation
§ 1.170A-16(f)(6) has been deleted from
the final regulations because it is incon-
sistent with the Tax Court's position. In
Crimi, the IRS argued that there was no
qualified appraisal. The Tax Court dis-
cussed the doctrine of substantial compli-
ance with respect to the qualified appraisal
regulation, but stated that it was unneces-
sary to decide whether it was applicable to
the petitioners' case because they estab-
lished that the failure was due to reason-
able cause. Specifically, the court stated
that a reasonable cause inquiry is "inher-
ently a fact-intensive one, and facts and
circumstances must be judged on a case-
by-case basis." Id. at *99. The court found
that petitioners reasonably and in good
faith relied on their long-time certified
public accountant's advice that their ap-
praisal met all the legal requirements to
claim the deduction. Thus, the final regu-
lations do not contain a standard for the
reasonable cause exception.

###### B. Appraiser privacy concerns

A number of commenters expressed
concern over appraisers' privacy if the
appraiser's social security number is re-
quired on qualified appraisals and Forms
8283 (Section B). This concern was ad-
dressed by the proposed regulations. Both
the proposed and final regulations require
an appraiser to use a taxpayer identifica-

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tion number on an appraisal, but that num-
ber does not need to be the appraiser's
social security number. An appraiser may
use an employer identification number,
which may be obtained by: (1) applying
on the IRS website (www.regulations.
gov); or (2) filing a completed Form
SS-4, Application for Employer Identifi-
cation Number, by mail or by fax. The
IRS has modified the instructions to Form
8283 to make clear that an appraiser may
use either a social security number or an
employer identification number.

#### C. Form 8283 is not a contemporaneous written acknowledgment

One commenter asked whether a Form
8283 can satisfy the requirement for a
contemporaneous written acknowledg-
ment under section 170(f)(8). Although no
format is prescribed for a contemporane-
ous written acknowledgment (for exam-
ple, an email may qualify), a contempo-
raneous written acknowledgment of a
contribution by the donee organization
must contain all of the information re-
quired by section 170(f)(8)(B). More-
over, section 170(f)(8)(A) states that the
acknowledgment is made "by the donee
organization." Only Section B, part IV
of Form 8283, completed for property
valued at over $5,000, is a donee ac-
knowledgment, and this acknowledg-
ment only contains some of the infor-
mation required by section 170(f)(8)(B).
Accordingly, even a fully-completed
Form 8283 does not satisfy the require-
ments of section 170(f)(8).

#### D. Form 8283 (Section B) provided to donee.

Another commenter suggested that the
Form 8283 (Section B) should be required
to be fully completed, including the ap-
praiser information and the appraised or
claimed value of the property, before the
donor obtains the donee's signature. Sec-
tion 1.170A-16(d)(5)(iii) of the proposed
regulations provides that specific portions
of the Form 8283 (Section B) must be
completed before it is signed by the do-
nee, but that the Form 8283 (Section B)
does not need to contain certain other in-
formation, such as the appraiser informa-
tion and the appraised or claimed value of

the property, before the donee signs the
form. Regardless of any benefits that may
result from additional information shar-
ing, the public should have the opportu-
nity to comment on any proposed require-
ment to share additional information with
the donee. Accordingly, the final regula-
tions adopt the proposed regulation lan-
guage without adoption of this suggestion.

E. Attaching appraisal to carryover year
returns

One commenter suggested deleting the
requirement in the regulations to attach an
appraisal to the tax returns for carryover
years. Because the need for the IRS to
have the appraisal attached to each return
reflecting a contribution in excess of
$500,000 outweighs the burden on tax-
payers to supply it, the final regulations
retain this requirement. Accordingly, if
the appraisal is required to be attached to
the return for the contribution year, it must
also be attached to the returns for the
carryover years.

#### III. New Requirements for Qualified Appraisals and Qualified Appraisers

As prescribed in section 170(f)(11)(E),
as amended by the PPA, § 1.170A-17 of
the proposed and final regulations pro-
vides definitions for qualified appraisal
and qualified appraiser.

#### A. Transitional rule

One commenter suggested that a tran-
sitional rule be included for § 1.170A-17
because additional time may be needed to
meet the education and experience re-
quirements in § 1.170A-17 for qualified
appraisers. In order to provide appraisers
with a reasonable amount of time to meet
the new education and experience require-
ments, the final rules under § 1.170A-17
apply only to contributions made on or
after January 1, 2019.

#### B. Definition of generally accepted appraisal standards

Section 170(f)(11)(E)(i)(II) provides
that the term qualified appraisal means an
appraisal that is conducted by a qualified
appraiser in accordance with generally ac-
cepted appraisal standards. Generally ac-

cepted appraisal standards are defined in
the proposed regulations at § 1.170A-
17(a)(2) as the "substance and principles
of the Uniform Standards of Professional
Appraisal Practice [USPAP], as devel-
oped by the Appraisal Standards Board of
the Appraisal Foundation." Several com-
menters recommended that the final regu-
lations require appraisal documents to be
prepared "in accordance with USPAP"
and not merely in accordance with the
"substance and principles of USPAP."
Other commenters indicated that strict
compliance with USPAP would eliminate
use of all other appraisal standards, in-
cluding some that are generally accepted
in the appraisal industry. The Treasury
Department and the IRS agree that it is
beneficial to provide some flexibility by
requiring conformity with appraisal stan-
dards that are consistent with the sub-
stance and principles of USPAP rather
than requiring that all appraisals be pre-
pared strictly in accordance with USPAP.
Accordingly, the final regulations do not
adopt the recommendation to require strict
compliance with USPAP and retain the
requirement of consistency with the sub-
stance and principles of USPAP.

#### C. Education and experience requirement for qualified appraisers

Section 170(f)(11)(E)(ii)(I) and (iii)(I)
and § 1.170A-17(b) of the proposed reg-
ulations provide that a qualified appraiser
is an individual with verifiable education
and experience in valuing the type of
property for which the appraisal is per-
formed. Some commenters reiterated sug-
gestions made in response to Notice
2006-96 that the final regulations inter-
pret the requirement in section 170(f)
(11)(E) that a qualified appraiser have ver-
ifiable "education and experience" as re-
quiring verifiable "education or experi-
ence." The Treasury Department and the
IRS did not adopt this suggestion in the
proposed regulations, and do not do so in
the final regulations, because it would be
contrary to the clear language of the stat-
ute.

Section 1.170A-17(b)(4) of the pro-
posed regulations requires an appraiser to
specify in the appraisal the appraiser's
education and experience in valuing the
type of property and to make a declaration

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in the appraisal that, because of the ap-
praiser's education and experience, the
appraiser is qualified to make appraisals
of the type of property being valued. A
commenter suggested that, to meet the
"verifiable" requirement in § 1.170A-
17(b), the appraiser should be required to
specify in the appraisal only that the ap-
praiser is a qualified appraiser under
§ 1.170A-17(b) and that the appraisal was
prepared in accordance with the substance
and principles of USPAP. The general
statement of qualification suggested by
the commenter does not demonstrate,
as required under section 170(f)(11)(E)
(iii)(I), that the appraiser has verifiable
education and experience that qualifies the
appraiser to prepare the appraisal for that
type of property. Accordingly, the final
regulations do not adopt this suggestion.

#### D. Parity between "designation" and "education and experience"

Section 1.170A-17(b)(2)(i) of the pro-
posed regulations provides that an indi-
vidual is treated as having education and
experience in valuing the type of property
if, as of the date the individual signs the
appraisal, the individual has satisfied the
following requirements: (A) successfully
completed professional or college-level
coursework in valuing the type of prop-
erty and has two or more years of experi-
ence in valuing the type of property; or
(B) earned a recognized appraiser desig-
nation for the type of property. One com-
menter suggested that it is much more
difficult to earn a designation from a gen-
erally recognized professional appraiser
organization under § 1.170A-17(b)(2)
(i)(B) than to satisfy the education and
experience requirements under § 1.170A-
17(b)(2)(i)(A). The commenter suggested
that the education and experience require-
ments be made more stringent. In enacting
section 170(f)(11)(E), Congress intended
to improve the accuracy of deductions
claimed for noncash contributions by re-
quiring qualified appraisers to meet more
stringent qualification standards, including
by requiring that both education and expe-
rience requirements be met. See H.R. Rep.
No. 108-548, pt. 1, at 356 (2004). The
requirements for education and experience
in the proposed regulations are sufficiently
stringent as intended by Congress. Accord-

ingly, the final regulations do not adopt this
suggestion and retain without modification
the requirements for education and experi-
ence in the proposed regulations.

E. Satisfying verifiable education
requirement

Section 170(f)(11)(E)(iii)(I) requires
verifiable education and experience in
valuing the type of property subject to the
appraisal. Section 1.170A-17(b)(2)(i)(A)
of the proposed regulations provides
that an individual is treated as having
education and experience in valuing the
type of property if, as of the date the
individual signs the appraisal, the indi-
vidual has successfully completed (for
example, received a passing grade on
a final examination) professional or
college-level coursework in valuing the
type of property, and has two or more
years of experience in valuing the type
of property. One commenter asked
whether attendance at a training event
that does not include a final examination
meets the requirement of successful
completion of coursework. The refer-
ence to a passing grade on a final exam-
ination in § 1.170A-17(b)(2)(i)(A) is
merely an example of what is consid-
ered successful completion of profes-
sional or college-level coursework, and
other evidence of successful completion
may be sufficient. However, mere atten-
dance at a training event is not suffi-
cient, and evidence of successful com-
pletion of coursework is necessary
under the final regulations.

#### F. Education provided by trade organization

Two commenters pointed out that, in
addition to generally recognized profes-
sional appraiser organizations, a gener-
ally recognized professional trade orga-
nization may provide coursework that
satisfies the requirement for verifiable
education in valuing the type of prop-
erty under § 1.170A-17(b)(2)(i)(A) and
(ii)(B). The Treasury Department and
the IRS agree with this comment,
and the final regulations provide that an
appraiser also can satisfy § 1.170A-
17(b)(2)(i)(A) and (ii)(B) by successfully
completing coursework in valuing the type

of property from a generally recognized pro-
fessional trade organization.

#### G. Examples of generally recognized professional appraiser organizations

Some commenters objected to the ref-
erences in the proposed regulations to des-
ignations conferred by one particular or-
ganization as examples of recognized
appraiser designations. The Treasury De-
partment and the IRS do not require or
prefer the designation of any particular
appraiser organization, and, therefore, the
final regulations do not contain examples
of any designations.

#### IV. Additional Comments

A number of commenters requested that
the Treasury Department and the IRS pro-
vide that the final regulations apply to char-
itable contributions for all federal tax pur-
poses, including estate and gift tax. These
regulations are promulgated under Jobs Act
and PPA provisions that apply only to in-
come tax deductions for charitable contribu-
tions under section 170. No substantive
changes were made to the proposed regula-
tions in response to these comments because
these comments were beyond the scope of
the proposed regulations.

Some commenters suggested that ap-
praisers be allowed to use certain IRS
valuation tables, such as those for chari-
table remainder trusts, other remainder in-
terests in property, and life insurance pol-
icies, instead of a qualified appraisal.
These tables may be used to value prop-
erty in certain other contexts, but they do
not necessarily provide a fair market value
of the property contributed. Therefore,
these tables are not acceptable substitutes
for a qualified appraisal to substantiate
deductions for charitable contributions
under section 170.

Another commenter suggested that tax-
payers should not be required to substan-
tiate their charitable contribution deduc-
tion with a qualified appraisal when they
purchase medical equipment, such as a
Magnetic Resonance Imaging (MRI) ma-
chine, and donate the equipment to a qual-
ified organization. The purchase price of
the medical equipment may differ from its
fair market value. A qualified appraisal
prepared by a qualified appraiser is re-

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quired to determine the fair market value
at the time of contribution. Therefore, no
changes were made to the proposed regu-
lations in response to this comment.

#### Effect on Other Documents

Notice 2006-96 provides transitional
guidance on the definitions of qualified
appraisal and qualified appraiser under
section 170(f)(11). Notice 2006-110 pro-
vides transitional guidance under section
170(f)(17) for substantiating charitable
contributions made by payroll deduction.
Notice 2008-16 provides transitional
guidance under section 170(f)(17) for sub-
stantiating a one-time, lump-sum charita-
ble contribution of a cash, check, or other
monetary gift made through the CFC or a
similar program. All three notices provide
that taxpayers may rely on the notices
until final regulations are effective. Ac-
cordingly, Notice 2006-110 and Notice
2008-16 are obsolete as of July 30, 2018
and Notice 2006-96 is obsolete as of Jan-
uary 1, 2019.

#### V. Applicability Dates

In general, §§ 1.170A-15, 1.170A-16,
and 1.170A-18 apply to contributions
made after July 30, 2018. Section
1.170A-17 applies to contributions made
on or after January 1, 2019. Taxpayers are
reminded that the effective dates of the
Jobs Act and the PPA relating to substan-
tiating and reporting charitable contribu-
tions precede the effective date of these
final regulations, and the Jobs Act and the
PPA apply in accordance with their appli-
cability dates. See Notice 2006-96.

### Special Analyses

This regulation is not subject to review
under section 6(b) of Executive Order
12866 pursuant to the Memorandum of
Agreement (April 11, 2018) between the
Department of the Treasury and the Office
of Management and Budget regarding re-
view of tax regulations. Further it is
hereby certified that these regulations will
not have a significant economic impact on
a substantial number of small entities. Ac-
cordingly, a Regulatory Flexibility Anal-
ysis under the Regulatory Flexibility Act
(5 U.S.C. chapter 6) is not required. Al-
though this rule could affect a substantial

number of small entities, any economic
impact is expected to be minimal. The
final rule provides clarifications and sim-
plifications to the existing substantiation
and reporting requirements for charitable
contributions and are designed to reduce
the burden on taxpayers. Further, any sub-
stantiation and reporting rules contained
in these final regulations that are in addi-
tion to the rules in current regulations
reflect statutory substantiation and report-
ing requirements. Pursuant to section
7805(f) of the Internal Revenue Code, the
notice of proposed rulemaking preceding
this regulation was submitted to the Chief
Counsel for Advocacy of the Small Busi-
ness Administration for comment on its
impact on small business, and no com-
ments were received.

### Drafting Information

The principal authors of these regula-
tions are Charles Gorham and Karin Gross
of the Office of Associate Chief Counsel
(Income Tax and Accounting). Other per-
sonnel from the Treasury Department and
the IRS participated in their development.
List of Subjects

#### 26 CFR Part 1

Income taxes, Reporting and record-
keeping requirements.

26 CFR Part 602

Reporting and recordkeeping require-
ments.

### Adoption of Amendments to the Regu- lations

Accordingly, 26 CFR parts 1 and 602
are amended as follows:

## PART 1-INCOME TAXES

Paragraph 1. The authority citation for
part 1 amended by adding sectional
authorities for §§ 1.170A-15 through
1.170A-18 in numerical order to read in
part as follows:

Authority: 26 U.S.C. 7805

* * * * *

§ 1.170A-15 also issued under 26
U.S.C. 170(a)(1).

§ 1.170A-16 also issued under 26
U.S.C. 170(a)(1) and 170(f)(11).

§ 1.170A-17 also issued under 26
U.S.C. 170(a)(1) and 170(f)(11).

§ 1.170A-18 also issued under 26
U.S.C. 170(a)(1).

* * * * *

### §§ 1.170-0, 1.170-1, and 1.170-2 [Removed]

Par. 2. Sections 1.170-0, 1.170-1, and
1.170-2 are removed.

Par. 3. Section 1.170A-1 is amended
by revising the third sentence of para-
graph (a) and adding two sentences to the
end of paragraph (k) to read as follows:

§ 1.170A-1 Charitable, etc.,
contributions and gifts; allowance of
deduction.

(a) * * * For rules relating to record
keeping and return requirements in sup-
port of deductions for charitable contribu-
tions (whether by an itemizing or no-
nitemizing taxpayer), see §§ 1.170A-13
(generally applicable to contributions on
or before July 30, 2018), 1.170A-14,
1.170A-15, 1.170A-16, 1.170A-17, and
1.170A-18. * * *

* * * * *

(k) * * * The third sentence of para-
graph (a) applies as provided in the sec-
tions referenced in that sentence.

Par. 4. Section 1.170A-14 is amended
by revising paragraphs (i) and (j) to read
as follows:

### § 1.170A-14. Qualified conservation contributions.

* * * * *

(i) Substantiation requirement. If a tax-
payer makes a qualified conservation con-
tribution and claims a deduction, the tax-
payer must maintain written records of the
fair market value of the underlying prop-
erty before and after the donation and the
conservation purpose furthered by the do-
nation, and such information shall be
stated in the taxpayer's income tax return
if required by the return or its instructions.
See also § 1.170A-13(c) (relating to sub-
stantiation requirements for deductions in
excess of $5,000 for charitable contribu-
tions made on or before July 30, 2018);
§ 1.170A-16(d) (relating to substantiation
of charitable contributions of more than
$5,000 made after July 30, 2018);
§ 1.170A-17 (relating to the definitions of
qualified appraisal and qualified appraiser
for substantiation of contributions made
on or after January 1, 2019); and section
6662 (relating to the imposition of an
accuracy-related penalty on underpay-

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ments). Taxpayers may rely on the rules in
§ 1.170A-16(d) for contributions made
after June 3, 2004, or appraisals prepared
for returns or submissions filed after Au-
gust 17, 2006. Taxpayers may rely on the
rules in § 1.170A-17 for appraisals pre-
pared for returns or submissions filed after
August 17, 2006.

(j) Effective/applicability dates. Except
as otherwise provided in § 1.170A-
14(g)(4)(ii) and § 1.170A-14(i), this sec-
tion applies only to contributions made on
or after December 18, 1980.

Par. 5. Section 1.170A-15 is added to
read as follows:

§ 1.170A-15 Substantiation require-
ments for charitable contribution of a
cash, check, or other monetary gift.

(a) In general-(1) Bank record or
written communication required. No de-
duction is allowed under sections 170(a)
and 170(f)(17) for a charitable contribu-
tion in the form of a cash, check, or other
monetary gift, as described in paragraph
(b)(1) of this section, unless the donor
substantiates the deduction with a bank
record, as described in paragraph (b)(2) of
this section, or a written communication,
as described in paragraph (b)(3) of this
section, from the donee showing the name
of the donee, the date of the contribution,
and the amount of the contribution.

(2) Additional substantiation required
for contributions of $250 or more. No
deduction is allowed under section 170(a)
for any contribution of $250 or more un-
less the donor substantiates the contribu-
tion with a contemporaneous written ac-
knowledgment, as described in section
170(f)(8) and § 1.170A-13(f), from the
donee.

(3) Single document may be used. The
requirements of paragraphs (a)(1) and (2)
of this section may be met by a single
document that contains all the information
required by paragraphs (a)(1) and (2) of
this section, if the document is obtained
by the donor no later than the date pre-
scribed by paragraph (c) of this section.

(b) Terms-(1) Monetary gift includes
a transfer of a gift card redeemable for
cash, and a payment made by credit card,
electronic fund transfer (as described in
section 5061(e)(2)), an online payment
service, or payroll deduction.

(2) Bank record includes a statement
from a financial institution, an electronic
fund transfer receipt, a canceled check, a
scanned image of both sides of a canceled
check obtained from a bank website, or a
credit card statement.

(3) Written communication includes
email.

(c) Deadline for receipt of substantia-
tion. The substantiation described in para-
graph (a) of this section must be received
by the donor on or before the earlier of-

(1) The date the donor files the original
return for the taxable year in which the
contribution was made; or

(2) The due date, including any exten-
sion, for filing the donor's original return
for that year.

(d) Special rules-(1) Contributions
made by payroll deduction. In the case of
a charitable contribution made by payroll
deduction, a donor is treated as meeting
the requirements of section 170(f)(17) and
paragraph (a) of this section if, no later
than the date described in paragraph (c) of
this section, the donor obtains-

(i) A pay stub, Form W-2, "Wage and
Tax Statement," or other employer-
furnished document that sets forth the
amount withheld during the taxable year
for payment to a donee; and

(ii) A pledge card or other document
prepared by or at the direction of the do-
nee that shows the name of the donee.

(2) Distributing organizations as do-
nees. The following organizations are
treated as donees for purposes of section
170(f)(17) and paragraph (a) of this sec-
tion, even if the organization (pursuant to
the donor's instructions or otherwise) dis-
tributes the amount received to one or
more organizations described in section
170(c):

(i) An organization described in sec-
tion 170(c).

(ii) An organization described in 5
CFR 950.105 (a Principal Combined Fund
Organization (PCFO) for purposes of the
Combined Federal Campaign (CFC)) and
acting in that capacity. For purposes of the
requirement for a written communication
under section 170(f)(17), if the donee is a
PCFO, the name of the local CFC cam-
paign may be treated as the name of the
donee organization.

(e) Substantiation of out-of-pocket ex-
penses. Paragraph (a)(1) of this section

does not apply to a donor who incurs
unreimbursed expenses of less than $250
incident to the rendition of services,
within the meaning of § 1.170A-1(g). For
substantiation of unreimbursed out-of-
pocket expenses of $250 or more, see
§ 1.170A-13(f)(10).

(f) Charitable contributions made by
partnership or S corporation. If a partner-
ship or an S corporation makes a charita-
ble contribution, the partnership or S cor-
poration is treated as the donor for
purposes of section 170(f)(17) and para-
graph (a) of this section.

(g) Transfers to certain trusts. The re-
quirements of section 170(f)(17) and para-
graphs (a)(1) and (3) of this section do not
apply to a transfer of a cash, check, or
other monetary gift to a trust described in
section 170(f)(2)(B); a charitable remain-
der annuity trust, as described in section
664(d)(1) and the corresponding regula-
tions; or a charitable remainder unitrust,
as described in section 664(d)(2) or (d)(3)
and the corresponding regulations. The re-
quirements of section 170(f)(17) and para-
graphs (a)(1) and (2) of this section do
apply, however, to a transfer to a pooled
income fund, as defined in section
642(c)(5).

(h) Effective/applicability date. This
section applies to contributions made after
July 30, 2018. Taxpayers may rely on the
rules of this section for contributions
made in taxable years beginning after Au-
gust 17, 2006.

Par. 6. Section 1.170A-16 is added to
read as follows:

§ 1.170A-16 Substantiation and
reporting requirements for noncash
charitable contributions.

(a) Substantiation of charitable contri-
butions of less than $250-(1) Individu-
als, partnerships, and certain corpora-
tions required to obtain receipt. Except as
provided in paragraph (a)(2) of this sec-
tion, no deduction is allowed under
section 170(a) for a noncash charitable
contribution of less than $250 by an indi-
vidual, partnership, S corporation, or C
corporation that is a personal service cor-
poration or closely held corporation un-
less the donor maintains for each contri-
bution a receipt from the donee showing
the following information:

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(i) The name and address of the donee;

(ii) The date of the contribution;

(iii) A description of the property in
sufficient detail under the circumstances
(taking into account the value of the prop-
erty) for a person who is not generally
familiar with the type of property to as-
certain that the described property is the
contributed property; and

(iv) In the case of securities, the name of
the issuer, the type of security, and whether
the securities are publicly traded securi-
ties within the meaning of § 1.170A-
13(c)(7)(xi).

(2) Substitution of reliable written re-
cords-(i) In general. If it is impractica-
ble to obtain a receipt (for example, where
a donor deposits property at a donee's
unattended drop site), the donor may sat-
isfy the recordkeeping rules of this para-
graph (a) by maintaining reliable written
records, as described in paragraphs
(a)(2)(ii) and (iii) of this section, for the
contributed property.

(ii) Reliable written records. The reli-
ability of written records is to be deter-
mined on the basis of all of the facts and
circumstances of a particular case, includ-
ing the proximity in time of the written
record to the contribution.

(iii) Contents of reliable written re-
cords. Reliable written records must in-
clude-

(A) The information required by para-
graph (a)(1) of this section;

(B) The fair market value of the prop-
erty on the date the contribution was
made;

(C) The method used in determining
the fair market value; and

(D) In the case of a contribution of
clothing or a household item as defined in
§ 1.170A-18(c), the condition of the item.

(3) Additional substantiation rules may
apply. For additional substantiation rules,
see paragraph (f) of this section.

(b) Substantiation of charitable contri-
butions of $250 or more but not more than
$500. No deduction is allowed under sec-
tion 170(a) for a noncash charitable con-
tribution of $250 or more but not more
than $500 unless the donor substantiates
the contribution with a contemporaneous
written acknowledgment, as described in
section 170(f)(8) and § 1.170A-13(f).

(c) Substantiation of charitable contri-
butions of more than $500 but not more

than $5,000-(1) In general. No deduc-
tion is allowed under section 170(a) for a
noncash charitable contribution of more
than $500 but not more than $5,000 unless
the donor substantiates the contribution
with a contemporaneous written acknowl-
edgment, as described in section 170(f)(8)
and § 1.170A-13(f), and meets the appli-
cable requirements of this section.

(2) Individuals, partnerships, and cer-
tain corporations also required to file
Form 8283 (Section A). No deduction is
allowed under section 170(a) for a non-
cash charitable contribution of more than
$500 but not more than $5,000 by an
individual, partnership, S corporation, or
C corporation that is a personal service
corporation or closely held corporation
unless the donor completes Form 8283
(Section A), "Noncash Charitable Contri-
butions," as provided in paragraph (c)(3)
of this section, or a successor form, and
files it with the return on which the de-
duction is claimed.

(3) Completion of Form 8283 (Section
A). A completed Form 8283 (Section A)
includes-

(i) The donor's name and taxpayer
identification number (for example, a so-
cial security number or employer identifi-
cation number);

(ii) The name and address of the donee;

(iii) The date of the contribution;

(iv) The following information about
the contributed property:

(A) A description of the property in
sufficient detail under the circumstances,
taking into account the value of the prop-
erty, for a person who is not generally
familiar with the type of property to as-
certain that the described property is the
contributed property;

(B) In the case of real or tangible per-
sonal property, the condition of the prop-
erty;

(C) In the case of securities, the name
of the issuer, the type of security, and
whether the securities are publicly
traded securities within the meaning of
§ 1.170A-13(c)(7)(xi);

(D) The fair market value of the prop-
erty on the date the contribution was made
and the method used in determining the
fair market value;

(E) The manner of acquisition (for ex-
ample, by purchase, gift, bequest, inheri-
tance, or exchange), and the approximate

date of acquisition of the property by the
donor (except that in the case of a contri-
bution of publicly traded securities as de-
fined in § 1.170A-13(c)(7)(xi), a repre-
sentation that the donor held the securities
for more than one year is sufficient) or, if
the property was created, produced, or
manufactured by or for the donor, the
approximate date the property was sub-
stantially completed;

(F) The cost or other basis, adjusted as
provided by section 1016, of the property
(except that the cost or basis is not re-
quired for contributions of publicly traded
securities (as defined in § 1.170A-
13(c)(7)(xi)) that would have resulted in
long-term capital gain if sold on the con-
tribution date, unless the donor has elected
to limit the deduction to basis under sec-
tion 170(b)(1)(C)(iii));

(G) In the case of tangible personal
property, whether the donee has certified
it for a use related to the purpose or func-
tion constituting the donee's basis for ex-
emption under section 501, or in the case
of a governmental unit, an exclusively
public purpose; and

(v) Any other information required by
Form 8283 (Section A) or the instructions
to Form 8283 (Section A).

(4) Additional requirement for certain
vehicle contributions. In the case of a con-
tribution of a qualified vehicle described
in section 170(f)(12)(E) for which an ac-
knowledgment by the donee organization
is required under section 170(f)(12)(D),
the donor must attach a copy of the ac-
knowledgment to the Form 8283 (Section
A) for the return on which the deduction is
claimed.

(5) Additional substantiation rules may
apply. For additional substantiation rules,
see paragraph (f) of this section.

(d) Substantiation of charitable contri-
butions of more than $5,000-(1) In gen-
eral. Except as provided in paragraph
(d)(2) of this section, no deduction is al-
lowed under section 170(a) for a noncash
charitable contribution of more than
$5,000 unless the donor-

(i) Substantiates the contribution with a
contemporaneous written acknowledg-
ment, as described in section 170(f)(8)
and § 1.170A-13(f);

(ii) Obtains a qualified appraisal, as
defined in § 1.170A-17(a)(1), prepared by

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a qualified appraiser, as defined in
§ 1.170A-17(b)(1); and

(iii) Completes Form 8283 (Section B),
as provided in paragraph (d)(3) of this
section, or a successor form, and files it
with the return on which the deduction is
claimed.

(2) Exception for certain noncash con-
tributions. A qualified appraisal is not
required, and a completed Form 8283
(Section A) containing the information re-
quired in paragraph (c)(3) of this section
meets the requirements of paragraph
(d)(1)(iii) of this section for contributions
of-

(i) Publicly traded securities as defined
in § 1.170A-13(c)(7)(xi);

(ii) Property described in section
170(e)

(1)(B)(iii) (certain intellectual property);

(iii) A qualified vehicle described in
section 170(f)(12)(A)(ii) for which an ac-
knowledgment under section 170(f)(12)
(B)(iii) is provided; and

(iv) Property described in section
1221(a)(1) (inventory and property held
by the donor primarily for sale to custom-
ers in the ordinary course of the donor's
trade or business).

(3) Completed Form 8283 (Section B).
A completed Form 8283 (Section B) in-
cludes-

(i) The donor's name and taxpayer
identification number (for example, a so-
cial security number or employer identifi-
cation number);

(ii) The donee's name, address, tax-
payer identification number, signature, the
date signed by the donee, and the date the
donee received the property;

(iii) The appraiser's name, address,
taxpayer identification number, appraiser
declaration, as described in paragraph
(d)(4) of this section, signature, and the
date signed by the appraiser;

(iv) The following information about
the contributed property:

(A) The fair market value on the val-
uation effective date, as defined in
§ 1.170A-17(a)(5)(i).

(B) A description in sufficient detail
under the circumstances, taking into ac-
count the value of the property, for a per-
son who is not generally familiar with the
type of property to ascertain that the de-
scribed property is the contributed prop-
erty.

(C) In the case of real property or tan-
gible personal property, the condition of
the property;

(v) The manner of acquisition (for ex-
ample, by purchase, gift, bequest, inheri-
tance, or exchange), and the approximate
date of acquisition of the property by the
donor, or, if the property was created,
produced, or manufactured by or for the
donor, the approximate date the property
was substantially completed;

(vi) The cost or other basis of the prop-
erty, adjusted as provided by section
1016;

(vii) A statement explaining whether
the charitable contribution was made by
means of a bargain sale and, if so, the
amount of any consideration received for
the contribution; and

(viii) Any other information required
by Form 8283 (Section B) or the instruc-
tions to Form 8283 (Section B).

(4) Appraiser declaration. The ap-
praiser declaration referred to in para-
graph (d)(3)(iii) of this section must
include the following statement: "I under-
stand that my appraisal will be used in
connection with a return or claim for re-
fund. I also understand that, if there is a
substantial or gross valuation misstate-
ment of the value of the property claimed
on the return or claim for refund that is
based on my appraisal, I may be subject to
a penalty under section 6695A of the In-
ternal Revenue Code, as well as other
applicable penalties. I affirm that I have
not been at any time in the three-year
period ending on the date of the appraisal
barred from presenting evidence or testi-
mony before the Department of the Trea-
sury or the Internal Revenue Service pur-
suant to 31 U.S.C. section 330(c)."

(5) Donee signature-(i) Person au-
thorized to sign. The person who signs
Form 8283 (Section B) for the donee must
be either an official authorized to sign the
tax or information returns of the donee, or
a person specifically authorized to sign
Forms 8283 (Section B) by that official. In
the case of a donee that is a governmental
unit, the person who signs Form 8283
(Section B) for the donee must be an
official of the governmental unit.

(ii) Effect of donee signature. The sig-
nature of the donee on Form 8283 (Sec-
tion B) does not represent concurrence in
the appraised value of the contributed

property. Rather, it represents acknowl-
edgment of receipt of the property de-
scribed in Form 8283 (Section B) on the
date specified in Form 8283 (Section B)
and that the donee understands the infor-
mation reporting requirements imposed
by section 6050L and § 1.6050L-1.

(iii) Certain information not required
on Form 8283 (Section B) before donee
signs. Before Form 8283 (Section B) is
signed by the donee, Form 8283 (Section
B) must be completed (as described in
paragraph (d)(3) of this section), except
that it is not required to contain the fol-
lowing:

(A) The appraiser declaration or infor-
mation about the qualified appraiser.

(B) The manner or date of acquisition.

(C) The cost or other basis of the prop-
erty.

(D) The appraised fair market value of
the contributed property.

(E) The amount claimed as a charitable
contribution.

(6) Additional substantiation rules may
apply. For additional substantiation rules,
see paragraph (f) of this section.

(7) More than one appraiser. More
than one appraiser may appraise the do-
nated property. If more than one appraiser
appraises the property, the donor does not
have to use each appraiser's appraisal for
purposes of substantiating the charitable
contribution deduction under this para-
graph (d). If the donor uses the appraisal
of more than one appraiser, or if two or
more appraisers contribute to a single ap-
praisal, each appraiser shall comply with
the requirements of this paragraph (d) and
the requirements in § 1.170A-17, includ-
ing signing the qualified appraisal and ap-
praisal summary.

(e) Substantiation of noncash charitable
contributions of more than $500,000-(1) In
general. Except as provided in paragraph
(e)(2) of this section, no deduction is al-
lowed under section 170(a) for a noncash
charitable contribution of more than
$500,000 unless the donor-

(i) Substantiates the contribution with a
contemporaneous written acknowledg-
ment, as described in section 170(f)(8)
and § 1.170A-13(f);

(ii) Obtains a qualified appraisal, as
defined in § 1.170A-17(a)(1), prepared by
a qualified appraiser, as defined in
§ 1.170A-17(b)(1);

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(iii) Completes, as described in para-
graph (d)(3) of this section, Form 8283
(Section B) and files it with the return on
which the deduction is claimed; and

(iv) Attaches the qualified appraisal of
the property to the return on which the
deduction is claimed.

(2) Exception for certain noncash con-
tributions. For contributions of property
described in paragraph (d)(2) of this sec-
tion, a qualified appraisal is not required,
and a completed Form 8283 (Section A),
containing the information required in
paragraph (c)(3) of this section, meets the
requirements of paragraph (e)(1)(iii) of
this section.

(3) Additional substantiation rules may
apply. For additional substantiation rules,
see paragraph (f) of this section.

(f) Additional substantiation rules-
(1) Form 8283 (Section B) furnished by
donor to donee. A donor who presents a
Form 8283 (Section B) to a donee for
signature must furnish to the donee a copy
of the Form 8283 (Section B).

(2) Number of Forms 8283 (Section A
or Section B)-(i) In general. For each
item of contributed property for which a
Form 8283 (Section A or Section B) is
required under paragraphs (c), (d), or (e)
of this section, a donor must attach a sep-
arate Form 8283 (Section A or Section B)
to the return on which the deduction for
the item is claimed.

(ii) Exception for similar items. The
donor may attach a single Form 8283
(Section A or Section B) for all similar
items of property, as defined in § 1.170A-
13(c)(7)(iii), contributed to the same do-
nee during the donor's taxable year, if the
donor includes on Form 8283 (Section A
or Section B) the information required by
paragraph (c)(3) or (d)(3) of this section
for each item of property.

(3) Substantiation requirements for
carryovers of noncash contribution de-
ductions. The rules in paragraphs (c), (d),
and (e) of this section (regarding substan-
tiation that must be submitted with a re-
turn) also apply to the return for any car-
ryover year under section 170(d).

(4) Partners and S corporation share-
holders-(i) Form 8283 (Section A or
Section B) must be provided to partners
and S corporation shareholders. If the
donor is a partnership or S corporation,
the donor must provide a copy of the

completed Form 8283 (Section A or Sec-
tion B) to every partner or shareholder
who receives an allocation of a charitable
contribution deduction under section 170
for the property described in Form 8283
(Section A or Section B). Similarly, a
recipient partner or shareholder that is a
partnership or S corporation must provide
a copy of the completed Form 8283 (Sec-
tion A or Section B) to each of its partners
or shareholders who receives an allocation
of a charitable contribution deduction un-
der section 170 for the property described
in Form 8283 (Section A or Section B).

(ii) Partners and S corporation share-
holders must attach Form 8283 (Section A
or Section B) to return. A partner of a
partnership or shareholder of an S corpo-
ration who receives an allocation of a
charitable contribution deduction under
section 170 for property to which para-
graph (c), (d), or (e) of this section applies
must attach a copy of the partnership's or
S corporation's completed Form 8283
(Section A or Section B) to the return on
which the deduction is claimed.

(5) Determination of deduction amount
for purposes of substantiation rules-(i)
In general. In determining whether the
amount of a donor's deduction exceeds
the amounts set forth in section 170(f)
(11)(B) (noncash contributions exceed-
ing $500), 170(f)(11)(C) (noncash
contributions exceeding $5,000), or
170(f)(11)(D) (noncash contributions
exceeding $500,000), the rules of para-
graphs (f)(5)(ii) and (iii) of this section
apply.

(ii) Similar items of property must be
aggregated. Under section 170(f)(11)(F),
the donor must aggregate the amount
claimed as a deduction for all similar
items of property, as defined in § 1.170A-
13(c)(7)(iii), contributed during the tax-
able year. For rules regarding the number
of qualified appraisals and Forms 8283
(Section A or Section B) required if sim-
ilar items of property are contributed, see
§ 1.170A-13(c)(3)(iv)(A) and (4)(iv)(B).

(iii) For contributions of certain inven-
tory and scientific property, excess of
amount claimed over cost of goods sold
taken into account-(A) In general. In
determining the amount of a donor's con-
tribution of property to which section
170(e)(3) (relating to contributions of in-
ventory and other property) or (e)(4) (re-

lating to contributions of scientific prop-
erty used for research) applies, the donor
must take into account only the excess of
the amount claimed as a deduction over
the amount that would have been treated
as the cost of goods sold if the donor had
sold the contributed property to the donee.

(B) Example. The following example
illustrates the rule of this paragraph
(f)(5)(iii):

Example. X Corporation makes a contribution of
inventory described in section 1221(a)(2). The con-
tribution, described in section 170(e)(3), is for the
care of the needy. The cost of the property to X
Corporation is $5,000 and the fair market value of
the property at the time of the contribution is
$11,000. Pursuant to section 170(e)(3)(B), X Corpo-
ration claims a charitable contribution deduction of
$8,000 ($5,000 + 1/2 X ($11,000 - 5,000) =
$8,000). The amount taken into account for purposes
of determining the $5,000 threshold of paragraph (d)
of this section is $3,000 ($8,000-$5,000).

(g) Effective/applicability date. This
section applies to contributions made after
July 30, 2018. Taxpayers may rely on the
rules of this section for contributions
made after June 3, 2004, or appraisals
prepared for returns or submissions filed
after August 17, 2006.

Par. 7. Section 1.170A-17 is added to
read as follows:

§ 1.170A-17 Qualified appraisal and
qualified appraiser.

(a) Qualified appraisal-(1) Defini-
tion. For purposes of section 170(f)(11)
and § 1.170A-16(d)(1)(ii) and (e)(1)(ii),
the term qualified appraisal means an ap-
praisal document that is prepared by a
qualified appraiser (as defined in para-
graph (b)(1) of this section) in accordance
with generally accepted appraisal stan-
dards (as defined in paragraph (a)(2) of
this section) and otherwise complies with
the requirements of this paragraph (a).

(2) Generally accepted appraisal stan-
dards defined. For purposes of paragraph
(a)(1) of this section, generally accepted
appraisal standards means the substance
and principles of the Uniform Standards
of Professional Appraisal Practice, as de-
veloped by the Appraisal Standards Board
of the Appraisal Foundation.

(3) Contents of qualified appraisal. A
qualified appraisal must include-

(i) The following information about the
contributed property:

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(A) A description in sufficient detail
under the circumstances, taking into ac-
count the value of the property, for a per-
son who is not generally familiar with the
type of property to ascertain that the ap-
praised property is the contributed prop-
erty.

(B) In the case of real property or tan-
gible personal property, the condition of
the property.

(C) The valuation effective date, as de-
fined in paragraph (a)(5)(i) of this section.

(D) The fair market value, within the
meaning of § 1.170A-1(c)(2), of the con-
tributed property on the valuation effec-
tive date;

(ii) The terms of any agreement or un-
derstanding by or on behalf of the donor
and donee that relates to the use, sale, or
other disposition of the contributed prop-
erty, including, for example, the terms of
any agreement or understanding that-

(A) Restricts temporarily or perma-
nently a donee's right to use or dispose of
the contributed property;

(B) Reserves to, or confers upon, any-
one, other than a donee or an organization
participating with a donee in cooperative
fundraising, any right to the income from
the contributed property or to the posses-
sion of the property, including the right to
vote contributed securities, to acquire the
property by purchase or otherwise, or to
designate the person having income, pos-
session, or right to acquire; or

(C) Earmarks contributed property for
a particular use;

(iii) The date, or expected date, of the
contribution to the donee;

(iv) The following information about
the appraiser:

(A) Name, address, and taxpayer iden-
tification number.

(B) Qualifications to value the type of
property being valued, including the ap-
praiser's education and experience.

(C) If the appraiser is acting in his or
her capacity as a partner in a partnership,
an employee of any person, whether an
individual, corporation, or partnership, or
an independent contractor engaged by a
person other than the donor, the name,
address, and taxpayer identification
number of the partnership or the person
who employs or engages the qualified
appraiser;

(v) The signature of the appraiser and
the date signed by the appraiser (appraisal
report date);

(vi) The following declaration by the
appraiser: "I understand that my appraisal
will be used in connection with a return or
claim for refund. I also understand that,
if there is a substantial or gross valua-
tion misstatement of the value of the
property claimed on the return or claim
for refund that is based on my appraisal,
I may be subject to a penalty under
section 6695A of the Internal Revenue
Code, as well as other applicable penal-
ties. I affirm that I have not been at any
time in the three-year period ending on
the date of the appraisal barred from
presenting evidence or testimony before
the Department of the Treasury or the
Internal Revenue Service pursuant to 31
U.S.C. section 330(c)";

(vii) A statement that the appraisal was
prepared for income tax purposes;

(viii) The method of valuation used to
determine the fair market value, such as
the income approach, the market-data
approach, or the replacement-cost-less-
depreciation approach; and

(ix) The specific basis for the valua-
tion, such as specific comparable sales
transactions or statistical sampling, in-
cluding a justification for using sampling
and an explanation of the sampling proce-
dure employed.

(4) Timely appraisal report. A quali-
fied appraisal must be signed and dated by
the qualified appraiser no earlier than 60
days before the date of the contribution
and no later than-

(i) The due date, including extensions,
of the return on which the deduction for
the contribution is first claimed;

(ii) In the case of a donor that is a
partnership or S corporation, the due date,
including extensions, of the return on
which the deduction for the contribution is
first reported; or

(iii) In the case of a deduction first
claimed on an amended return, the date on
which the amended return is filed.

(5) Valuation effective date-(i) Defi-
nition. The valuation effective date is the
date to which the value opinion applies.

(ii) Timely valuation effective date. For
an appraisal report dated before the date
of the contribution, as described in
§ 1.170A-1(b), the valuation effective

date must be no earlier than 60 days be-
fore the date of the contribution and no
later than the date of the contribution. For
an appraisal report dated on or after the
date of the contribution, the valuation ef-
fective date must be the date of the con-
tribution.

(6) Exclusion for donor knowledge of
falsity. An appraisal is not a qualified ap-
praisal for a particular contribution, even
if the requirements of this paragraph (a)
are met, if the donor either failed to dis-
close or misrepresented facts, and a rea-
sonable person would expect that this fail-
ure or misrepresentation would cause the
appraiser to misstate the value of the con-
tributed property.

(7) Number of appraisals required. A
donor must obtain a separate qualified ap-
praisal for each item of property for which
an appraisal is required under section
170(f)(11)(C) and (D) and paragraph (d)
or (e) of § 1.170A-16 and that is not
included in a group of similar items
of property, as defined in § 1.170A-
13(c)(7)(iii). For rules regarding the num-
ber of appraisals required if similar items
of property are contributed, see section
170(f)(11)(F) and § 1.170A-13(c)(3)
(iv)(A).

(8) Time of receipt of qualified ap-
praisal. The qualified appraisal must be
received by the donor before the due date,
including extensions, of the return on
which a deduction is first claimed, or re-
ported in the case of a donor that is a
partnership or S corporation, under sec-
tion 170 with respect to the donated prop-
erty, or, in the case of a deduction first
claimed, or reported, on an amended re-
turn, the date on which the return is filed.

(9) Prohibited appraisal fees. The fee
for a qualified appraisal cannot be based
to any extent on the appraised value of the
property. For example, a fee for an ap-
praisal will be treated as based on the
appraised value of the property if any part
of the fee depends on the amount of the
appraised value that is allowed by the
Internal Revenue Service after an exami-
nation.

(10) Retention of qualified appraisal.
The donor must retain the qualified ap-
praisal for so long as it may be relevant in
the administration of any internal revenue
law.

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(11) Effect of appraisal disregarded
pursuant to 31 U.S.C. section 330(c). If an
appraiser has been prohibited from prac-
ticing before the Internal Revenue Service
by the Secretary under 31 U.S.C. section
330(c) at any time during the three-year
period ending on the date the appraisal is
signed by the appraiser, any appraisal pre-
pared by the appraiser will be disregarded
as to value, but could constitute a qualified
appraisal if the requirements of this sec-
tion are otherwise satisfied, and the donor
had no knowledge that the signature, date,
or declaration was false when the ap-
praisal and Form 8283 (Section B) were
signed by the appraiser.

(12) Partial interest. If the contributed
property is a partial interest, the appraisal
must be of the partial interest.

(b) Qualified appraiser-(1) Defini-
tion. For purposes of section 170(f)(11)
and § 1.170A-16(d)(1)(ii) and (e)(1)(ii),
the term qualified appraiser means an in-
dividual with verifiable education and ex-
perience in valuing the type of property
for which the appraisal is performed, as
described in paragraphs (b)(2) through (4)
of this section.

(2) Education and experience in valu-
ing the type of property-(i) In general.
An individual is treated as having educa-
tion and experience in valuing the type of
property within the meaning of paragraph
(b)(1) of this section if, as of the date the
individual signs the appraisal, the individ-
ual has-

(A) Successfully completed (for exam-
ple, received a passing grade on a final
examination) professional or college-level
coursework, as described in paragraph
(b)(2)(ii) of this section, in valuing the
type of property, as described in para-
graph (b)(3) of this section, and has two or
more years of experience in valuing the
type of property, as described in para-
graph (b)(3) of this section; or

(B) Earned a recognized appraiser des-
ignation, as described in paragraph
(b)(2)(iii) of this section, for the type of
property, as described in paragraph (b)(3)
of this section.

(ii) Coursework must be obtained from
an educational organization, generally
recognized professional trade or ap-
praiser organization, or employer educa-
tional program. For purposes of para-

graph (b)(2)(i)(A) of this section, the
coursework must be obtained from-

(A) A professional or college-level ed-
ucational organization described in sec-
tion 170(b)(1)(A)(ii);

(B) A generally recognized profes-
sional trade or appraiser organization that
regularly offers educational programs in
valuing the type of property; or

(C) An employer as part of an em-
ployee apprenticeship or educational pro-
gram substantially similar to the educa-
tional programs described in paragraphs
(b)(2)(ii)(A) and (B) of this section.

(iii) Recognized appraiser designation
defined. A recognized appraiser designa-
tion means a designation awarded by a
generally recognized professional ap-
praiser organization on the basis of dem-
onstrated competency.

(3) Type of property defined-(i) In
general. The type of property means the
category of property customary in the ap-
praisal field for an appraiser to value.

(ii) Examples. The following examples
illustrate the rule of paragraphs (b)(2)(i)
and (b)(3)(i) of this section:

Example (1). Coursework in valuing type of
property. There are very few professional-level
courses offered in widget appraising, and it is cus-
tomary in the appraisal field for personal property
appraisers to appraise widgets. Appraiser A has suc-
cessfully completed professional-level coursework
in valuing personal property generally but has com-
pleted no coursework in valuing widgets. The
coursework completed by Appraiser A is for the type
of property under paragraphs (b)(2)(i) and (b)(3)(i)
of this section.

Example (2). Experience in valuing type of prop-
erty. It is customary for professional antique apprais-
ers to appraise antique widgets. Appraiser B has 2
years of experience in valuing antiques generally and
is asked to appraise an antique widget. Appraiser B
has obtained experience in valuing the type of prop-
erty under paragraphs (b)(2)(i) and (b)(3)(i) of this
section.

Example (3). No experience in valuing type of
property. It is not customary for professional antique
appraisers to appraise new widgets. Appraiser C has
experience in appraising antiques generally but no
experience in appraising new widgets. Appraiser C is
asked to appraise a new widget. Appraiser C does
not have experience in valuing the type of property
under paragraphs (b)(2)(i) and (b)(3)(i) of this sec-
tion.

(4) Verifiable. For purposes of para-
graph (b)(1) of this section, education and
experience in valuing the type of property
are verifiable if the appraiser specifies in
the appraisal the appraiser's education and
experience in valuing the type of property,
as described in paragraphs (b)(2) and (3)

of this section, and the appraiser makes a
declaration in the appraisal that, because
of the appraiser's education and experi-
ence, the appraiser is qualified to make
appraisals of the type of property being
valued.

(5) Individuals who are not qualified
appraisers. The following individuals are
not qualified appraisers for the appraised
property:

(i) An individual who receives a fee
prohibited by paragraph (a)(9) of this sec-
tion for the appraisal of the appraised
property.

(ii) The donor of the property.

(iii) A party to the transaction in which
the donor acquired the property (for ex-
ample, the individual who sold, ex-
changed, or gave the property to the do-
nor, or any individual who acted as an
agent for the transferor or for the donor
for the sale, exchange, or gift), unless the
property is contributed within 2 months of
the date of acquisition and its appraised
value does not exceed its acquisition
price.

(iv) The donee of the property.

(v) Any individual who is either-

(A) Related, within the meaning of sec-
tion 267(b), to, or an employee of, an
individual described in paragraph (b)(5)
(ii), (iii), or (iv) of this section;

(B) Married to an individual described
in paragraph (b)(5)(v)(A) of this section;
or

(C) An independent contractor who is
regularly used as an appraiser by any of
the individuals described in paragraph
(b)(5)(ii), (iii), or (iv) of this section, and
who does not perform a majority of his or
her appraisals for others during the tax-
able year.

(vi) An individual who is prohibited
from practicing before the Internal Reve-
nue Service by the Secretary under 31
U.S.C. section 330(c) at any time during
the three-year period ending on the date
the appraisal is signed by the individual.

(c) Effective/applicability date. This
section applies to contributions made on
or after January 1, 2019. Taxpayers may
rely on the rules of this section for ap-
praisals prepared for returns or submis-
sions filed after August 17, 2006.

Par. 8. Section 1.170A-18 is added to
read as follows:

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§ 1.170A-18 Contributions of clothing
and household items.

(a) In general. Except as provided in
paragraph (b) of this section, no deduction
is allowed under section 170(a) for a con-
tribution of clothing or a household item
(as described in paragraph (c) of this sec-
tion) unless-

(1) The item is in good used condition
or better at the time of the contribution;
and

(2) The donor meets the substantiation
requirements of § 1.170A-16.

(b) Certain contributions of clothing or
household items with claimed value of
more than $500. The rule described in
paragraph (a)(1) of this section does not
apply to a contribution of a single item of
clothing or a household item for which a
deduction of more than $500 is claimed, if
the donor submits with the return on
which the deduction is claimed a qualified
appraisal, as defined in § 1.170A-
17(a)(1), of the property prepared by a
qualified appraiser, as defined in
§ 1.170A-17(b)(1), and a completed Form
8283 (Section B), "Noncash Charitable
Contributions," as described in § 1.170A-
16(d)(3).

(c) Definition of household items. For
purposes of section 170(f)(16) and this
section, the term household items includes
furniture, furnishings, electronics, appli-
ances, linens, and other similar items.
Food, paintings, antiques, and other ob-
jects of art, jewelry, gems, and collections
are not household items.

(d) Effective/applicability date. This
section applies to contributions made after
July 30, 2018. Taxpayers may rely on the
rules of this section for contributions
made after August 17, 2006.

Par. 9. § 1.664-1 is amended by revis-
ing paragraph (a)(7)(i)(b) and adding a
sentence to the end of paragraph (f)(1) to
read as follows:

§ 1.664-1. Charitable remainder trusts.

(a) * * *

(7) * * *

(i) * * *

(b) Determined by a current qualified
appraisal from a qualified appraiser, as
those terms are defined in-

(1) Section 1.170A-13(c)(3) and
1.170A-13(c)(5), respectively, for ap-
praisals prepared for returns or submis-
sions filed on or before August 17, 2006;
(2) Section 3 of Notice 2006-96,
2006-2 CB 902, for appraisals prepared
for returns or submissions filed after Au-
gust 17, 2006, if the donations are made
before January 1, 2019; or

(3) Section 1.170A-17(a) and 1.170A-
17(b), respectively, for appraisals pre-
pared for returns or submissions for dona-
tions made on or after January 1, 2019.
* * * * *

(f) ***

(1)* * * The provisions of paragraph
§ 1.664-1(a)(7)(i)(b) apply as provided in
that paragraph.

* * * * *

Par. 10. § 1.6050L-1 is amended by:

1\. Revising the first two sentences of
paragraph (a)(2)(i).

2\. Revising paragraphs (c)(4)(i) intro-
ductory text and (d)(2).

3\. Revising the first sentences of para-
graphs (e) and (f)(2)(ii).

4\. Adding paragraph (h).

The revisions and addition read as fol-
lows:

§ 1.6050L-1. Information return by
donees relating to certain dispositions of
donated property.

(a) * * *

(2) * * *

(i) In general. Paragraph (a)(1) of this
section shall not apply with respect to an
item of charitable deduction property
disposed of by sale if the Form 8283 ap-
praisal summary (as described in
§ 1.170A-13(c)(4) for contributions made
on or before July 30, 2018 and § 1.170A-
16(d)(3) for contributions made after July
30, 2018), or a successor form, signed by
the donee with respect to the item con-
tains, at the time of the donee's signature,
a statement signed by the donor that the
appraised value of the item does not ex-
ceed $500. In the case of a Form 8283
appraisal summary that describes more
than one item, this exception shall apply
only with respect to an item clearly iden-
tified as having an appraised value of
$500 or less. * * *

* * * * *

(c) * * *

(4) * * *

(i) Shall provide its name, address, and
employer identification number and a
copy of the Form 8283 appraisal summary
(as described in § 1.170A-13(c)(4) for
contributions made on or before July 30,
2018 and § 1.170A-16(d)(3) for contribu-
tions made after July 30, 2018) relating to
the transferred property to the successor
donee on or before the 15th day after the
latest of -

** * * *

(d) * * *

(2) Retention of Form 8283 appraisal
summary. Every donee shall retain the
Form 8283 appraisal summary (as de-
scribed in § 1.170A-13(c)(4) for contri-
butions made on or before July 30, 2018
and § 1.170A-16(d)(3) for contributions
made after July 30, 2018) in the donee's
records for so long as it may be relevant in
the administration of any internal revenue
law.

* * * * *

(e) Charitable deduction property. For
purposes of this section, the term charita-
ble deduction property means any prop-
erty (other than money and publicly
traded securities to which § 1.170A-
13(c)(7)(xi)(B) does not apply) contrib-
uted after December 31, 1984, with re-
spect to which the donee signs (or is
presented with for signature in cases de-
scribed in § 1.170A-13(c)(4)(iv)(C)(2)) a
Form 8283 appraisal summary (as de-
scribed in § 1.170A-13(c)(4) for contri-
butions made on or before July 30, 2018
and § 1.170A-16(d)(3) for contributions
made after July 30, 2018). * * *

* * * * *

(f) * * *

(2) * * *

(ii) Exception. Notwithstanding para-
graph (f)(2)(i) of this section, in the case
of a donee who, on the date of receipt of
the transferred property, had no reason to
believe that the substantiation require-
ments of § 1.170A-13(c) or § 1.170A-
16(d) apply with respect to the property,
the donee information return is not re-
quired to be filed until the 60th day after
the date on which such donee has reason
to believe that the substantiation require-
ments of § 1.170A-13(c) or § 1.170A-
16(d) apply with respect to the property. *
\* \*

* * * * *

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(h) Effective/applicability dates. The
first two sentences of paragraph (a)(2)(i),
paragraphs (c)(4)(i) and (d)(2), and the
first sentences of paragraphs (e) and
(f)(2)(ii) apply to contributions made after
July 30, 2018.
PART 602-OMB CONTROL NUM-

BERS UNDER THE PAPERWORK RE-
DUCTION ACT

Par. 11. The authority citation for part
602 continues to read as follows:
Authority: 26 U.S.C. 7805.

Par. 12. In § 602.101, paragraph (b) is

amended by adding in numerical order

entries for 1.170A-15 through 1.170A-18
to read as follows:

§ 602.101 OMB Control numbers.
** * * *

(b) * * *

CFR part or section where identified and described

Current OMB control No.

** * * *

1.170A-15

1545-1953

1.170A-16

1545-1953

1.170A-17

1545-1953

1.170A-18

1545-1953

* * * * *

Approved: April 23, 2018.

Kirsten Wielobob,
Deputy Commissioner for Services and Enforcement.

David J. Kautter,
Assistant Secretary of the Treasury (Tax Policy).

(Filed by the Office of the Federal Register on July 27, 2018, 8:45 a.m., and published in the issue of the Federal Register for July 30, 2018, 83 F.R. 36417)

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## Part III. Administrative, Procedural, and Miscellaneous

### Guidance on Recontributions, Rollovers and Qualified Higher Education Expenses under Section 529

Notice 2018-58

#### I. PURPOSE AND OVERVIEW

This notice announces that the Depart-
ment of the Treasury (the Treasury De-
partment) and the Internal Revenue Ser-
vice (the IRS) intend to issue regulations
providing clarification regarding (1) the
special rules for contributions of refunded
qualified higher education expenses to a
qualified tuition program under § 529(c)
(3)(D) of the Internal Revenue Code
(Code); (2) the new rules under § 529(c)
(3)(C)(i)(III) permitting a rollover from a
qualified tuition program to an ABLE ac-
count under § 529A; and (3) the new rules
under § 529(c)(7) treating certain elemen-
tary or secondary school expenses as qual-
ified higher education expenses.

#### II. BACKGROUND

Under § 529, a State or its agency or
instrumentality may establish or maintain
a program that permits a person to prepay
or contribute to an account for a desig-
nated beneficiary's qualified higher edu-
cation expenses (QHEEs). In addition, an
eligible educational institution may estab-
lish or maintain a program that permits a
person to prepay a designated beneficiary's
QHEEs. These programs are collectively re-
ferred to as section 529 qualified tuition
programs (QTPs). Section 529(c)(3) pro-
vides that distributions (including any attrib-
utable earnings) from a QTP are not in-
cluded in gross income if such distributions
do not exceed the designated beneficiary's
QHEEs. To the extent distributions exceed
the designated beneficiary's QHEEs, a por-
tion of the distribution is included in gross
income.

Prior to its amendment by "An Act to
provide for reconciliation pursuant to ti-

tles II and V of the concurrent resolution
on the budget for fiscal year 2018", Pub. L.
115-97 (the "2017 Act"), signed into law
on December 22, 2017, § 529(e)(3)(A)
defined QHEEs to include tuition, fees,
books, supplies, and equipment required
for the enrollment or attendance of a
designated beneficiary at an eligible edu-
cational institution,2 including certain
computer equipment and software used
primarily by the beneficiary during any
years the beneficiary is enrolled at an el-
igible educational institution. In the case
of a special needs beneficiary, QHEEs
include expenses for special needs ser-
vices that are incurred in connection with
such enrollment or attendance. QHEEs
also include reasonable costs for room and
board for eligible students as defined in
§ 25A(b)(3) (generally, those who are en-
rolled at least half-time).

Sections 529(c)(3)(C)(i)(I) and (II)
permit a tax-free rollover of a distribution
from a QTP, made within 60 days of the
distribution, to another QTP for the ben-
efit of either the same designated benefi-
ciary or another designated beneficiary
who is a member of the family of the
original designated beneficiary. However,
Notice 2001-81, 2001-52 I.R.B. 617,
provides that the distributing QTP must
provide a breakdown of the earnings por-
tion of the rollover amount to the recipient
QTP and, until the recipient QTP receives
appropriate documentation showing the
earnings portion, the entire rollover amount
is treated as earnings. Notice 2001-81 ap-
plies the same rule to a direct transfer (i.e., a
trustee-to-trustee transfer) from a QTP to
another QTP.

Section 529(c)(3)(D), added to the
Code by the Protecting Americans from
Tax Hikes Act of 2015 (PATH Act), part
of the Consolidated Appropriations Act,
2016 (Pub. L. 114-113), addresses situa-
tions in which QTP funds are distributed
for a beneficiary's QHEEs, but some por-
tion of those expenses is refunded to the
beneficiary by the eligible educational in-
stitution. This could occur, for example, if
the beneficiary were to drop a class mid-

semester. Section 529(c)(3)(D) provides
that the portion of such a distribution re-
funded to an individual who is the bene-
ficiary of a QTP by an eligible educa-
tional institution is not subject to
income tax to the extent that the refund
is recontributed to a QTP of which that
individual is the beneficiary not later
than 60 days after the date of such re-
fund and does not exceed the refunded
amount. Section 529(c)(3)(D) applies to
refunds received after December 31,
2014. The PATH Act also included a
transition rule with regard to the dead-
line for recontributing a refund received
after 2014 but before the date of enact-
ment (December 18, 2015). Specifically,
those refunded distributions are exempt
from income tax if they were recontrib-
uted to the beneficiary's QTP not later
than February 16, 2016 (60 days after
the date of enactment of the PATH Act).

The 2017 Act added § 529(c)(3)
(C)(i)(III) which provides that a distribu-
tion from a QTP made after December 22,
2017, and before January 1, 2026, is not
subject to income tax if, within 60 days
of the distribution, it is transferred to
an ABLE account (as defined in
§ 529A(e)(6))3 of the designated bene-
ficiary or a member of the family of the
designated beneficiary. Under § 529(c)
(3)(C)(i), the amount of any rollover to
an ABLE account is limited to the
amount that, when added to all other
contributions made to the ABLE ac-
count for the taxable year, does not ex-
ceed the contribution limit for the ABLE
account under § 529A(b)(2)(B)(i), i.e.,
the annual gift tax exclusion amount
under § 2503(b).

In addition, the 2017 Act expanded the
definition of QHEEs to include tuition in
connection with the designated beneficia-
ry's enrollment or attendance at an ele-
mentary or secondary public, private, or
religious school. See § 529(c)(7). The
2017 Act also amended § 529(e)(3)(A) to
limit the total amount of these tuition dis-
tributions for each designated beneficiary
to $10,000 per year from all QTPs of the

2Section 529(e)(5) defines an "eligible educational institution" as an institution (A) which is described in § 481 of the Higher Education Act of 1965 (20 U.S.C. 1088), as in effect on the
date of the enactment of this paragraph, and (B) which is eligible to participate in a program under title IV of such Act.

3Generally, an ABLE account is established under a § 529A qualified ABLE program to pay the qualified disability expenses of an eligible individual who is blind or has a disability.

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designated beneficiary. Both amendments
apply to distributions made after Decem-
ber 31, 2017.

### III. RECONTRIBUTION OF REFUNDED QHEEs

The Treasury Department and the IRS
are aware of concerns expressed by QTP
administrators regarding the administra-
tive burdens that would arise if a recon-
tribution of a refunded QHEE is treated in
the same manner as a rollover under
Notice 2001-81 requiring a breakdown of
the earnings portion of the recontribution.
Because the amount is refunded by the
eligible educational institution, which will
have no information regarding the income
portion of each tuition payment (whether
made from a single or multiple QTPs),
QTP administrators generally would be
unable to determine the earnings portion
of the recontribution. Accordingly, the
Treasury Department and the IRS intend
to issue regulations providing that the en-
tire recontributed amount will be treated
as principal. This rule of administrative
convenience will eliminate the burdens
associated with determining the earnings
portion. Furthermore, because the recon-
tributed amount previously was taken into
account in applying the overall contribu-
tion limit under § 529(b)(6), the Treasury
Department and the IRS anticipate that the
regulations will provide that the recontrib-
uted amount does not count against the
limit on contributions on behalf of the
designated beneficiary under § 529(b)(6).
In addition, consistent with § 529(c)
(3)(D), the Treasury Department and the
IRS anticipate that the regulations will
confirm that the recontribution must be to
a QTP for the benefit of the designated
beneficiary who received the refund of
QHEEs, although the recontribution need
not be to the QTP from which the distri-
butions for the QHEEs were made.

### IV. ROLLOVER FROM A QTP TO AN ABLE ACCOUNT

In accordance with new § 529(c)(3)
(C)(i)(III), the Treasury Department and
the IRS intend to issue regulations provid-

ing that a distribution from a QTP made
after December 22, 2017, and before Jan-
uary 1, 2026, to the ABLE account of the
designated beneficiary of that QTP, or of a
member of the family of that designated
beneficiary, is not subject to income tax if
two requirements are satisfied. First, the
distributed funds must be contributed to
the ABLE account within 60 days after
their withdrawal from the QTP. Second,
the distribution, when added to all other
contributions made to the ABLE account
for the taxable year that are subject to
the limitation under § 529A(b)(2)(B)(i)
(the annual gift tax exclusion under
§ 2503(b)), must not exceed that limita-
tion. Specifically, the regulations are ex-
pected to provide that the sum of the
distribution and all other contributions
to the ABLE account for the taxable
year, other than contributions of the des-
ignated beneficiary's compensation as
described in § 529A(b)(2)(B)(ii), must
not exceed the annual gift tax exclusion
for that taxable year. Consistent with the
longstanding approach of treating direct
transfers similarly to rollovers in Notice
2001-81, the Treasury Department and
the IRS also anticipate that the regula-
tions will provide that the same rules
will apply regardless of whether such a
QTP distribution is rolled over to an
ABLE account or instead is transferred
by a direct transfer from a QTP to an
ABLE account.

To the extent that a direct transfer (or,
in the case of a rollover, a contribution of
the distributed amount) would cause the
contribution limit under § 529A(b)(2)
(B)(i) to be exceeded, it would be subject
to income tax and a 10% additional tax
under § 529(c)(6), if applicable.4 There-
fore, the Treasury Department and the IRS
anticipate that the regulations will require
a QTP to prohibit the direct transfer of any
amount that would cause the limit under
§ 529A(b)(2)(B)(i) to be exceeded. Fur-
thermore, a qualified ABLE program is
prohibited from accepting certain contri-
butions in excess of the limitations appli-
cable to ABLE accounts, and any viola-
tion of those rules could cause the

designated beneficiary to incur tax, and
could impact adversely the ABLE benefi-
ciary's eligibility for certain public bene-
fits.5

The Treasury Department and the IRS
encourage the QTP designated benefi-
ciary, in the case of a rollover, or the QTP,
in the case of a direct transfer, to contact
the qualified ABLE program before con-
tributing any funds to the ABLE account
to ensure that the § 529A(b)(2)(B)(i) limit
will not be exceeded. However, the Trea-
sury Department and the IRS anticipate
that the regulations will provide that, in
the case of a direct transfer, any excess
contribution that is rejected by the quali-
fied ABLE program and returned to the
QTP will not be deemed to be a new
contribution to the QTP for purposes of
the § 529(b)(6) contribution limit.

Further, the Treasury Department and
the IRS anticipate that the regulations will
specify that, for purposes of identifying
the ABLE accounts permitted to receive
such a rollover from a designated benefi-
ciary's QTP, a member of the family of
the designated beneficiary means a mem-
ber of the family as defined in § 529(e)(2),
rather than the more limited definition in
§ 529A(e)(4) that applies for purposes of
qualified ABLE programs.

### V. SECTION 529 EXPANSION OF QHEES TO INCLUDE ELEMENTARY AND SECONDARY EDUCATION TUITION EXPENSES

Consistent with new § 529(c)(7) and
(e)(3)(A), respectively, the Treasury De-
partment and the IRS anticipate that the
regulations will provide that QHEEs in-
clude tuition in connection with the des-
ignated beneficiary's enrollment or atten-
dance at an elementary or secondary
public, private, or religious school, but
that such QHEEs are limited to a total of
$10,000 per year per designated benefi-
ciary, regardless of the number of QTPs
making such distributions for that same
designated beneficiary. The Treasury De-
partment and IRS intend to issue regula-
tions defining the term "elementary or
secondary" to mean kindergarten through

4Section 529(c)(6) provides that the additional 10% tax imposed by § 530(d)(4) applies to any payment or distribution from a QTP in the same manner as it applies to a payment or distribution
from a Coverdell education savings account.

5For more information on the effect of ABLE accounts on the beneficiary's eligibility for public benefits, see the preamble of the Notice of Proposed Rulemaking (80 FR 35602) published
in the Federal Register on 6/22/2015.

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grade 12 as determined under State law,
consistent with the definition applicable
for Coverdell education savings accounts
in § 530(b)(3)(B). Coverdell education
savings accounts are another type of tax-
favored savings account governed under
§ 530 and also may be established to pay
for tuition and other expenses in connec-
tion with enrollment or attendance at an
elementary or secondary public, private,
or religious school. Applying the same
definition to both a QTP and a Coverdell
education savings account will facilitate

the allocation of expenses between those
two accounts as is required by § 530(d)
(2)(C)(ii) if a designated beneficiary re-
ceives distributions from both a QTP and
a Coverdell education savings account
and those total distributions exceed the
designated beneficiary's qualified ex-
penses.

### VI. RELIANCE

Before the issuance of the proposed
regulations described in this notice, tax-

payers, beneficiaries, and administrators
of 529 and ABLE programs may rely on
the rules described in sections III, IV, and
V of this notice.

### VII. DRAFTING INFORMATION

The principal author of this notice is
Peter A. Holiat of the Office of the Asso-
ciate Chief Counsel (TEGE). For further
information regarding this notice contact
Mr. Holiat at 202-317-4541 (not a toll-
free number).

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### Definition of Terms

Revenue rulings and revenue procedures
(hereinafter referred to as "rulings") that
have an effect on previous rulings use the
following defined terms to describe the
effect:

Amplified describes a situation where
no change is being made in a prior pub-
lished position, but the prior position is
being extended to apply to a variation of
the fact situation set forth therein. Thus, if
an earlier ruling held that a principle ap-
plied to A, and the new ruling holds that
the same principle also applies to B, the
earlier ruling is amplified. (Compare with
modified, below).

Clarified is used in those instances
where the language in a prior ruling is
being made clear because the language
has caused, or may cause, some confu-
sion. It is not used where a position in a
prior ruling is being changed.

Distinguished describes a situation
where a ruling mentions a previously pub-
lished ruling and points out an essential
difference between them.

Modified is used where the substance
of a previously published position is being
changed. Thus, if a prior ruling held that a
principle applied to A but not to B, and the
new ruling holds that it applies to both A

and B, the prior ruling is modified because
it corrects a published position. (Compare
with amplified and clarified, above).

Obsoleted describes a previously pub-
lished ruling that is not considered deter-
minative with respect to future transac-
tions. This term is most commonly used in
a ruling that lists previously published rul-
ings that are obsoleted because of changes
in laws or regulations. A ruling may also
be obsoleted because the substance has
been included in regulations subsequently
adopted.

Revoked describes situations where the
position in the previously published ruling
is not correct and the correct position is
being stated in a new ruling.

Superseded describes a situation where
the new ruling does nothing more than
restate the substance and situation of a
previously published ruling (or rulings).
Thus, the term is used to republish under
the 1986 Code and regulations the same
position published under the 1939 Code
and regulations. The term is also used
when it is desired to republish in a single
ruling a series of situations, names, etc.,
that were previously published over a pe-
riod of time in separate rulings. If the new
ruling does more than restate the sub-

stance of a prior ruling, a combination of
terms is used. For example, modified and
superseded describes a situation where the
substance of a previously published ruling
is being changed in part and is continued
without change in part and it is desired to
restate the valid portion of the previously
published ruling in a new ruling that is
self contained. In this case, the previously
published ruling is first modified and then,
as modified, is superseded.

Supplemented is used in situations in
which a list, such as a list of the names of
countries, is published in a ruling and that
list is expanded by adding further names
in subsequent rulings. After the original
ruling has been supplemented several
times, a new ruling may be published that
includes the list in the original ruling and
the additions, and supersedes all prior rul-
ings in the series.

Suspended is used in rare situations to
show that the previous published rulings
will not be applied pending some future
action such as the issuance of new or
amended regulations, the outcome of
cases in litigation, or the outcome of a
Service study.

### Abbreviations

The following abbreviations in current
use and formerly used will appear in ma-
terial published in the Bulletin.

A-Individual.

Acq .- Acquiescence.

B-Individual.

BE-Beneficiary.

F.R .- Federal Register.

FUTA-Federal Unemployment Tax Act.

FX-Foreign corporation.

G.C.M .- Chief Counsel's Memorandum.

GE-Grantee.

GP-General Partner.

GR-Grantor.

COOP-Cooperative.

IC-Insurance Company.

Ct.D .- Court Decision.

I.R.B .- Internal Revenue Bulletin.

CY-County.

LE-Lessee.

D-Decedent.

LP-Limited Partner.

LR-Lessor.

M-Minor.

Nonacq .- Nonacquiescence.

O Organization.

P-Parent Corporation.

PHC-Personal Holding Company.

PO-Possession of the U.S.

PR-Partner.

PRS-Partnership.

PTE-Prohibited Transaction Exemption.
Pub. L .- Public Law.

REIT-Real Estate Investment Trust.

Rev. Proc .- Revenue Procedure.

Rev. Rul .- Revenue Ruling.

S-Subsidiary.

S.P.R .- Statement of Procedural Rules.

Stat .- Statutes at Large.

T-Target Corporation.

T.C .- Tax Court.

T.D .- Treasury Decision.

TFE-Transferee.

TFR-Transferor.

CI-City.

T.I.R .- Technical Information Release.

TP-Taxpayer.
TR-Trust.

TT-Trustee.

U.S.C .- United States Code.

DE-Donee.

Del. Order-Delegation Order.

DISC-Domestic International Sales Corporation.
DR-Donor.

E-Estate.

EE-Employee.

E.O .- Executive Order.

ER-Employer.

ERISA-Employee Retirement Income Security Act.
EX-Executor.

F-Fiduciary.

FC-Foreign Country.

FICA-Federal Insurance Contributions Act.

FISC-Foreign International Sales Company.

FPH-Foreign Personal Holding Company.

BK-Bank.

B.T.A .- Board of Tax Appeals.

C-Individual.

C.B .- Cumulative Bulletin.

CFR-Code of Federal Regulations.

DC-Dummy Corporation.

X-Corporation.

Y-Corporation.

Z-Corporation.

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#### Numerical Finding List1

Bulletin 2018-27 through 2018-33

##### Announcements:

2018-09, 2018-28 I.R.B. 206
2018-12, 2018-30 I.R.B. 232

Notices:

2018-48, 2018-28 I.R.B. 9
2018-56, 2018-27 I.R.B. 3
2018-58, 2018-33 I.R.B. 305

2018-59, 2018-28 I.R.B. 196
2018-60, 2018-31 I.R.B. 275

2018-61, 2018-31 I.R.B. 278

##### Proposed Regulations:

REG-103474-18, 2018-32 I.R.B. 284
REG-106977-18, 2018-27 I.R.B. 6

##### Revenue Procedures:

2018-35, 2018-28 I.R.B. 204
2018-37, 2018-29 I.R.B. 210

2018-38, 2018-31 I.R.B. 280

##### Revenue Rulings:

2018-19, 2018-27 I.R.B. 1
2018-20, 2018-28 I.R.B. 8
2018-21, 2018-32 I.R.B. 282

Treasury Decisions:

9834, 2018-31 I.R.B. 233

9835, 2018-33 I.R.B. 288

9836, 2018-33 I.R.B. 291

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# Finding List of Current Actions on Previously Published Items1

Bulletin 2018-27 through 2018-33

1 A cumulative list of all revenue rulings, revenue procedures, Treasury decisions, etc., published in Internal Revenue Bulletins 2018-01 through 2018-26 is in Internal Revenue Bulletin
2018-26, dated June 27, 2018.

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# Internal Revenue Service Washington, DC 20224

Official Business
Penalty for Private Use, $300

# INTERNAL REVENUE BULLETIN

The Introduction at the beginning of this issue describes the purpose and content of this publication. The weekly Internal Revenue
Bulletins are available at www.irs.gov/irb/.

# We Welcome Comments About the Internal Revenue Bulletin

If you have comments concerning the format or production of the Internal Revenue Bulletin or suggestions for improving it, we
would be pleased to hear from you. You can email us your suggestions or comments through the IRS Internet Home Page
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