Par. 2. Sections 53.4966-0 through 53.4966-6 are added to read as follows:
(a) In general. The definitions in paragraphs (b) through (m) of this section apply for purposes of section 4966 of the Internal Revenue Code (Code) and the section 4966 regulations.
(b) Contribution. The term contribution means any gift, bequest, or similar payment or transfer, whether in cash or in-kind, to or for the use of a sponsoring organization.
(c) Disqualified supporting organization. With respect to any distribution, the term disqualified supporting organization means—
(1) Any Type III supporting organization, as defined in section 4943(f)(5)(A) of the Code and the regulations under section 509(a)(3) of the Code, that is not a functionally integrated Type III supporting organization, as defined in section 4943(f)(5)(B) and the regulations under section 509(a)(3) ( see § 1.509(a)-4(i) of this chapter); and
(2) Any other supporting organization described in section 509(a)(3) if a donor or donor-advisor with respect to the donor advised fund (either alone or together with related persons) directly or indirectly controls a supported organization (as defined in section 509(f)(3)) of the supporting organization. For purposes of this paragraph (c), a supported organization will be considered controlled by a donor or donor-advisor with respect to the donor advised fund if that donor or donor-advisor, either alone or by aggregating votes or positions of authority with related persons, may require the supported organization to perform any act that significantly affects its operations or may prevent the supported organization from performing any such act. The supported organization will be considered to be controlled directly or indirectly by a donor or donor-advisor with respect to the donor advised fund, either alone or together with related persons, if the voting power of such persons is 50 percent or more of the total voting power of the governing body of such supported organization or if one or more of such persons have the right to exercise veto power over the actions of the governing body of the supported organization. However, all pertinent facts and circumstances will be taken into consideration in determining whether one or more persons do in fact directly or indirectly control the supported organization.
(d) Distributee. The term distributee means any person, governmental entity, or donor advised fund receiving a distribution.
(e) Distribution —(1) In general. The term distribution means any grant, payment, disbursement, or transfer, whether in cash or in kind, from a donor advised fund. Except as provided in paragraph (e)(2) of this section, investments and reasonable investment or grant-related fees are not considered distributions.
(2) Deemed distribution. A distribution includes any use of donor advised fund assets that results in a more than incidental benefit (within the meaning of section 4967) to a donor, donor-advisor, or related person. In addition, a distribution includes an expense charged solely to a particular donor advised fund that is paid, directly or indirectly, to a donor, donor-advisor, or related person with respect to the donor advised fund.
(f) Donor. The term donor means any person described in section 7701(a)(1) of the Code that makes a contribution to a fund or account of a sponsoring organization, other than a contributor that is a governmental unit described in section 170(c)(1) of the Code or an organization described in section 509(a)(1), (2), or (3) that is not a disqualified supporting organization.
(g) Donor advised fund. See § 53.4966-3 for the definition of donor advised fund. See § 53.4966-4 for exceptions to the definition of donor advised fund.
(h) Donor-advisor —(1) In general. The term donor-advisor means a person appointed or designated by a donor to have advisory privileges regarding the distribution or investment of assets held in a fund or account of a sponsoring organization. If a donor-advisor delegates any of the donor-advisor's advisory privileges to another person, or appoints or designates another donor-advisor, that person is also a donor-advisor. No particular form of appointment or designation is necessary. Except as provided in paragraphs (h)(3)(ii) and (h)(4) of this section, a donor-advisor includes a person recommended by a donor or donor-advisor to have advisory privileges if the sponsoring organization provides such privileges.
(2) Person who establishes fund or account. A person (other than a person or governmental unit excepted from status as a donor under paragraph (f) of this section) who establishes a fund or account and advises as to the distribution or investment of amounts in that fund or account will be treated as a donor-advisor with respect to that fund or account, regardless of whether the person contributes to the fund or account.
(3) Personal investment advisors —(i) In general. An investment advisor defined in section 4958(f)(8)(B) of the Code who manages the investment of, or provides investment advice with respect to, both the assets maintained in a donor advised fund and the personal assets of a donor to that donor advised fund (personal investment advisor) will be treated as a donor-advisor with respect to the donor advised fund while serving in that dual capacity regardless of whether the donor appointed, designated, or recommended the personal investment advisor.
(ii) Exception. A personal investment advisor is not considered a donor-advisor if the personal investment advisor is properly viewed as providing services to the sponsoring organization as a whole, rather than providing services to the donor advised fund.
(4) Donor-recommended advisory committee member. A person recommended by a donor or donor-advisor and appointed by the sponsoring organization to serve as a member of a committee of the sponsoring organization that advises as to distributions or investments of amounts in a fund or account is a donor-advisor unless—
(i) The recommendation is based on objective criteria related to the expertise of the member in the particular field of interest or purpose of the fund or account;
(ii) The committee consists of three or more individuals, and a majority of the committee is not recommended by the donor or donor-advisor; and
(iii) The recommended person is not a related person with respect to the recommending donor or donor-advisor.
(i) Fund manager —(1) In general. The term fund manager means, with respect to any sponsoring organization—
(i) An officer, director, or trustee of the sponsoring organization or any person having authority or responsibility similar to that exercised by an officer, director, or trustee of a sponsoring organization; or
(ii) With respect to any act (or failure to act) resulting in a taxable distribution, the employee who has final authority or responsibility (either individually or as a member of a collective body) for the act (or failure to act).
(2) Delegation of authority. A person has authority or responsibility similar to that exercised by an officer, director, or trustee of a sponsoring organization within the meaning of paragraph (i)(1)(i) of this section if, with respect to an act (or failure to act) resulting in a taxable distribution, he or she has been delegated final authority or responsibility with respect to the act by an officer, director, or trustee of the sponsoring organization or by the governing body of the sponsoring organization. For example, an investment manager is a fund manager with respect to a taxable distribution if the sponsoring organization's governing body delegated to the investment manager the final authority to make certain investment decisions and, in the exercise of that authority, the manager committed the sponsoring organization to making a taxable distribution. To be considered to have authority or responsibility similar to that exercised by an officer, director, or trustee of a sponsoring organization within the meaning of paragraph (i)(1)(i) of this section, a person need not be an employee of the sponsoring organization. A person does not have authority or responsibility similar to that exercised by an officer, director, or trustee of a sponsoring organization within the meaning of paragraph (i)(1)(i) of this section if the person is merely implementing a decision made by a superior.
(j) Related persons. With respect to any individual, the term related person means a family member of the individual (as defined in section 4958(f)(4)). With respect to any person or persons, the term related person also means a 35-percent controlled entity (as defined in section 4958(f)(3) by substituting such person or persons or their family members for persons described in subparagraph (A) or (B) of paragraph (1) in section 4958(f)(3)(A)(i)). See section 4958(f)(7)(B) and (C).
(k) Section 4966 regulations. The term section 4966 regulations means this section and §§ 53.4966-2 through 53.4966-6.
(l) Sponsoring organization. The term sponsoring organization means any organization that—
(1) Is described in section 170 (other than a governmental unit described in section 170(c)(1)), without the requirement under section 170(c)(2)(A) that it be created or organized in the United States or in any possession thereof, or under the law of the United States, any State, the District of Columbia, or any possession of the United States;
(2) Is not a private foundation (as defined in section 509(a) and the regulations under section 509(a)); and
(3) Maintains one or more donor advised funds.
(m) Taxable distribution. See § 53.4966-5 for the definition of taxable distribution.