Private foundation division approved with pass-through conditions

Plain-English summary

A family private foundation proposed transferring 40 percent of its assets equally to two new private foundations so different family branches could pursue separate charitable priorities. The IRS ruled that the transfers would qualify as section 507(b)(2) reorganizations, would not terminate the original foundation, and would not subject the transfers to the section 507 termination tax. It also ruled that the transfers would further charitable purposes, generate no section 4940 investment-income tax, constitute neither self-dealing nor jeopardizing investments, and allow reasonable transaction expenses to count as qualifying distributions without becoming taxable expenditures. Because the new foundations would be controlled by disqualified persons and would be non-operating foundations, the original foundation could count transferred assets toward its minimum distribution only when the new foundations satisfied the section 4942 pass-through and recordkeeping rules. The transfers were grants to private non-operating foundations, so the original foundation also had to exercise expenditure responsibility under section 4945(h).

Ruling snapshot

• Question: What private-foundation tax consequences would follow a 40 percent division of assets among two new family foundations?
• Outcome: The nine requested rulings were granted, subject to pass-through, recordkeeping, and expenditure-responsibility requirements.
• Key authorities: IRC §§ 501(c)(3), 507(b)(2), 4940, 4941, 4942, 4944, and 4945

Full text (IRS public release)

Internal Revenue Service                                     Department of the Treasury
                                                             Washington, DC 20224

Number: 201609001                                            Third Party Communication: None
Release Date: 2/26/2016                                      Date of Communication: Not Applicable
Index Number: 501.03-02, 507.06-00,
              4940.02-01, 4941.04-00,                        Person To Contact:
              4942.03-05, 4944.05-00,                        ------------------, ID No. ------------------
              4945.04-00                                     Telephone Number:
                                                             ----------------------
---------------------------------                            Refer Reply To:
--------------                                               CC:TEGE:EOEG:EO3
-------------------------------------                        PLR-107389-15
-------------------                                          Date:
 ----------------------------------------------              October 09, 2015




    Foundation       =            ------------------------- E.I.N.: -----------------
                                  -----------------
    Founder          =            ------------------------




                           TY: --------------------------------------

Dear -----------------:


This is in response to the letter dated January 26, 2015, and additional submissions
dated April 15 and May 20, 2015, in which Foundation’s counsel requested, on behalf of
Foundation, rulings under sections 501, 507, 4940, 4941, 4942, 4944, and 4945 of the
Internal Revenue Code.1

BACKGROUND

Based on the documents and representations submitted on behalf of Foundation, the
relevant facts on which Foundation’s request for rulings is based are as follows:

Pursuant to the terms of a trust created by Founder, Foundation was organized for the
purpose of making payments or distributions for charitable purposes to or for the use of
charitable organizations organized in the United States or any possession of the United
States entitled to recognition of exemption from federal income tax under sections
501(a) and 501(c)(3).

1
 The Internal Revenue Code of 1986, as amended, to which all subsequent “section” references are
made unless otherwise indicated.
PLR-107389-15                                 2




The Internal Revenue Service has recognized Foundation as an organization described
in section 501(c)(3) and classified it as a private foundation under section 509(a).
Foundation has made all of its grants to public charities described in section 509(a)(1),
(2), or (3).

Founder was a substantial contributor to Foundation within the meaning of section
507(d)(2).

Foundation has a nine-person board of directors composed of Founder’s five children
and four grandchildren. The directors’ visions of the charitable causes to be promoted
and supported by Foundation have diverged, making it difficult for Foundation to
develop a unified administration of its charitable goals and objectives. Accordingly,
Foundation’s directors desire to divide Foundation into three separate private
foundations, permitting each of the two newly created private foundations to be
governed and operated by one of Founder’s children and certain of each child’s family
members. To accomplish this objective, Foundation proposes to distribute an amount
equal to 20 percent of the fair market value of its assets to each of the two newly
created foundations. Foundation will keep 60 percent of the assets it will own
immediately before those distributions. Foundation will receive no consideration for the
amounts transferred, and none of the amounts will be out of current income.

The two newly created private foundations will be nonprofit corporations. Prior to the
proposed distributions to them, each of the newly formed organizations will receive a
determination letter from the IRS recognizing it as exempt from federal income tax
under section 501(a) as an organization described in section 501(c)(3) and classified as
a private foundation within the meaning of section 509(a), but not as an operating
foundation as defined by section 4942(j)(3). The boards of directors of the two newly
created private foundations will be composed of four of the nine persons who currently
serve on the board of directors of Foundation plus additional family members, with each
newly created private foundation being governed by a child of Founder and two of each
child’s immediate family members. Foundation’s board will consist of the remaining five
of the nine current directors (three of Founder’s children, and two of his grandchildren).
All of the directors of each of the foundations will be disqualified persons with respect to
each of the resulting foundations because they are all descendants of Founder.

Foundation intends to pay all reasonable expenses necessary to create the newly
created private foundations and to transfer the assets to them, including the reasonable
expenses incurred in connection with this request for rulings.

After the transfers of assets to the newly created private foundations, Foundation and
each of the two newly created private foundations will operate and maintain their own
PLR-107389-15                                   3

statuses as section 501(c)(3) tax-exempt private foundations.

Foundation has not given, and does not intend to give, notice to the IRS of intention to
terminate its private foundation status, nor has Foundation received from the IRS
notification that its private foundation status has been terminated. Further, Foundation
has not committed any willful repeated acts or any willful and flagrant act that gives rise
to liability under Chapter 42.

Based on the documentation submitted and the facts and representations described
above, Foundation has requested the rulings discussed below.

RULINGS REQUESTED, LAW, and ANALYSIS

Requested Rulings 1 and 2:

1. The proposed transfers of 40 percent of Foundation’s assets to the new private
   foundations will qualify as transfers of assets described in section 507(b)(2) and will
   not be described in section 507(a).

2. The new private foundations will not be treated as newly created organizations as a
   result of the transfers.

Section 507(a) says that, except as provided in subsection (b), the status of any
organization as a private foundation shall be terminated only if (1) it notifies the
Secretary of its intent to accomplish such a termination, or (2) with respect to such
organization, there have been either willful repeated acts (or failures to act), or a willful
and flagrant act (or failure to act), giving rise to liability for tax under Chapter 42, and the
Secretary notifies such organization that it is liable for the tax imposed by section
507(c), and either such organization pays the tax (or any portion not abated under
section 507(g)) or the entire amount of such tax is abated under section 507(g).

Section 507(b)(2) says that in the case of a transfer of assets of any private foundation
to another private foundation pursuant to any liquidation or other adjustment,
organization, or reorganization, the transferee foundation shall not be treated as a newly
created organization. A transfer described in section 507(b)(2) is referred to as a
“section 507(b)(2) transfer.”

The exception in section 507(a) for what is “provided in subsection (b)” excludes section
507(b)(2) transfers from imposition of the termination tax. Accordingly, a transfer of
assets described in section 507(b)(2) from one private foundation to another does not
trigger the termination tax on the transferor private foundation if the transferee private
foundation involved in the transfer “is not . . . treated as a newly created organization.”
This is explained in more detail in the applicable regulations. Treas. Reg. Sec.
1.507-3(a)(1) states that in the case of a transfer of assets described in section
PLR-107389-15                                  4

507(b)(2), including a significant disposition of assets to one or more private foundations
within the meaning of paragraph (c) of Treas. Reg. Sec. 1.507-3, the transferee
organization will not be treated as a newly created organization. Similarly, Treas. Reg.
Sec. 1.507-1(b)(6) provides that if a private foundation transfers all or part of its assets
to one or more other private foundations pursuant to a transfer described in section
507(b)(2) and Treas. Reg. Sec. 1.507-3(c), such transferor foundation will not have
terminated its private foundation status under section 507(a)(1).

Treas. Reg. Sec. 1.507-3(c)(1) describes the terms “other adjustment, organization, or
reorganization” as including any significant distribution of assets to one or more private
foundations, other than transfers for full and adequate consideration or distributions out
of current income. The term “significant disposition of assets to one or more private
foundations” is defined by Treas. Reg. Sec. 1.507-3(c)(2) as any disposition or series of
dispositions where the aggregate value transferred is 25 percent or more of the fair
market value of the net assets of the transferor foundation at the beginning of the
taxable year. Foundation will be transferring 40 percent of its assets to the two newly
created private foundations. Foundation will not receive any consideration for the
amounts transferred, and none of the amounts will be out of current income.
Accordingly, Foundation’s proposed transfers will constitute a significant disposition of
assets that will qualify as section 507(b)(2) transfers.

Treas. Reg. Sec. 1.507-4(b) provides, in part, that a private foundation that makes
transfers described in section 507(b)(2) is “not subject to the tax imposed under section
507(c) with respect to such transfers unless the provisions of section 507(a) become
applicable.” Foundation has represented that it has not and will not notify the Secretary
of any intent to terminate its status as a private foundation within the meaning of
section 507(a)(1) and that it has not either committed willful repeated acts (or failures to
act) or committed a willful and flagrant act (or failure to act) which gives rise to tax under
Chapter 42 within the meaning of section 507(a)(2). Therefore, because the proposed
transfers will be described in section 507(b)(2) and because Foundation will not give the
notice described in section 507(a)(1) or be described in section 507(a)(2), Foundation’s
proposed transfers of assets to the newly created private foundations will not be
described in section 507(a), and the newly created private foundations will not be
treated as newly created organizations for this purpose.

The conclusion that the newly created private foundations will not be treated as newly
created organizations is reached herein only for purposes of responding to Foundation’s
request for the ruling that the proposed transfers will not subject Foundation to the tax
imposed by section 507(c) because the transfers will be described in section 507(b)(2).
Section 6110(j)(3) provides, in part, that unless “the Secretary otherwise establishes by
regulations, a written determination may not be used or cited as precedent.” For this
purpose, section 6110(b)(1)(A) provides that a “written determination” generally means
“a ruling, determination letter, technical advice memorandum, or Chief Counsel advice.”
The request for rulings to which this letter is directed was submitted by Foundation, not
PLR-107389-15                                 5

by either of the newly created private foundations. Accordingly, the newly created
private foundations may not use or cite this letter as precedent. See also, section 11.02
of Rev. Proc. 2015-1, 2015-1 I.R.B. 1, 59.

Requested Ruling 3: The proposed transfers of assets and the carrying out of the
transaction contemplated will be in furtherance of Foundation’s section 501(c)(3)
purposes.

Section 501(a) exempts from federal income tax organizations that are described in
section 501(c). Section 501(c)(3) describes organizations that are organized and operated
exclusively for charitable and other designated exempt purposes. Organizations
described in section 501(c)(3) must operate exclusively for an exempt purpose.

Revenue Ruling 64-182, 1964-1 C.B. 186, provides that a corporation organized
exclusively for charitable purposes is entitled to exemption under section 501(c)(3)
where it is shown to be carrying on through contributions and grants a charitable
program commensurate in scope with its financial resources.

Foundation will transfer an amount equal to 40 percent of the fair market value of its
assets to the two newly created private foundations after they are recognized by the IRS
as being described in section 501(c)(3) and as being exempt under section 501(a).
Foundation will continue to operate for exempt purposes following the proposed
transfers of assets in a manner commensurate in scope with its remaining financial
resources. Accordingly, Foundation’s proposed transfers of assets and the carrying out
of the transaction contemplated will be in furtherance of Foundation’s section 501(c)(3)
purposes.

Requested Ruling 4: The transfers of assets will not give rise to gross investment
income (including capital gains) and will not result in the imposition of tax under section
4940.

Foundation proposes to distribute an amount equal to 40 percent of the fair market
value of its assets in equal shares to each of the two newly created private foundations.
Foundation will not receive any form of consideration for either proposed transfer.

Section 4940(a) imposes an excise tax on a private foundation’s net investment income
for the taxable year. Section 4940(c)(1) defines net investment income as the amount
by which the sum of the gross investment income and the capital gain net income
exceeds the deductions allowed under section 4940(c)(3). Section 4940(c)(2) provides,
in part, that for purposes of section 4940, the term “gross investment income” means
the gross amount of income from interest, dividends, rents, payments with respect to
securities loans, and royalties. Section 4940 does not define “capital gain net income.”
However, Treas. Reg. Sec. 53.4940-1(f)(1) provides, in relevant part, that in determining
capital gain net income for purposes of the tax imposed by section 4940, there shall be
PLR-107389-15                                  6

taken into account only capital gains and losses from the sale or other disposition of
property held by a private foundation for investment purposes.

In the context of applying sections 507(b)(2) and 4940 to a transfer of all of a private
foundation’s assets to one or more other private foundations, Rev. Rul. 2002-28, 2002-1
C.B. 941, states that section 507(b)(2) transfers do not constitute investments of the
transferor for purposes of section 4940, and, therefore, the transfers do not give rise to
net investment income subject to tax under section 4940(a). Foundation’s proposed
transfers of its assets to the newly created private foundations are similar to those in
Rev. Rul. 2002-28, supra, in that they are transfers described in section 507(b)(2).

Accordingly, the proposed transfers to the newly created private foundations will not
result in the production of net investment income and will not result in the imposition of
tax under section 4940.

Requested Ruling 5: Neither Foundation nor any disqualified persons with respect to
Foundation will be deemed to have engaged in an act of self-dealing under section
4941 by effectuating the transfers of assets and the transactions contemplated herein,
including the formation of the newly created private foundations and the payment by
Foundation of reasonable expenses necessary to effect such transactions.

Section 4941(a)(1) imposes taxes on each act of self-dealing between a disqualified
person and a private foundation. Taxes are imposed on both the self-dealers involved in
an act of self-dealing and on any foundation managers who knowingly participate in an
act of self-dealing. Even though section 4941 does not impose a tax on a private
foundation when an act of self-dealing occurs, a foundation with respect to which there
has been an act of self-dealing is required to report it to the IRS on its annual
information return, which is the Form 990-PF in this case.

Section 4941(d)(1)(E) provides that the term “self-dealing” includes any direct or indirect
transfer to, or use by or for the benefit of, a disqualified person of the income or assets
of a private foundation. Section 4946(a)(1) defines the term “disqualified person.” Treas.
Reg. Sec. 53.4946-1(a)(8) provides that the term “disqualified person” does not include
organizations that are exempt under section 501(c)(3). Thus, the newly created private
foundations, by definition, will not be “disqualified persons” with respect to Foundation.

In Situation 1 in Rev. Rul. 2002-28, supra, P is recognized as exempt from federal
income tax under section 501(c)(3) and is classified as a private foundation under
section 509(a). Pursuant to a plan of dissolution, after satisfying all of its outstanding
liabilities, P distributes all of its remaining assets in equal shares to X, Y, and Z. Rev.
Rul. 2002-28, states, in part, that the transfers in question are to section 501(c)(3)
organizations, which are not treated as disqualified persons for purposes of section
4941. Rev. Rul. 2002-28 concludes that the transfers do not constitute self-dealing
transactions and are not subject to tax under section 4941(a)(1).
PLR-107389-15                                7


Foundation’s proposed transfers of assets to the newly created private foundations will
not constitute acts of self-dealing, assuming that the newly created private foundations
are recognized by the IRS as organizations described in section 501(c)(3) and exempt
from tax under sections 501(a). Similarly, the proposed payment of the expenses
connected with creating and obtaining recognition of tax-exempt private foundation
status for each of the newly created private foundations will not constitute acts of self-
dealing, again assuming that the newly created private foundations are recognized by
the IRS as organizations described in section 501(c)(3) and exempt from tax under
sections 501(a).

With respect to the request for a ruling that no disqualified persons with respect to
Foundation will be deemed to have engaged in an act of self-dealing under section
4941 by effectuating the proposed transactions, this letter is directed to Foundation, and
not to the newly created private foundations, the children of Founder, the grandchildren
of Founder, or any other disqualified persons with respect to Foundation. As previously
stated, section 6110(j)(3) provides, in part, that unless “the Secretary otherwise
establishes by regulations, a written determination may not be used or cited as
precedent.” Accordingly, neither the newly created private foundations, the children, the
grandchildren, nor any other disqualified persons with respect to Foundation may use or
cite this letter as precedent. See section 11.02 of Rev. Proc. 2015-1, supra, at 59.

Requested Ruling 6: The proposed transfers of assets by Foundation to the new private
foundations will not constitute an investment that jeopardizes the charitable purposes of
Foundation under section 4944.

Section 4944(a)(1) imposes a tax on any amount invested by a private foundation in a
manner that jeopardizes the carrying out of any of the foundation’s exempt purposes.
Neither section 4944 nor the regulations thereunder define “invest” or “investment.”
However, as mentioned previously in the context of section 4940, in the context of
applying sections 507(b)(2) and 4944 to a transfer of all of a private foundation’s assets
to one or more other private foundations, Rev. Rul. 2002-28, supra, states that section
502(b)(2) transfers do not constitute investments for purposes of section 4944.

Accordingly, the proposed transfers will not jeopardize Foundation’s exempt purposes
and will not be subject to tax under section 4944(a)(1).

Requested Ruling 7: The reasonable legal, accounting, and other expenses paid by
Foundation in connection with this ruling request, in creating the new private
foundations, and in effectuating the transfers of assets will not constitute taxable
expenditures pursuant to section 4945, and all such expenses will be considered as
“qualifying distributions” under section 4942.
PLR-107389-15                                  8

Section 4942(g)(1)(A) and Treas. Reg. Sec. 53.4942(a)-3(a)(2)(i) provide, in part, that
the term “qualifying distribution” means any amount, including “reasonable and
necessary administrative expenses,” paid to accomplish one or more purposes
described in section 170(c)(1) or (2)(B). Section 170(c)(2)(B) lists the following
purposes: “religious, charitable, scientific, literary, or educational purposes, or to foster
national or international amateur sports competition (but only if no part of its activities
involve the provision of athletic facilities or equipment), or for the prevention of cruelty to
children or animals.” These purposes are the same as the purposes listed in section
501(c)(3). Thus, a grant by a private foundation to another organization described in
section 501(c)(3) ordinarily is an amount paid to accomplish a purpose described in
section 170(c)(2)(B) and may be considered to be a qualifying distribution.

Section 4945(a) imposes a tax on each “taxable expenditure” of a private foundation.
Section 4945(d)(5) provides that the term “taxable expenditure” includes any amount
paid or incurred by a private foundation for any purpose other than one specified in
section 170(c)(2)(B).

Treas. Reg. Sec. 53.4945-6(b)(2) provides that legal, administrative, and other
expenses incurred by a private foundation are not taxable expenditures if the foundation
can demonstrate that such expenses were paid or incurred in the good faith belief that
they were reasonable and that the payment or incurrence of such expenses in such
amounts was consistent with ordinary business care and prudence. The determination
whether an expenditure is reasonable depends upon the facts and circumstances of a
particular case. Thus, Foundation’s payment of reasonable legal, accounting, and other
expenses relating to the creation of the newly created private foundations and the
transfers of assets to them, assuming that Foundation can demonstrate ordinary
business care and prudence, will not constitute taxable expenditures under section
4945.

Assuming that Foundation’s legal, accounting, and other expenses incurred in
connection with this ruling request and with effecting the proposed transfers will be
reasonable and consistent with ordinary business care and prudence and paid to
accomplish one or more purposes described in section 170(c)(2)(B), such expenses will
be considered qualifying distributions under section 4942.

Requested Ruling 8: Foundation may count the assets distributed in the proposed
transfers toward satisfaction of its minimum distribution requirements under section
4942 to the extent that the new private foundations make qualifying distributions
described in section 4942(g)(3).

Treas. Reg. Sec. 1.507-3(a)(5) provides that except as provided in Treas. Reg. Sec.
1.507-3(a)(9) (relating to section 507(b)(2) transfers in which all of the transferor’s
assets are transferred to one or more effectively controlled transferee private
foundations), a private foundation is required to meet the distribution requirements of
PLR-107389-15                                 9

section 4942 for any taxable year in which it makes a section 507(b)(2) transfer of all or
part of its net assets to another private foundation. Such a transfer itself will be counted
toward satisfaction of those requirements to the extent the amount transferred meets
the requirements of section 4942(g), including the recordkeeping requirements of
section 4942(g)(3)(B).

In the case of a section 507(b)(2) transfer, Treas. Reg. Sec. 1.507-3)(a)(3) provides that
a substantial contributor to a transferor foundation (such as Founder) will be treated as
a substantial contributor to the transferee organization(s). Section 4946(a)(1)(D)
provides that a member of the family of a substantial contributor to a foundation also is
a disqualified person with the foundation. Accordingly, since all of the directors of
Foundation and the newly created private foundations will be family members of
Founder, all of the directors will be disqualified persons with respect to each of the
foundations involved in the proposed transfers. Thus, the newly created private
foundations will be controlled by persons who are disqualified persons with respect to
Foundation. Accordingly, the proposed transfers to the newly created private
foundations will be treated as qualifying distributions only to the extent that the
requirements of section 4942(g)(3) are satisfied.

Section 4942(g)(1)(A) states, in part, that a “qualifying distribution” includes any amount
(including that portion of reasonable and necessary administrative expenses) paid to
accomplish one or more purposes described in section 170(c)(2)(B), other than any
contribution to (i) an organization controlled (directly or indirectly) by the foundation or
disqualified persons with respect to the foundation or (ii) any private foundation that is
not an operating foundation under section 4942(j)(3), except as provided in section
4942(g)(3). The newly created private foundations will not be operating foundations.

Section 4942(g)(3) provides that the term “qualifying distribution” includes a contribution
to (i) another charitable organization controlled directly or indirectly by the transferor
foundation or one or more disqualified persons with respect to the transferor or (ii) a
private non-operating foundation if two requirements are satisfied. The first such
requirement is that the transferee organization satisfy certain “pass-through”
requirements. See section 4942(g)(3)(A). The second requirement is that the transferor
obtains adequate records or other sufficient evidence from the transferee
organization(s) showing that the required pass-through distributions were made. See
section 4942(g)(3)(B).

Accordingly, if the two newly created private foundations make qualifying distributions in
the manner required by the pass-through rules of section 4942(g)(3)(A) and if
Foundation obtains sufficient records to satisfy the recordkeeping requirements of
section 4942(g)(3)(B), then Foundation may count as qualifying distributions those
portions of the amounts distributed to the two newly created private foundations that
satisfy the requirements of section 4942(g)(3)(A) and (B).
PLR-107389-15                                 10

Requested Ruling 9: The proposed transfers of Foundation’s assets to the new private
foundations will constitute a charitable grant to an organization as described in
section 4945(d)(4) and as such will not constitute a taxable expenditure under
section 4945 provided that Foundation exercises expenditure responsibility with respect
to the transfers in accordance with section 4945(h).

Section 4945(a) imposes a tax on each “taxable expenditure” of a private foundation.
Section 4945(d)(4) provides that the term “taxable expenditure” includes any amount
paid or incurred by a private foundation (such as, in this case, Foundation) as a grant to
a private non-operating foundation (such as the two newly created private foundations)
unless the grantor foundation exercises expenditure responsibility with respect to such
grant in accordance with section 4945(h).

Treas. Reg. Sec. 53.4945-4(a)(2) provides that for purposes of section 4945, the term
“grants” includes such expenditures as “payments to exempt organizations to be used in
furtherance of such recipient organizations’ exempt purposes.” Foundation has
represented that the two newly created private foundations will have received
recognition as organizations described in section 501(c)(3) and as private, non-
operating foundations prior to Foundation’s making any transfers of assets to them, and
that they will be responsible for maintaining their tax-exempt status thereafter.

Treas. Reg. Sec. 53.4945-6(c)(3) allows a private foundation to transfer its assets to
exempt organizations described in section 501(c)(3), including private foundations,
pursuant to section 507(b)(2), without the transfers being taxable expenditures under
section 4945. However, Treas. Reg. Sec. 53.4945-6(c)(3) does not override the
requirement under section 4945(d)(4) that grants to private, non-operating foundations
be subject to the expenditure responsibility requirements of section 4945(h). Such an
override is available under Treas. Reg. Sec.1.507-3(a)(9) when the transfer of assets is
a section 507(b)(2) transfer of all of the transferor’s assets, but it is not available when
the transfer does not constitute a transfer of all of the transferor’s assets, as is the case
here. Consequently, Foundation will have to exercise expenditure responsibility with
respect to its grants to the two newly created private foundations, including the
proposed transfers of assets described in section 507(b)(2), to avoid liability for tax
under section 4945.

RULINGS

Based on the foregoing, and assuming the accuracy of the facts and representations set
forth herein, we rule as follows:

1. The proposed transfers of 40 percent of Foundation’s assets to the newly created
   private foundations will qualify as a transfer of assets described in section 507(b)(2)
   and will not be described in section 507(a).
PLR-107389-15                                 11

2. For purposes of applying section 507(b)(2) and Chapter 42 to Foundation only, the
   newly created private foundations will not be treated as newly created organizations
   as a result of the proposed transfers of assets.

3. The proposed transfers of assets and the carrying out of the contemplated
   transaction will be in furtherance of Foundation’s section 501(c)(3) purposes, as
   described above.

4. The proposed transfers of assets will not give rise to gross investment income
   (including capital gains) and will not result in the imposition of tax under section 4940.

5. Foundation will not be deemed to have engaged in any acts of self-dealing under
   section 4941 by effectuating the proposed transfers of assets and the contemplated
   transaction, including the formation of the newly created private foundations and the
   payment by Foundation of reasonable expenses necessary to effect such
   transactions.

6. The proposed transfers of assets by Foundation to the newly created private
   foundations will not constitute investments that will jeopardize the charitable
   purposes of Foundation under section 4944.

7. The reasonable legal, accounting, and other expenses paid by Foundation in
   connection with this request for rulings, in creating the newly created private
   foundations, and in effectuating the proposed transfers of assets will not constitute
   taxable expenditures under section 4945, and all such expenses will be qualifying
   distributions under section 4942.

8. Foundation may count the assets distributed in the proposed transfers toward the
   satisfaction of its minimum distribution requirement under section 4942 to the extent
   the newly created private foundations make qualifying distributions described in
   section 4942(g)(3)(A) and Foundation obtains sufficient records to satisfy the
   requirements of section 4942(g)(3)(B).

9. The proposed transfers of assets to the newly created private foundations will
   constitute grants described in section 4945(d)(4) but will not be taxable expenditures
   under section 4945 if Foundation exercises expenditure responsibility with respect to
   the transfers in accordance with the requirements of section 4945(h).

This letter does not address the applicability of any section of the Code or Regulations
to the facts submitted other than with respect to the sections specifically described.
Neither does this letter constitute a determination that Foundation is exempt from tax
under section 501(a) or is a private foundation under section 509(a). Because it could
help resolve questions concerning your federal income tax status, this letter should be
kept in your permanent records.
PLR-107389-15                                  12


This letter will be made available for public inspection under section 6110 of the Code
after certain deletions of identifying information are made. For details, see the enclosed
Notice 437, Notice of Intention to Disclose. A copy of this letter with deletions that we
intend to make available for public inspection is attached to Notice 437. If you disagree
with our proposed deletions, you should follow the instructions in the Notice 437.

The rulings contained in this letter are based upon information and representations
submitted by the taxpayer and accompanied by a penalty of perjury statement executed
by an individual with authority to bind the taxpayer and upon the understanding that
there will be no material changes in the facts. This office has not verified any of the
material submitted in support of the request for rulings, and such material is subject to
verification on examination.

No ruling is granted as to whether Foundation qualifies as an organization described in
section 501(c) or section 509(a), and, except as expressly provided above, no opinion is
expressed or implied concerning the federal income tax consequences of any other
aspects of any transaction or item of income set forth in the ruling.

This letter is directed only to the taxpayer requesting it. Section 6110(k)(3) of the Code
provides that it may not be used or cited by others as precedent.

A copy of this letter must be attached to any tax return to which it is relevant.
Alternatively, if Foundation files its return electronically, it may satisfy this requirement
by attaching a statement to its return that provides the date and control number of this
letter.

In accordance with the Power of Attorney on file with this office, a copy of this letter is
being sent to each of your authorized representatives.
PLR-107389-15                                13

If you have any questions about this ruling, please contact the person whose name and
telephone number are shown in the heading of this letter.

Sincerely,


Kenneth M. Griffin
Chief
Exempt Organizations Branch 3
(Tax Exempt & Government Entities)

Encl.: Notice 437, Notice of Intention to Disclose
       Redacted copy of this letter