IRS grants a 60-month extension for a museum relocation set-aside

Plain-English summary

A private foundation had previously received approval to set aside funds to relocate a museum between two foreign cities. An unexpected donation doubled the museum's collection and increased its space requirements, while land, construction, labor, materials, and taxes became more expensive. Major city events limited available architects and contractors, and the global pandemic caused further delays. The IRS found good cause and granted a 60-month extension of the deadline to pay out the set-aside under IRC § 4942(g)(2).

Ruling snapshot

• Question: Did the foundation show good cause for a 60-month extension of its approved museum relocation set-aside?
• Outcome: Approved
• Key authorities: IRC § 4942(g)(2)(B)(i); Treas. Reg. § 53.4942(a)-3(b)(7)(i)(e)

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
P.O. Box 2508
Cincinnati, OH 45201

Employer Identification Number:

Date: October 20, 2020
Contact Person - ID Number:

Number: 202102014

Release Date: 1/15/2021 Contact Telephone Number:
LEGEND UIL

B = City, Country 4942.03-07

C = City, Country

D = Museum

E = Number

x dollars = Amount

Y = Date

Z = Date

Dear :

Why you are receiving this letter
This is our response to your April 1, 2020 letter requesting a 60-month extension
to pay out a set-aside approved on July 11, 2016.

Our ruling dated July 11, 2016 approved a set-aside in the amount of x dollars for
the purpose of relocating D from C to B with payout date no later than Y. You are

requesting advance approval of a 60-month extension of time to pay the set-aside
amount of x dollars beyond Y until Z.

Our determination

Based on the information submitted, we conclude that you have established good
cause to extend the period of time to payout the set-aside amount of x dollars
approved on July 11, 2016. Therefore, we approve your request for a 60-month
extension to payout the set-aside amount of x dollars no later than Z.

Your request details

Your original approval dated on July 11, 2016 was that you were to pay x dollars
no later than Y for the purpose of relocating D from C to B. You provided
estimated costs, physical facilities, and future sources of funding and budgets for
the project. Due to the death of a family member of D, you received unexpected
donation of E . This donation doubled the collection D currently has. As

a result, this increases the physical space D needs for the future site it expected in
the original approval and you were not able to locate a suitable site for D despite
your diligent efforts to do so.

The anticipated cost of the future site for D has dramatically increased due to
increase in land values in B since the original approval was granted. The
anticipated cost of construction, labor and material, for the future site of D has also
increased substantially in B within last five years. The national sales tax rate in B
also increased. As a result, you have to increase the budget for the construction
costs to meet the particular structural and environmental requirements.

You expected there was going to be shortage of manpower B in the original
approval due to large-scale upcoming events in the city. The unusual heavy
demand and scale for construction services and architects needed for these
events continue to cause unavailability of project consultants, support personnel,
architects, and construction companies.

Most recently, the global pandemic has caused delays and has affected economy
of all areas in B and globally. Companies have told tens of thousands of workers
to stay at home. Complications of the pandemic has further postponed the project.

Basis for our determination

Internal Revenue Code Section 4942(g)(2)(B)(i) provides requirements for
approval of a set-aside for a specific project that will be paid out in 5 years. A
foundation must establish that the project is one that can better be accomplished
using the set-aside than by making an immediate payment. A set-aside also may
have its period to pay extended if it satisfies the requirements of Section
4942(g)(2)(B)(i) of the Code and good cause is shown.

Section 53.4942(a)-3(b)(7)(i)(e) of the Foundation and Similar Excise Taxes
Regulations provides that you must provide a statement showing good cause as to
why the set aside payment period should be extended, specifying the requested
extension of time.

Additional information

This determination is directed only to the organization that requested it. Internal
Revenue Code Section 6110(k)(3) provides that it may not be used or cited as a
precedent.

Please keep a copy of this letter in your records. We have sent a copy of this letter
to your representative as indicated in your power of attorney.

If you have any questions, please contact the person listed at the top of this letter.

Sincerely,

Stephen A. Martin
Director, Exempt Organizations
Rulings and Agreements

Enclosure