Set-aside for domestic violence housing approved

Plain-English summary

A private foundation requested approval to set aside funds for additional transitional housing for women and children affected by domestic violence. The foundation already operates a housing program with a waiting list and plans to use the set-aside for construction. It explained that architectural design and contractor work make the project better suited to a set-aside than immediate payment. The IRS approved the request under section 4942(g)(2). The foundation must document the set-aside and pay the amounts within 60 months after the first set-aside.

Ruling snapshot

• Question: May the foundation treat funds reserved for additional transitional housing as a qualifying set-aside under section 4942(g)(2)?
• Outcome: Approved
• Key authorities: IRC §§ 170(c)(2)(B), 4942, 501(c)(3), and 509(a); Treas. Reg. § 53.4942(a)-3(b)

Full text (IRS public release)

Department of the Treasury Date:
Internal Revenue Service 03/06/2025
Tax Exempt and Government Entities Employer ID number:
IRS P.O. Box 2508
Cincinnati, OH 45201 Person to contact:
Name:
ID number:
Release Number: 202523026 Telephone:
Release Date: 6/6/2025 Fax:

LEGEND UIL: 4942.03-07
B = City, State

C = Program

D = Number

E = Number

f dollars = Amount

Dear :

Why you are receiving this letter

We received your December 21, 2023 request for approval of a set-aside under Internal Revenue Code (IRC)
Section 4942(g)(2). Based on the information furnished, your request is approved.

You are recognized as tax-exempt under IRC Section 501(c)(3) and as a private foundation under IRC
Section 509(a).

What you need to do

Document your approved set-aside(s) in your records as pledges or obligations. You must pay the set-aside
amounts within 60 months after the date of the first set-aside, as required under IRC Section 4942(g)(2).

Take into account the amounts set aside when determining your minimum investment return under IRC Section
4942(e)(1)(A) and the income attributable to your set-asides when computing your adjusted net income under
IRC Section 4942(f).

Description of set-aside request

The purpose of your set-aside is for transitional housing for abused women and their children who have been
victims of domestic violence. You purchased property in B and have been operating C, a transitional program
for victims of domestic violence. C has D apartments and has a waiting list of women with children who are in
need of a place to stay while they get back on their feet. You provide support for the women in order to help
them build the skills they need to live on their own. Residents stay between E months before transitioning out of
the program. Due to the waiting list and the overwhelming need for housing in the area, the set-aside will be
used to build additional housing. The estimates you received to build additional housing are around f dollars.
The set-aside amounts will be paid not more than 60 months after the date of the first set-aside. The project can
be better accomplished by a set-aside rather than immediate payment of fund due to the time involved in
obtaining architectural drawings and working with contractors to build the project.

Letter 4797 (Rev. 1-2021)
Catalog Number 58293H

Basis for our determination

IRC Section 4942(g)(2)(A) states that an amount set aside for a specific project, which includes one or more
purposes described in IRC Section 170(c)(2)(B), may be treated as a qualifying distribution if it meets the
requirements of IRC Section 4942(g)(2)(B).

IRC Section 4942(g)(2)(B) states that an amount set aside for a specific project will meet the requirements of
this subparagraph if, at the time of the set-aside, the foundation establishes that the amount will be paid within
five years and either clause (i) or (ii) are satisfied.

IRC Section 4942(g)(2)(B)(i) is satisfied if, at the time of the set-aside, the private foundation establishes that
the project can better be accomplished using the set-aside than by making an immediate payment.

Treasury Regulation (Treas. Reg.) Section 53.4942(a)-3(b)(1) provides that a private foundation may establish a
project as better accomplished by a set-aside than by immediate payment if the set-aside satisfies the suitability
test described in Treas. Reg. Section 53.4942(a)-3(b)(2).

Treas. Reg. Section 53.4942(a)-3(b)(2) provides that specific projects better accomplished using a set-aside
include, but are not limited to, projects where relatively long-term expenditures must be made requiring more
than one year's income to assure their continuity.

In Revenue Ruling 74-450, 1974-2 C.B. 388, an operating foundation converted a portion of newly acquired
land into a public park under a four-year construction contract. The construction contract payments were to be
made mainly during the final two years. This constituted a "specific project." The foundation's set-aside of all
its excess earnings for four years was treated as a qualifying distribution under IRC Section 4942(g)(2).

Additional information

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

Visit www.irs.gov/setasides for more information.

We'll make this determination letter available for public inspection after deleting personally identifiable information,
as required by IRC Section 6110. Enclosed are Letter 437, Notice of Intention to Disclose -Rulings, and a copy of
the letter that shows our proposed deletions.

• If you disagree with our proposed deletions, follow the instructions in the Letter 437 on how to notify us.

• If you agree with our deletions, you don't need to take any further action.

Keep a copy of this letter for your records.

If you have questions, you can call the contact the person shown above.

Sincerely,

Stephen A. Martin
Director, Exempt Organizations
Rulings and Agreements

Enclosures:
Redacted Letter 4797
Letter 437

Letter 4797 (Rev. 1-2021)
Catalog Number 58293H