Notice 2005-41

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Notice 2005-41; 2005-1 C.B. 1203;
2005 IRB LEXIS 201, *; 2005-23 I.R.B. 1203
Notice 2005-41
Notice 2005-41; 2005-1 C.B. 1203; 2005 IRB LEXIS 201; 2005-23 I.R.B. 1203
June 6, 2005
[*1]
SUBJECT MATTER: Guidance Regarding Qualified Intellectual Property Contributions
TEXT:
PURPOSE
This notice provides guidance regarding § 882 of the American Jobs Creation Act of 2004, Pub. L. No.
108-357, 118 Stat. 1418 (2004), which adds §§ 170(e)(1)(B)(iii) and 170(m) to the Internal Revenue
Code and amends § 6050L. Section 170(e)(1)(B)(iii) provides that the amount of a donor's initial
charitable contribution deduction allowed under § 170 for contributions of qualified intellectual property
is limited to the lesser of the fair market value of, or the donor's adjusted basis in, the qualified
intellectual property. Section 170(m) allows the donor to deduct, as a charitable contribution, certain
additional amounts based on a percentage of the qualified donee income received by or accrued to the
donee with respect to the qualified intellectual property. To qualify for the additional deductions, the
donor must notify the donee at the time of the contribution of the donor's intention to take the
additional deductions. As amended, § 6050L(b) requires a donee to make a return in the form and
manner prescribed by the Secretary with respect to each qualified intellectual property contribution.
Sections 170(e)(1)(B)(iii) [*2] and 170(m), and the amendments to § 6050L, are effective for
contributions made after June 3, 2004.
BACKGROUND
Section 170(a) allows a deduction for a charitable contribution. Generally, if a donor makes a charitable
contribution of property, the amount of the deduction is the fair market value of the property at the
time of the contribution, reduced as provided in § 170(e) and § 1.170A-4 of the Income Tax
Regulations. For certain types of property, § 170(e)(1)(B) reduces the amount of the deduction by the
amount of gain that would have been long-term capital gain if the donor had sold the property at its
fair market value, determined as of the time of the contribution. Under § 170(e)(1)(B)(iii), this
reduction applies in determining a donor's initial deduction for a charitable contribution of "any patent,
copyright (other than a copyright described in section 1221(a)(3) or 1231(b)(1)(C)), trademark, trade
name, trade secret, know-how, software (other than software described in section 197(e)(3)(A)(i)), or
similar property, or applications or registrations of such property."
Subject to the terms and limitations of § 170, § 170(m) allows a donor of qualified intellectual property
to [*3] deduct, in the year of contribution or in subsequent taxable years, additional amounts based
on a percentage (specified in § 170(m)(7)) of the qualified donee income received by or accrued to the
donee with respect to the qualified intellectual property. For this purpose, "qualified intellectual
property" is property described in § 170(e)(1)(B)(iii) other than property contributed to or for the use
of private foundations as defined in § 509(a) (with certain exceptions as described in § 170(b)(1)(E)).
"Qualified donee income" is any net income properly allocable to the qualified intellectual property (as
opposed to the activity in which the intellectual property is used) that is received by or accrued to the
donee organization during the year. Qualified donee income does not include any income received by or
accrued to the donee organization after the earlier of the tenth anniversary of the date of the
contribution or the expiration of the legal life of the qualified intellectual property. See § 170(m)(5) and
(6). Additional deductions are allowed, however, only to the extent that the aggregate of the specified
percentages of qualified donee income exceeds the initial deduction claimed [*4] by the donor. See §
170(m)(2).

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To qualify for the additional deductions, the donor must inform the donee at the time of the
contribution that the donor intends to treat the contribution as a qualified intellectual property
contribution (the notification requirement). See § 170(m)(8).
Section 6050L(b), as amended by the Act, requires a donee (which may not be a private foundation
described in section 170(e)(1)(B)(ii)) that receives notification from the donor to make a return with
respect to a qualified intellectual property contribution for each taxable year of the donee showing the
amount of any qualified donee income. Section 6050L(c) requires the donee to provide a copy of the
return to the donor. See also § 1.6050L-2T of the Procedure and Administration Regulations (May 23,
2005); Prop. Treas. Reg. § 1.6050L-2T (May 23, 2005). The amount of net income taken into account
by the donor may not exceed the amount of qualified donee income reported by the donee under §
6050L.
GUIDANCE ON THE NOTIFICATION REQUIREMENT
General rule
A donor will satisfy the notification requirement under § 170(m)(8) if the donor delivers or mails to the
donee, at the time of the contribution, a written statement [*5] containing the following information:
(1) The name, address, and taxpayer identification number of the donor;
(2) A description of the qualified intellectual property in sufficient detail to identify the qualified
intellectual property received by the donee;
(3) The date of the contribution to the donee; and
(4) A statement that the donor intends to treat the contribution as a qualified intellectual property
contribution for purposes of §§ 170(m) and 6050L.
Transitional rule for contributions made after June 3, 2004, and on or before June 20, 2005
Section 170(m) was enacted on October 22, 2004, and is effective for contributions made after June 3,
2004. Donors may have made contributions of qualified intellectual property after June 3, 2004, and
may not have informed the donee at the time of the contribution that they intended to treat the
contribution as a qualified intellectual property contribution.
A donor who contributed qualified intellectual property after June 3, 2004, and on or before June 20,
2005, without notifying the donee that it intended to treat the contribution as a qualified intellectual
property contribution will be regarded as satisfying the notification requirement if, [*6] on or before
July 20, 2005, the donor delivers or mails to the donee a written statement containing the information
described above.
PAPERWORK REDUCTION ACT
The collection of information in this notice has been reviewed and approved by the Office of
Management and Budget (OMB) in accordance with the Paperwork Reduction Act (44 U.S.C. 3507)
under control number 1545-1937.
An agency may not conduct or sponsor, and a person is not required to respond to, a collection of
information unless the collection of information displays a valid OMB control number.
The collection of information in this notice is in the GUIDANCE ON THE NOTIFICATION REQUIREMENT
section of this notice. The collection of information is required from donors to satisfy the notification
requirement of § 170(m). The collection of information is required from donors to obtain a benefit. The
likely respondents are individuals, partnerships, and corporations.
The estimated total annual reporting burden is 30 hours.
The estimated annual burden per respondent varies from 0.5 hours to 1.5 hours, depending on
individual circumstances, with an estimated average of 1 hour. The estimated number of respondents is

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30.
Books or records relating [*7] to a collection of information must be retained as long as their
contents may become material in the administration of any internal revenue law. Generally, tax returns
and return information are confidential, as required by § 6103.
DRAFTING INFORMATION
The principal authors of this notice are Charles V. Dumas and Susan J. Kassell of the Office of Associate
Chief Counsel (Income Tax & Accounting). For further information regarding this notice contact Ms.
Kassell at 202-622-5020 (not a toll-free call).
Source: IRS Cumulative Bulletin and Internal Revenue Bulletin
View: Full
Date/Time: Tuesday, July 5, 2011 - 4:09 PM EDT
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