IRS Proposes to Eliminate Reporting Requirements on Charitable Contributions for Certain Trusts

The IRS has proposed regulations that would eliminate an often-overlooked information reporting requirement for certain trusts whose charitable deductions arise solely from charitable contributions made by a partnership or S corporation in which the trust holds an interest. The proposed regulations would also formally clarify that split-interest trusts satisfy their applicable information reporting requirements by filing Form 5227, Split-Interest Trust Information Return, rather than Form 1041-A.

The proposed regulations, REG-109082-25, are scheduled to be published in the Federal Register on August 17, 2026.

The Current Reporting Requirement

Section 6034 of the Internal Revenue Code generally authorizes the Treasury Department to require trusts claiming charitable deductions under Section 642(c) to provide information regarding those deductions. Under the current regulations, a trust claiming a Section 642(c) deduction generally must file Form 1041-A, U.S. Information Return Trust Accumulation of Charitable Amounts, unless an exception applies.

Form 1041-A is intended, among other things, to provide the IRS with information necessary to determine whether amounts for which a charitable deduction was claimed have actually been paid to charity and whether a deduction has been claimed more than once.

The requirement can create an administrative burden for trusts that receive a charitable deduction indirectly through a pass-through entity. For example, a trust that owns an interest in a partnership or S corporation may be allocated its share of a charitable contribution made by that entity. The contribution is made by the partnership or S corporation, not by the trust, but the charitable deduction is nevertheless taken into account by the trust under the applicable pass-through rules.

Proposed Exception for Pass-Through Contributions

The proposed regulations would add a new exception to the Form 1041-A filing requirement for trusts whose only Section 642(c) deductions are attributable to charitable contributions made by a pass-through entity in which the trust holds an interest.

Specifically, proposed Section 1.6034-1(b)(3) would provide that a trust is not required to file Form 1041-A if its only claimed Section 642(c) deductions are attributable to contributions taken into account under Section 702(a)(4) (partnerships), Section 1366(a)(1) (S corporations), or both. This would include an LLC that is classified as a partnership for federal income tax purposes, but generally would not include a single-member LLC that is treated as disregarded.

In practical terms, the proposed exception would apply where:

• the trust owns an interest, directly or indirectly, in a partnership or S corporation;
• the partnership or S corporation makes a charitable contribution;
• the trust receives an allocable share of the resulting charitable deduction; and
• the trust has no other Section 642(c) charitable deduction for the taxable year.

In the proposed rule, the IRS explains that these trusts are different from trusts that accumulate income for future charitable distributions. The trust does not receive the contributed funds and does not itself make the charitable contribution. Instead, the charitable contribution is made at the pass-through entity level, and the resulting deduction is reported to the trust through the entity’s Schedule K-1.

The IRS therefore views the additional Form 1041-A filing as unnecessary in these circumstances because the reporting requirement was principally intended to allow the IRS to monitor charitable amounts accumulated or paid by the trust.

Clarification for Split-Interest Trusts

The proposed regulations would also conform the regulations to current IRS practice by clarifying that split-interest trusts described in Section 4947(a)(2) file Form 5227, rather than Form 1041-A. Form 5227 has replaced Form 1041-A for these trusts since 2007, but the regulations have not been updated to reflect the change.

Takeaway

The proposed regulations would apply to taxable years ending on or after the date the final regulations are published. Importantly, qualifying trusts may rely on the proposed rules for taxable years ending before that date.

Trustees and advisors should identify trusts that claim Section 642(c) deductions through partnership or S corporation interests. If those are the trust’s only Section 642(c) deductions for the year, the proposed regulations would eliminate the Form 1041-A filing requirement.

Comments are due 60 days after publication in the Federal Register, which is scheduled for August 17, 2026.

If you have any questions regarding this alert, please contact your Cummings & Lockwood private clients attorney.