IRS Proposes To Ease Form 1041-A Filing Burden For Trusts With Passthrough Charitable Deductions

The Treasury Department and IRS have issued proposed regulations that would eliminate an information-return filing requirement for certain trusts whose only charitable contribution deductions flow from a partnership or S corporation in which the trust holds an interest. The proposed rule, published for public inspection under REG-109082-25 and scheduled for formal publication in the Federal Register on August 17, 2026, responds directly to complaints from practitioners that the current filing requirement imposes an unnecessary burden on trustees who may not even be aware it applies to them.

Under existing law, a trust other than a simple trust can generally deduct amounts of gross income that are, under its governing instrument, paid for a charitable purpose described in Section 170(c) of the tax code. Section 6034 requires trusts claiming this deduction, or split-interest trusts described in Section 4947(a)(2), to file an annual information return reporting details about the deduction, including amounts previously deducted but not yet paid out and a full balance sheet of trust assets and liabilities. The reporting requirement, dating back to the Revenue Act of 1950, was designed to let the IRS confirm that charitable deductions claimed for accumulated trust income are eventually actually paid to charity and are not claimed more than once.

The problem the new proposal addresses is that this same reporting obligation currently sweeps in trusts that never accumulated any charitable funds of their own at all. When a trust owns an interest in a partnership or S corporation that makes a charitable contribution, the trust picks up its allocable share of that deduction under Sections 702 or 1366 of the Code, even though the trust itself never received or held the contributed funds and made no independent decision to give to charity. Commenters argued that requiring these pass-through recipient trusts to complete the same Form 1041-A as trusts actively accumulating charitable funds serves no real enforcement purpose while creating real administrative headaches, particularly for trustees unfamiliar with the obscure filing requirement.

The proposed regulations would add a new exception under Treasury Regulation Section 1.6034-1(b), relieving a trust of the Form 1041-A filing requirement for any taxable year in which its only Section 642(c) deduction results from a passthrough contribution reported to it on a Schedule K-1. The proposal would also fix a longstanding technical inconsistency in the regulations: current rules still direct split-interest trusts described in Section 4947(a)(2) to file Form 1041-A, even though Form 5227 has actually replaced that form for such trusts since 2007 following the Pension Protection Act. The proposed regulations would formally update the text to require split-interest trusts to file Form 5227 instead.

Treasury and the IRS have designated the rule as deregulatory under Executive Order 14192 and confirmed it is not economically significant. If finalized, the changes would apply to taxable years ending on or after the date final regulations are published, though trusts and split-interest trusts may rely on the proposed rules for earlier taxable years in the meantime. Trustees and fiduciary advisors whose trusts hold interests in partnerships or S corporations with charitable giving programs should review their current Form 1041-A filing practices in light of this proposal and consider submitting comments if the change would affect their compliance obligations.