In Announcement 2007-87, 2007-40 IRB 753 (Oct. 1, 2007), the IRS announced the publication of an advance notice of proposed regulations in response to changes made by the Pension Protection Act of 2006 to the requirements that a tax-exempt organization must meet to qualify as a Type III supporting organization under section 509(a)(3); comments are due by October 31, 2007.
As background, a supporting organization qualifies as a public charity because it has a close relationship with another publicly supported section 501(c)(3) organization. Based on the relationship of the supporting organization to the public charity it supports, a supporting organization may be classified as a type I, II or III. Type III supporting organizations typically operate with a greater degree of independence from their supported organization than Type I and Type II organizations.
The regulations that the Treasury Department and the IRS anticipate proposing include the following:
• regulations covering the payout requirements for Type III supporting organizations that are not functionally integrated • the criteria for determining whether a Type III supporting organization is functionally integrated,• the modified requirements for Type III supporting organizations that are organized as trusts, and
• the requirements regarding the type of information a Type III supporting organization must provide to its supported organization(s) to demonstrate that it is responsive to its supported organization(s).
Posted by Lewis J. Saret, General Editor, Wealth Strategies Journal.
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