Additional Supporting Organization Regulations on Horizon

Yesterday, the District of Columbia Bar Taxation Section's Exempt Organizations Committee sponsored a program entitled “It's Pay Out Time for Supporting Organizations.”  (The event summary is available here; click on the program title and a pop-up appears.)  Tax Notes Today summarizes the remarks made at the program by officials with the Department of Treasury and the Internal Revenue Service. (See 2013 TNT 35-5.)  Reportedly, the government will be offering guidance to address issues not fully resolved in the recently issued regulations governing Type III supporting organizations (SOs).  It is anticipated that such future guidance will include clarification of the scope of the responsiveness test, which (among other things) requires a supported organization to “have a significant voice in the investment policies of the [SO], the timing of grants, the manner of making grants, and the selection of grant recipients by such [SO], and in otherwise directing the use of the income or assets of the [SO].”  Government officials also reportedly indicated that future guidance will address the types of distributions that non-functionally integrated Type III SOs can make in satisfying their payout requirements, as well as the definition of “control” for purposes of the rule of Internal Revenue Code section 509(f)(2) prohibiting Type I and Type III SOs from accepting contributions from donors who control their supported organizations.

 

JRB