Today the IRS and the Treasury Department released proposed regulations regarding the prohibition on certain contributions to Type I and Type III supporting organizations and the requirements for Type III supporting organizations. The regulations reflect changes to the law made by the Pension Protection Act of 2006.
Specifically, the proposed regulations define the term “control” for purposes of section 509(f)(2), which prohibits a Type I supporting organization or a Type III supporting organization from accepting contributions from persons who control the governing body of its supporting organization(s). The proposed regulations also set forth additional rules on the requirements for Type III supporting organizations, including (i) additional requirements to meet the responsiveness test for all Type III supporting organizations; (ii) additional rules regarding the qualification of an organization as a functionally integrated Type III supporting organization under Treas. Reg. § 1.509(a)-4(i)(4), including provisions for supporting organizations that support governmental entities; and (iii) additional rules regarding the required annual distributions under Treas. Reg. § 1.509(a)-4(i)(5) by a NFI Type III supporting organization.