Additional Supporting Organization Regulations on Horizon

Yesterday, the District of Columbia Bar Taxation Section’sExempt Organizations Committee sponsored a program entitled “It’s Pay Out Time for Supporting Organizations.”  (The event summary is available hererecently issuedregulations governing Type III supporting organizations (SOs).  It is anticipated that suchfuture guidance will include clarification of the scope of the responsivenesstest, which (among other things) requires a supported organization to “have a significantvoice in the investment policies of the [SO], the timing of grants, the mannerof making grants, and the selection of grant recipients by such [SO], and inotherwise directing the use of the income or assets of the [SO].”  Government officials also reportedly indicatedthat future guidance will address the types of distributions that non-functionallyintegrated Type III SOs can make in satisfying their payout requirements, aswell as the definition of “control” for purposes of the rule of Internal Revenue Code section509(f)(2) prohibiting Type I and Type III SOs from accepting contributions fromdonors who control their supported organizations.

JRB