IRS Publishes Long-Awaited Final Regulations For Type III Supporting Organizations

On Dec. 21, 2012, more than three years after publishing proposed regulations in 2009, the IRS and the Treasury Department issued final and temporary regulations (T.D. 9605) regarding the changes made to Type III supporting organizations under the Pension Protection Act of 2006 (the 2006 Act). Most significantly, the IRS withdrew portions of the 2009 proposed regulations that provided for a 5 percent distribution requirement for non-functionally integrated Type III supporting organizations similar to the distribution requirements that apply to private foundations. The withdrawn portion of the regulations was replaced with temporary regulations, which serve as the text of the new proposed regulations, requiring non-functionally integrated Type III supporting organizations to meet a distribution requirement equal to the greater of 85 percent of the organization's adjusted net income or 3.5 percent of the fair market value of the organization's non-exempt-use assets.