New IRS Notice: Interim Guidance Regarding Supporting Organizations And Donor Advised Funds

On December 4, 2006, the Internal Revenue Service issued Notice 2006-109 with interim guidance for supporting organizations and donor advised funds, in light of the new legislation enacted as part of the Pension Protection Act of 2006 ("PPA").1

In part, these temporary guidelines provide safe harbors for private foundations with regard to grants to certain types of public charities classified as supporting organizations. These guidelines also provide transitional relief for those organizations with pre-existing agreements impacted by the new provisions in the PPA.

The provisions enacted by the PPA impose certain excise taxes on transactions in which a private foundation makes a grant to a recipient who is ultimately controlled by the private foundation donor. These interim guidelines provide relatively "bright-line" tests for determining when a donee will be considered to be "controlled" by the donor.