IRS Issues Regulations For Type III Supporting Organizations

Type III supporting organizations should take steps to comply with new regulations and funders should review due diligence procedures for grants made to these organizations.

On December 21, 2012, the Internal Revenue Service (IRS) issued final and temporary regulations on the classification of Type III supporting organizations (SOs) as "functionally integrated" and "non-functionally integrated" in accordance with provisions added to the Internal Revenue Code by the Pension Protection Act of 2006 (PPA).¹ These regulations, which took effect on December 28, 2012, made significant changes to the proposed regulations that were published on September 24, 2009, including the requirements for functionally and non-functionally integrated Type III SOs. Type III SOs and their potential funders should familiarize themselves with the new regulations and their key features, as the regulations raise important considerations for these entities.