Update on IRS Guidance for Exempt Organizations Affected by the Pension Protection Act of 2006

On August 17, 2006, President Bush signed into law the Pension Protection Act of 2006 (PPA), which included several charitable giving incentives and numerous reforms primarily affecting charitable organizations and their donors. Since the PPA’s enactment, representatives of the charitable sector have requested guidance on several of the provisions, particularly those that were effective on, before, or shortly after the date of enactment.

Notice 2006-109 (the Notice), issued by the IRS on December 4, 2006 (available here), provides interim guidance on several issues affecting private foundations, supporting organizations, and donor-advised funds. Most importantly for many organizations, the Notice provides guidance to private foundations and sponsoring organizations of donor-advised funds on how to make a determination for three key aspects of the PPA: (1) whether a public charity is a supporting organization, (2) what type of supporting organization an entity is, and (3) whether a Type III supporting organization is “functionally integrated.”

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