Regulations: Payout requirement for non-functionally integrated Type III supporting organizations

Final regulations for Type III supporting organizations

The Treasury Department and IRS this afternoon released for publication in the Federal Register final regulations (T.D. 9746) regarding the distribution requirement for non-functionally integrated Type III supporting organizations. With today’s release, temporary regulations (that expired December 21, 2015) are withdrawn.

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The final regulations [PDF 225 KB] are effective on the date of filing with the Federal Register (presumably today, December 21, 2015). The regulations are scheduled to be published in the Federal Register on December 23, 2015.

The temporary regulations expired December 21, 2015, and the final regulations generally adopt the provisions of the temporary regulations, except the final regulations include provisions that:

  • Conform the provision regarding the valuation of non-exempt-use assets to the section 4942 regulation provision that it cross-references (Reg. section 53.4942(a)-2(c)(2)) 
  • Replace references in Reg. section 1.509(a)-4 to the temporary regulations with references to these final regulations

Future regulations to be proposed

The preamble to the final regulations indicates an intention of the IRS and Treasury to publish proposed regulations in the near future that would make one change to these final regulations—that is, the future regulations would be proposed to remove a provision that reduces the distributable amount by the amount of taxes subtitle A of the Code imposes on a supporting organization during the immediately preceding tax year. 

The to-be-issued proposed regulations would also propose specific rules, including transition relief, regarding the requirements for a functionally integrated Type III supporting organization that supports governmental supported organizations. Such supporting organizations may continue to rely on Section 3.01 of Notice 2014-4 until such proposed regulations are published in the Federal Register.

 

For more information, contact the Managing Director-in-Charge of KPMG's Washington National Tax Exempt Organizations Tax group:

D. Greg Goller | (703) 286-8391 | greggoller@kpmg.com

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