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Abstract: 

Amendments made to the Internal Revenue Code by the Pension Protection Act of 2006 (H.R. 4) now affect private foundation grantmaking to supporting organizations described in IRC §509(a)(3). Specifically, the Pension Protection Act provides that a private nonoperating foundation may not count as a “qualifying distribution” toward the foundation’s annual minimum distribution obligation grants paid to two categories of supporting organizations: (1) non-functionally integrated Type III supporting organizations and (2) any other type of supporting organization if a disqualified person with respect to the foundation directly or indirectly controls the supporting organization or a supported charity of the supporting organization. Any grant to these two categories of supporting organizations will also be treated as a taxable expenditure unless the foundation exercises expenditure responsibility over the grant.

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Affiliations:  1: Simon Thacher and Bartlett; 2: Simon Thacher and Bartlett.