What the New Charities Law Means For You
On Aug. 17, 2006, President Bush signed into law a bill that will impact grantmakers and donors.
The new charitable provisions, part of the Pension Protection Act of 2006 (H.R. 4), include the
first comprehensive regulation of donor-advised funds, as well as reforms or incentives that will
affect private foundations, supporting organizations and individual donors.
If You're A Supporting Organization
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Supporting Organization FAQs
If you receive necessary services from a substantial contributor and/or his or her family
You can no longer pay any kind of compensation to them for these services. In addition to not paying compensation, you cannot make any grants, loans or similar payments (including expense reimbursements) to a substantial contributor, a family member of a substantial contributor or an entity in which they have more than 35 percent control. The definition of a "substantial contributor" is the same as for other public charities: a person who contributed or bequeathed to the supporting organization an aggregate amount more than $5,000 and more than 2 percent of the total contributions and bequests received by the supporting organization in the taxable year in which the person's gift or bequest is made.
If you're a Type III supporting organization
You are now subject to the same excess business holding rules that currently apply to private foundations. This requirement applies only to Type III supporting organizations that are not "functionally integrated" and to Type II supporting organizations that are controlled by the supporting organization's donors.
If you're a supporting organization of any type
You must now indicate on your Form 990 all of your supported organizations, what type of supporting organization you are, and a certification that your organization is not controlled directly or indirectly by one or more disqualified persons other than qualified representatives of your supported organizations.
This information was made possible by the Forum of Regional Associations of
Grantmakers and its members, with valuable technical assistance provided by
Andras Kosaras, Council on Foundations.
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