Tax Reporting for Supporting Organizations
Affected transactions: Returns filed for taxable years ending after August 17, 2006.
Are all supporting organizations required to file Form 990?
Yes. Prior to the enactment of the Pension Protection Act of 2006, public charities that normally received less than $25,000 in annual gross receipts were not required to file Form 990. The Act requires all supporting organizations to file a Form 990 regardless of annual gross receipts.
What additional information must a supporting organization report on Form 990?
A supporting organization must report what type of supporting organization it is—type I, II or III. The organization must also identify its supported organizations. This information is already requested on the 2005 Form 990.
An organization must also certify that it is not controlled directly or indirectly by one or more disqualified persons unless such control is by either foundation managers or publicly supported charities. The legislative history suggests that such certification would include a certification that a majority of the organization’s governing body is comprised of individuals selected either (1) because of special knowledge or expertise in the field or discipline in which the supporting organization is operating or (2) because they represent the community that is served by the supported public charity.
Do type III supporting organizations have any additional reporting requirements?
Yes. Effective for each tax year beginning after August 17, 2006, a type III supporting organization must provide its supported organization information to ensure such organization is responsive to the needs or demands of the supported organization. While the Act leaves it to the Treasury Secretary to determine the information required to be provided by a type III to its supported organization, the legislative history suggests that such information could be “a copy of the supporting organization’s governing documents, any changes made to the governing documents, the organization’s annual information return filed with the Secretary (Form 990 series), any tax return (Form 990-T) filed with the Secretary, and an annual report (including a description of all of the support provided by the supporting organization, how such support was calculated, and a projection of the next year’s support.)
The information provided in this resource is based on our continuing analysis of the Pension Protection Act. Every effort has been made to ensure the accuracy of this information. Due to the complexity of the PPA and the fact that many of these provisions introduce issues that are new to the Internal Revenue Code, this information is subject to change. Please check back here and on the IRS website (www.irs.gov) for updates. This information is not a substitute for expert legal, tax, or other professional advice and we strongly encourage grantmakers and donors to work with their counsel to determine the impact of the PPA and related guidance on their particular situations. This information may not be relied upon for the purposes of avoiding any penalties that may be imposed under the Internal Revenue Code.