On February 19, 2016, the IRS issued proposed regulations regarding Type I and Type III supporting organizations (Proposed Regulations). The Proposed Regulations implement amendments to Section 509(a)(3) of the Internal Revenue Code (Code), contained in the Pension Protection Act of 2006, and clarify and expand on regulations issued in 2012 and 2015. The IRS is accepting written comments and requests for a public hearing on the Proposed Regulations through May 19, 2016.

BACKGROUND -

In general, “supporting organizations” support other tax-exempt organizations, typically public charities, described in 509(a)(1) or (2) of the Code. They are exempt from taxation under Section 501(c)(3) of the Code and qualify as public charities rather than private foundations (which are subject to more restrictive IRS regulations). Parent corporations of tax-exempt hospital systems often qualify as supporting organizations.