Exempt Organizations Advisory - IRS Issues Guidance on Functionally Integrated Type III Supporting Organizations

By: Catherine W. Wilkinson (cwilkinson@steptoe.com)
Suzanne Ross McDowell (smcdowell@steptoe.com)
Randal T. Evans (revans@steptoe.com)

The Internal Revenue Service has announced that it is lifting its ban on applications for determination letters to organizations seeking "functionally integrated Type III supporting organization" status, and has provided updated procedures for requests for a determination of public charity status under IRC § 509(a)(3).

The procedures, to be incorporated into IRM 7.20.7, are currently available in the form of two attachments to a memorandum from Robert Choi, Director, EO Rulings and Agreements.  The attachments consist of a Supporting Organizations Guide Sheet designed to assist in determining public charity status under IRC 509(a)(3), including interim guidelines for organizations seeking a determination as a functionally integrated Type III supporting organization, and a Guide Sheet Explanation designed to provide an overview of exempt organization tax law rules applicable to supporting organizations and to assist in the preparation of the Guide Sheet.

Some of the more restrictive rules and requirements imposed on IRC § 509(a)(3) supporting organizations by the Pension Protection Act of 2006, Pub. L. No. 109-208 (PPA), do not apply to a new category of Type III supported organization, the functionally integrated Type III supporting organization.  Until now, the IRS would not issue a determination letter recognizing an organization as a functionally integrated Type III supporting organization.  

The Memo, Guide Sheet, and Explanation, are available on the IRS website, under the heading New Guidelines for Supporting Organization Determinations.