IRS puts hold on applications by certain supporting organizations  

February 7: The Director, EO Rulings and Agreements, in a February 2013 memorandum directed EO Determinations to hold all applications for determinations that an organization is a functionally integrated Type III supporting organization because it supports a governmental supported entity, unless the organization otherwise satisfies the “integral part test” under the final regulations recently issued.

Background

The IRS and Treasury issued final and temporary regulations in late December 2012 that, among other things, provide rules for classification of Type III supporting organizations as either “functionally integrated” or “non-functionally integrated.”


The final regulations superseded proposed regulations issued in 2009. The final regulations, like the proposed regulations, provide three alternative ways in which a supporting organization may meet the “integral part test” to qualify as functionally integrated. One of the ways a supporting organization may meet the integral part test is to support a governmental entity. However, the final regulations reserved guidance on how an organization may satisfy the integral part test by supporting a governmental entity.


Read the December 2012 supporting organization regulations at TaxNewsFlash-Exempt Organizations (December 21, 2012)

Memorandum

The February 2013 memorandum [PDF 112 KB]—


  • States that the test for supporting a governmental entity in the 2009 proposed regulations no longer applies, and
  • Directs that, until new regulations are issued, EO Determinations must hold all new or pending applications or requests for determinations that an organization is a functionally integrated Type III supporting organization because it supports a governmental supported entity, unless the organization meets the integral part test in one of the other two ways set forth in the final regulations.


For more information, contact:


Rick Speizman, National Partner-In-Charge, KPMG’s Exempt Organizations Tax Practice (ExoTax)

+1 (202) 533-3084





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