80 FR 79684 - Payout Requirements for Type III Supporting Organizations That Are Not Functionally Integrated
DEPARTMENT OF THE TREASURY
Internal Revenue Service Federal Register Volume 80, Issue 246 (December 23, 2015)
Internal Revenue Service
Federal Register Volume 80, Issue 246 (December 23, 2015)
| Page Range | 79684-79687 | |
| FR Document | 2015-32146 |
[Federal Register Volume 80, Number 246 (Wednesday, December 23, 2015)] [Rules and Regulations] [Pages 79684-79687] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2015-32146] ======================================================================= ----------------------------------------------------------------------- DEPARTMENT OF THE TREASURY Internal Revenue Service 26 CFR Part 1 [TD 9746] RIN 1545-BL44 Payout Requirements for Type III Supporting Organizations That Are Not Functionally Integrated AGENCY: Internal Revenue Service (IRS), Treasury. ACTION: Final regulations and removal of temporary regulations. ----------------------------------------------------------------------- SUMMARY: This document contains final regulations regarding the distribution requirement for non-functionally integrated Type III supporting organizations. The regulations reflect changes to the law made by the Pension Protection Act of 2006. The regulations will affect non-functionally integrated Type III supporting organizations and their supported organizations. DATES: Effective Date: These regulations are effective on December 21, 2015. FOR FURTHER INFORMATION CONTACT: Jonathan Carter at (202) 317-4394 or Mike Repass at (202) 317-6176 (not toll-free numbers). SUPPLEMENTARY INFORMATION: Background 1. Overview This document contains amendments to the Income Tax Regulations (26 CFR part 1) regarding organizations described in section 509(a)(3) of the Internal Revenue Code (Code). An organization described in section 501(c)(3) is classified as either a private foundation or a public charity. To be classified as a public charity, an organization must be described in section 509(a)(1), (2), or (3). Organizations described in section 509(a)(3) are known as ``supporting organizations.'' Supporting organizations achieve their public charity status by supporting one or more organizations described in section 509(a)(1) or (2), which in this context are referred to as ``supported organizations.'' To be described in section 509(a)(3), an organization must satisfy (1) an organizational test, (2) an operational test, (3) a relationship test, and (4) a disqualified person control test. The organizational and operational tests require that a supporting organization be organized and at all times thereafter operated exclusively for the benefit of, to perform the functions of, or to carry out the purposes of one or more supported organizations. The relationship test requires a supporting organization to establish one of three types of relationships with one or more supported organizations. Finally, the disqualified person control test requires that a supporting organization not be controlled directly or indirectly by certain disqualified persons. Each of the described tests is a necessary requirement for an organization to establish that it qualifies as a supporting organization. These final regulations, however, focus primarily on the relationship test for supporting organizations that are ``operated in connection with'' their supporting organization(s), otherwise known as ``Type III'' supporting organizations. Specifically, the final regulations reflect statutory changes enacted by the Pension Protection Act of 2006, Public Law 109-280 (120 Stat. 780 (2006) (PPA)). Section 1241(d)(1) of the PPA directed the Secretary of the Treasury to promulgate regulations under section 509 that establish a new distribution requirement for Type III supporting organizations that are not ``functionally integrated'' to ensure that a ``significant amount'' is paid to supported organizations. For this purpose, the term ``functionally integrated'' means a Type III supporting organization that is not required under Treasury regulations to make payments to supported organizations because the supporting organization engages in activities that relate to performing the functions of, or carrying out the purposes of, its supported organization(s). These final regulations address the amount that a Type III supporting organization that is not functionally integrated (a non-functionally integrated (NFI) Type III supporting organization) must annually distribute to its supported organization(s). 2. Prior Rulemaking On August 2, 2007, the Treasury Department and the IRS published in the Federal Register (72 FR 42335) an advance notice of proposed rulemaking (ANPRM) (REG-155929-06) in response to the PPA. The ANPRM described proposed rules to implement the changes made by the PPA to the Type III supporting organization requirements and solicited comments regarding those proposed rules. On September 24, 2009, the Treasury Department and the IRS published in the Federal Register (74 FR 48672) a notice of proposed rulemaking (the 2009 NPRM) (REG-155929-06). The 2009 NPRM contained proposed regulations (the 2009 proposed regulations) setting forth the requirements to qualify as a Type III supporting organization under the PPA. On December 28, 2012, the Treasury Department and the IRS published in the Federal Register (77 FR 76382) a Treasury decision (TD 9605) containing final and temporary regulations (the 2012 TD) regarding the requirements to qualify as a Type III supporting organization. Based on the comments received, the 2012 TD made certain changes to the rules proposed in the 2009 NPRM, included in the temporary regulations significant changes to the distribution requirement, and reserved certain topics for further consideration. The 2012 TD was effective and applicable on December 28, 2012. The applicability of the temporary regulations expires on or before December 21, 2015. On December 28, 2012, the Treasury Department and the IRS also published in the Federal [[Page 79685]] Register (77 FR 76426) a notice of proposed rulemaking (the 2012 NPRM) (REG-155929-06) that incorporated the text of the temporary regulations in the 2012 TD by cross-reference. The IRS received five comments on the 2012 NPRM. The comments were considered in developing these final regulations and are available for public inspection at www.regulations.gov or upon request. No public hearing was requested. Under the 2012 TD, an NFI Type III supporting organization must annually distribute to or for the use of one or more supported organizations an amount equaling or exceeding the supporting organization's ``distributable amount'' for the taxable year. See Sec. 1.509(a)-4(i)(5)(ii). The temporary regulations contained in the 2012 TD defined an NFI Type III supporting organization's ``distributable amount'' as equal to the greater of (1) 85 percent of the supporting organization's adjusted net income or (2) its ``minimum asset amount,'' in each case for the immediately preceding taxable year. The temporary regulations defined ``minimum asset amount'' as 3.5 percent of the excess of the aggregate fair market value of the supporting organization's non-exempt-use assets over the acquisition indebtedness with respect to such nonexempt use assets. Additionally, the temporary regulations provided that the determination of the aggregate fair market value of an NFI Type III supporting organization's non-exempt- use assets would be made using the valuation methods generally applicable to private foundations under Sec. 53.4942(a)-2(c). The temporary regulations also provided that, consistent with the private foundation rules, the ``non-exempt use'' assets of a supporting organization do not include certain investment assets described in Sec. 53.4942(a)-2(c)(2) or assets used (or held for use) to carry out the exempt purposes of the supported organization(s) (as determined by applying the principles described in Sec. 53.4942(a)-2(c)(3)). After consideration of all the comments received in response to the 2012 NPRM, this Treasury decision adopts the 2012 NPRM without change, except to (1) conform the provision regarding the valuation of non- exempt-use assets to the section 4942 regulation provision that it cross-references (Sec. 53.4942(a)-2(c)(2)), and (2) replace references in Sec. 1.509(a)-4 to the temporary regulations with references to these final regulations. Thus, other than the change conforming the provision in the final regulations regarding the valuation of non- exempt-use assets to the provision in the section 4942 regulations, these final regulations are the same as the temporary regulations that have been applicable to Type III supporting organizations since December 28, 2012. Additionally, this Treasury decision removes the temporary regulations. The Treasury Department and the IRS intend to publish a notice of proposed rulemaking for Type III supporting organizations in the near future. Among other proposals, the new proposed regulations would make one change to these final regulations. Specifically, the new proposed regulations will propose removal of the provision in these final regulations that reduces the distributable amount by the amount of taxes subtitle A of the Code imposes on a supporting organization during the immediately preceding taxable year. In addition, the new proposed regulations will propose specific rules regarding the requirements for Type III supporting organizations that support governmental supported organizations to be treated as functionally integrated Type III supporting organizations. In addition, the new proposed regulations would provide transition relief beyond the period provided in Notice 2014-4, 2014-2 IRB 274. Supporting organizations may continue to rely on the transitional rule described in Section 3.01 of Notice 2014-4 until the date that the notice of proposed rulemaking prescribing the new proposed regulations under Sec. 1.509(a)- 4(i)(4)(iv) is published in the Federal Register. In the notice of proposed rulemaking publishing the new proposed regulations, the Treasury Department and the IRS will request comments on all proposed changes. Explanation of Provisions and Summary of Comments This section discusses the comments received in response to the 2012 NPRM. 1. Distributable Amount The PPA directed the promulgation of Treasury regulations requiring NFI Type III supporting organizations to make distributions of a percentage of either income or assets to their supported organizations to ensure that a significant amount is paid to those supported organizations. Under the Treasury regulations in effect when PPA was enacted, certain Type III supporting organizations were required to distribute ``substantially all'' of their income to one or more publicly supported organizations. For this purpose, ``substantially all'' had the same meaning of 85 percent or more that it had in Sec. 53.4942(b)-1(c) (defining ``substantially all'' for purposes of the income test for private operating foundations). See Rev. Rul. 76-208, 1976-1 C.B. 161. The 2009 NPRM had proposed to replace the income-based distribution requirement with an asset-based distribution requirement of 5 percent of the fair market value of an organization's non-exempt-use assets. In response to comments, the 2012 NPRM instead proposed to keep the historic income-based distribution requirement, and proposed to combine it with a reduced percentage-of-assets distribution requirement. Therefore, the temporary and proposed distributable amount for NFI Type III supporting organizations was the greater of 85 percent of adjusted net income or 3.5 percent of the net fair market value of non-exempt- use assets, in each case as determined for the immediately preceding taxable year. One commenter stated that a distribution requirement based on 3.5 percent of assets is sufficient to achieve the goals of Congress and that the distribution requirement based on 85 percent of income should be removed. The commenter stated that a distribution requirement based on income would prevent a supporting organization from smoothing its returns in high-earning years with low-earning years, and could result in organizations shifting investments away from income-producing assets toward appreciating assets to avoid erosion of an endowment even if that investment strategy results in forgoing higher returns. The commenter also said that having two tests increases administrative costs for a supporting organization by requiring it to make two calculations rather than one to determine its distributable amount, thus reducing the amount distributed for true charitable purposes. Another commenter suggested that organizations that were not previously identified as avoiding the prior substantially-all-of-income distribution requirement should be exempted from the asset-based distribution requirement because it potentially harms entities that are invested primarily in non-liquid assets. The Treasury Department and the IRS believe that a distribution requirement equal to the greater of 85 percent of adjusted net income or 3.5 percent of the net fair market value of an organization's non- exempt-use assets strikes an appropriate balance. It ensures that NFI Type III supporting organizations distribute significant amounts to their supported organizations, as Congress directed in the PPA. Further, the 85 percent of income test will make it more likely that [[Page 79686]] supported organizations will timely benefit from higher returns received by their supporting organizations. Conversely, in years with lower returns or for organizations that invest in assets that produce largely appreciation rather than income, a 3.5-percent of assets distribution requirement will apply, which is less than the 5-percent of assets distribution requirement that applies to private non- operating foundations. With respect to the suggestion that certain organizations be permitted to comply only with the income-based distribution requirement, the Treasury Department and the IRS believe it would be inequitable and administratively difficult to apply one requirement to some NFI Type III supporting organizations but another requirement to others. Therefore, the final regulations adopt the annual distributable amount rule of the 2012 NPRM without changes. 2. Income From Distributions From Subsidiary The 2012 NPRM provided that, for purposes of the calculation of the annual distributable amount, a supporting organization's adjusted net income would be determined using the principles of section 4942(f) and Sec. 53.4942(a)-2(d). These provisions apply the principles of subtitle A of the Code. One commenter requested that the definition of adjusted net income exclude dividend income resulting from a distribution of long-term capital gain property to a supporting organization by a corporate subsidiary. The commenter noted that without this exclusion, the receipt of distributed property could result in a much higher distribution requirement for that one year, but without producing any liquid assets to satisfy the higher distribution requirement. The 2012 NPRM provided that adjusted net income be determined by applying the principles that apply in calculating the adjusted net income of private operating foundations under sections 4942(d) and 4942(j)(3) and are generally based on long-standing principles under subtitle A of the Code. The Treasury Department and the IRS believe that the rules for calculating adjusted net income should be applied consistently for all taxpayers and do not believe that there is a justification for the rules to be altered solely for supporting organizations. Therefore, the final regulations do not adopt this comment. 3. Real Property Valuations The 2012 NPRM provided that for purposes of determining the distributable amount for a taxable year, non-exempt-use assets would be valued using the principles generally applicable to private foundations under Sec. 53.4942(a)-2(c). One commenter suggested allowing the use of state property tax valuations for purposes of valuing real property under Sec. 53.4942(a)-2(c). Section 53.4942(a)-2(c) applies the principles of regulations under section 2031, which generally apply for estate tax purposes, to the valuation of real property. Section 20.2031-1(b) provides that the value at which property is assessed for local tax purposes may be considered only if that value represents the fair market value as of the valuation date. Section 20.2031-3 further provides that if real property is leased or otherwise used in a business, special valuation rules may apply. The Treasury Department and the IRS continue to believe that the same valuation principles that apply to private foundations should apply to NFI Type III supporting organizations. Therefore, the final regulations do not adopt this comment. Effective Date These regulations are effective on December 21, 2015. Statement of Availability of IRS Documents The IRS Notice 2014-4 cited in this preamble is published in the Internal Revenue Bulletin and is available from the Superintendent of Documents, U.S. Government Printing Office, Washington, DC 20402, or by visiting the IRS Web site at http://www.irs.gov. Special Analyses Certain IRS regulations, including this one, are exempt from the requirements of Executive Order 12866, as supplemented and reaffirmed by Executive Order 13563. Therefore, a regulatory impact assessment is not required. It has also been determined that section 553(b) of the Administrative Procedure Act (5 U.S.C. chapter 5) does not apply to these regulations, and because these regulations do not impose a collection of information on small entities, a Regulatory Flexibility Analysis under the Regulatory Flexibility Act (5 U.S.C. chapter 6) is not required. Pursuant to section 7805(f) of the Code, the temporary and proposed regulations preceding these final regulations were submitted to the Chief Counsel for Advocacy of the Small Business Administration for comment on their impact on small business, and no comments were received. Drafting Information The principal authors of these regulations are Mike Repass and Jonathan Carter, Office of Associate Chief Counsel (Tax-Exempt and Government Entities). However, other personnel from the Treasury Department and the IRS participated in their development. List of Subjects in 26 CFR Part 1 Income taxes, Reporting and recordkeeping requirements. Adoption of Amendments to the Regulations Accordingly, 26 CFR part 1 is amended as follows: PART 1--INCOME TAXES 0 Paragraph 1. The authority citation for part 1 continues to read in part as follows: Authority: 26 U.S.C. 7805 * * * 0 Par. 2. Section 1.509(a)-4 is amended by: 0 1. Amending the second sentence of paragraph (i)(4)(ii)(C) to remove the language ``Sec. 1.509(a)-4T(i)(8)(ii)'' and adding ``paragraph (i)(8)(ii) of this section'' in its place. 0 2. Amending paragraph (i)(5)(ii)(A) to remove the language ``Sec. 1.509(a)-4T(i)(5)(ii)(B)'' and adding ``paragraph (i)(5)(ii)(B) of this section'' in its place. 0 3. Revising paragraph (i)(5)(ii)(B). 0 4. Revising paragraph (i)(5)(ii)(C). 0 5. Amending the last sentence of paragraph (i)(5)(ii)(D) to remove the language ``Sec. 1.509(a)-4T(i)(5)(ii)(B)'' and adding ``paragraph (i)(5)(ii)(B) of this section'' in its place. 0 6. Amending the first sentence of Example 1 of paragraph (i)(5)(iii)(D) to remove the language ``Sec. 1.509(a)-4T(i)(5)(ii)(B)'' and adding ``paragraph (i)(5)(ii)(B) of this section'' in its place. 0 7. Amending the first sentence of Example 2 of paragraph (i)(5)(iii)(D) to remove the language ``Sec. 1.509(a)-4T(i)(5)(ii)(B)'' and adding ``paragraph (i)(5)(ii)(B) of this section'' in its place. 0 8. Amending the third sentence of Example 3 of paragraph (i)(5)(iii)(D) to remove the language ``Sec. 1.509(a)-4T(i)(5)(ii)(B)'' and adding ``paragraph (i)(5)(ii)(B) of this section'' in its place. 0 9. Amending the fourth sentence of Example 4 of paragraph (i)(5)(iii)(D) to remove the language ``Sec. 1.509(a)- 4T(i)(5)(ii)(B)'' and adding ``paragraph (i)(5)(ii)(B) of this section'' in its place. 0 10. Amending paragraph (i)(6)(iv) to remove the language ``Sec. 1.509(a)- [[Page 79687]] 4T(i)(8)(ii)'' and adding ``paragraph (i)(8)(ii) of this section'' in its place. 0 11. Amending paragraph (i)(7)(ii) to remove the language ``Sec. 1.509(a)-4T(i)(5)(ii)(B)'' and adding ``paragraph (i)(5)(ii)(B) of this section'' in its place. 0 12. Revising paragraph (i)(8). 0 13. Revising paragraph (l). The revisions and additions read as follows: Sec. 1.509(a)-4 Supporting organizations. * * * * * (i) * * * (5) * * * (ii) * * * (B) Distributable amount. Except as provided in paragraphs (i)(5)(ii)(D) and (E) of this section, the distributable amount for a taxable year is an amount equal to the greater of 85 percent of the supporting organization's adjusted net income (as determined by applying the principles of section 4942(f) and Sec. 53.4942(a)-2(d) of this chapter) for the taxable year immediately preceding the taxable year of the required distribution (immediately preceding taxable year) or its minimum asset amount (as defined in paragraph (i)(5)(ii)(C) of this section) for the immediately preceding taxable year, reduced by the amount of taxes imposed on the supporting organization under subtitle A of the Internal Revenue Code during the immediately preceding taxable year. (C) Minimum asset amount. For purposes of this paragraph (i)(5), a supporting organization's minimum asset amount for the immediately preceding taxable year is 3.5 percent of the excess of the aggregate fair market value of all of the supporting organization's non-exempt- use assets (determined under paragraph (i)(8) of this section) in that immediately preceding taxable year over the acquisition indebtedness with respect to such non-exempt-use assets (determined under section 514(c)(1) without regard to the taxable year in which the indebtedness was incurred), increased by-- (1) Amounts received or accrued during the immediately preceding taxable year as repayments of amounts which were taken into account by the organization to meet the distribution requirement imposed in this paragraph (i)(5)(ii) for any taxable year; (2) Amounts received or accrued during the immediately preceding taxable year from the sale or other disposition of property to the extent that the acquisition of such property was taken into account by the organization to meet the distribution requirement imposed in this paragraph (i)(5)(ii) for any taxable year; and (3) Any amount set aside under paragraph (i)(6)(v) of this section to the extent it is determined during the immediately preceding taxable year that such amount is not necessary for the purposes for which it was set aside and such amount was taken into account by the organization to meet the distribution requirement imposed in this paragraph (i)(5)(ii) for any taxable year. * * * * * (8) Valuation of non-exempt-use assets. For purposes of determining its distributable amount for a taxable year, a supporting organization determines its minimum asset amount, as defined in paragraph (i)(5)(ii)(C) of this section, by determining the aggregate fair market value of all of its non-exempt-use assets in the immediately preceding taxable year. For these purposes, the determination of the aggregate fair market value of all non-exempt-use assets shall be made using the valuation methods described in Sec. 53.4942(a)-2(c) of this chapter. The aggregate fair market value of the supporting organization's non- exempt-use assets shall not be reduced by any amount that is set aside under paragraph (i)(6)(v) of this section. For these purposes, the non- exempt use assets of the supporting organization are all assets of the supporting organization other than-- (i) Assets described in Sec. 53.4942(a)-2(c)(2)(i) through (iv) of this chapter (with the term ``supporting organization'' being substituted for ``foundation'' or ``private foundation'' and the date ``August 17, 2006'' being substituted for ``December 31, 1969''); and (ii) Exempt-use assets, which are assets that are used (or held for use) directly in carrying out the exempt purposes of the supporting organization's supported organization(s) (determined by applying the principles described in Sec. 53.4942(a)-2(c)(3) of this chapter) by either-- (A) The supporting organization; or (B) One or more supported organizations, but only if the supporting organization makes the asset available to the supported organization(s) at no cost (or nominal rent) to the supported organization(s). * * * * * (l) Effective/applicability dates. Paragraphs (a)(6), (f)(5), (i)(1) through (i)(4)(ii)(B), (i)(4)(ii)(D) through (i)(5)(i), (i)(5)(ii)(E) through (i)(5)(iii)(C), (i)(6)(i) through (iii), (i)(6)(v) through (i)(7)(i), and (i)(9) through (11) of this section are applicable on December 28, 2012. Paragraphs (i)(4)(ii)(C), (i)(5)(ii)(A) through (i)(5)(ii)(D), (i)(5)(iii)(D), (i)(6)(iv), (i)(7)(ii) and (i)(8) of this section are applicable on December 21, 2015. See paragraphs (i)(5)(ii)(B), (i)(5)(ii)(C), and (i)(8) of Sec. 1.509(a)-4T contained in 26 CFR part 1, revised as of April 1, 2015, for certain rules regarding non-functionally integrated Type III supporting organizations effective before December 21, 2015. * * * * * Sec. 1.509(a)-4T [Removed]. 0 Par. 3. Section 1.509(a)-4T is removed. John Dalrymple, Deputy Commissioner for Services and Enforcement. Approved: December 14, 2015. Mark J. Mazur, Assistant Secretary of the Treasury (Tax Policy). [FR Doc. 2015-32146 Filed 12-21-15; 4:15 pm] BILLING CODE 4830-01-P
![79684 Federal Register / Vol. 80, No. 246 / Wednesday, December 23, 2015 / Rules and Regulations
TABLE 4—COORDINATES FOR THE Protection Act of 2006. The regulations (PPA)). Section 1241(d)(1) of the PPA
MULIĀVA UNIT will affect non-functionally integrated directed the Secretary of the Treasury to
Type III supporting organizations and promulgate regulations under section
Latitude Longitude their supported organizations. 509 that establish a new distribution
Point ID (south) (west) DATES: Effective Date: These regulations requirement for Type III supporting
are effective on December 21, 2015. organizations that are not ‘‘functionally
1 ................... ¥15.387 ¥169.012 integrated’’ to ensure that a ‘‘significant
2 ................... ¥14.271 ¥169.012 FOR FURTHER INFORMATION CONTACT:
Jonathan Carter at (202) 317–4394 or amount’’ is paid to supported
3 ................... ¥14.271 ¥169.121
4 ................... ¥14.150 ¥169.121 Mike Repass at (202) 317–6176 (not toll- organizations. For this purpose, the term
5 ................... ¥14.150 ¥169.012 free numbers). ‘‘functionally integrated’’ means a Type
6 ................... ¥13.698 ¥169.012 SUPPLEMENTARY INFORMATION:
III supporting organization that is not
7 ................... ¥13.698 ¥167.283 required under Treasury regulations to
8 ................... ¥15.387 ¥167.283 Background make payments to supported
9 ................... ¥15.387 ¥169.012
1. Overview organizations because the supporting
organization engages in activities that
(f) Ta’u Unit This document contains amendments relate to performing the functions of, or
The Ta’u Unit boundary is defined by the to the Income Tax Regulations (26 CFR carrying out the purposes of, its
coordinates provided in Table 5 and the part 1) regarding organizations supported organization(s). These final
textual description in § 922.101(f). described in section 509(a)(3) of the regulations address the amount that a
Internal Revenue Code (Code). An Type III supporting organization that is
TABLE 5—COORDINATES FOR THE TA’U organization described in section not functionally integrated (a non-
UNIT 501(c)(3) is classified as either a private functionally integrated (NFI) Type III
foundation or a public charity. To be supporting organization) must annually
Latitude Longitude classified as a public charity, an
Point ID (south) (west) distribute to its supported
organization must be described in organization(s).
1 .................. ¥14.24889 ¥169.503056
section 509(a)(1), (2), or (3).
Organizations described in section 2. Prior Rulemaking
2 .................. ¥14.273056 ¥169.488056
3 .................. ¥14.277222 ¥169.488056 509(a)(3) are known as ‘‘supporting On August 2, 2007, the Treasury
4 .................. ¥14.261111 ¥169.429167 organizations.’’ Supporting Department and the IRS published in
5 .................. ¥14.293889 ¥169.429167 organizations achieve their public the Federal Register (72 FR 42335) an
6 .................. ¥14.293889 ¥169.519722 charity status by supporting one or more advance notice of proposed rulemaking
7 .................. ¥14.24889 ¥169.519722 organizations described in section (ANPRM) (REG–155929–06) in response
8 .................. ¥14.24889 ¥169.503056 509(a)(1) or (2), which in this context to the PPA. The ANPRM described
are referred to as ‘‘supported proposed rules to implement the
Appendix A to Subpart R of Part 922 organizations.’’ changes made by the PPA to the Type
[Amended] To be described in section 509(a)(3), III supporting organization requirements
an organization must satisfy (1) an and solicited comments regarding those
■ 4. In appendix A to subpart R of part organizational test, (2) an operational
922, amend the table by removing the proposed rules.
test, (3) a relationship test, and (4) a On September 24, 2009, the Treasury
figure ‘‘¥83.584432’’ for the longitude disqualified person control test. The Department and the IRS published in
of Point 7 and adding in its place organizational and operational tests the Federal Register (74 FR 48672) a
‘‘¥83.586892’’. require that a supporting organization
[FR Doc. 2015–32265 Filed 12–22–15; 8:45 am]
notice of proposed rulemaking (the 2009
be organized and at all times thereafter NPRM) (REG–155929–06). The 2009
BILLING CODE 3510–NK–P
operated exclusively for the benefit of, NPRM contained proposed regulations
to perform the functions of, or to carry (the 2009 proposed regulations) setting
out the purposes of one or more forth the requirements to qualify as a
DEPARTMENT OF THE TREASURY supported organizations. The Type III supporting organization under
relationship test requires a supporting the PPA.
Internal Revenue Service On December 28, 2012, the Treasury
organization to establish one of three
types of relationships with one or more Department and the IRS published in
26 CFR Part 1 the Federal Register (77 FR 76382) a
supported organizations. Finally, the
[TD 9746] disqualified person control test requires Treasury decision (TD 9605) containing
that a supporting organization not be final and temporary regulations (the
RIN 1545–BL44
controlled directly or indirectly by 2012 TD) regarding the requirements to
Payout Requirements for Type III certain disqualified persons. qualify as a Type III supporting
Supporting Organizations That Are Not Each of the described tests is a organization. Based on the comments
Functionally Integrated necessary requirement for an received, the 2012 TD made certain
organization to establish that it qualifies changes to the rules proposed in the
AGENCY: Internal Revenue Service (IRS), as a supporting organization. These final 2009 NPRM, included in the temporary
Treasury. regulations, however, focus primarily on regulations significant changes to the
ACTION: Final regulations and removal of the relationship test for supporting distribution requirement, and reserved
asabaliauskas on DSK5VPTVN1PROD with RULES
temporary regulations. organizations that are ‘‘operated in certain topics for further consideration.
connection with’’ their supporting The 2012 TD was effective and
SUMMARY: This document contains final organization(s), otherwise known as applicable on December 28, 2012. The
regulations regarding the distribution ‘‘Type III’’ supporting organizations. applicability of the temporary
requirement for non-functionally Specifically, the final regulations reflect regulations expires on or before
integrated Type III supporting statutory changes enacted by the December 21, 2015. On December 28,
organizations. The regulations reflect Pension Protection Act of 2006, Public 2012, the Treasury Department and the
changes to the law made by the Pension Law 109–280 (120 Stat. 780 (2006) IRS also published in the Federal
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4T(i)(8)(ii)’’ and adding ‘‘paragraph (3) Any amount set aside under section are applicable on December 21,
(i)(8)(ii) of this section’’ in its place. paragraph (i)(6)(v) of this section to the 2015. See paragraphs (i)(5)(ii)(B),
■ 11. Amending paragraph (i)(7)(ii) to extent it is determined during the (i)(5)(ii)(C), and (i)(8) of § 1.509(a)–4T
remove the language ‘‘§ 1.509(a)– immediately preceding taxable year that contained in 26 CFR part 1, revised as
4T(i)(5)(ii)(B)’’ and adding ‘‘paragraph such amount is not necessary for the of April 1, 2015, for certain rules
(i)(5)(ii)(B) of this section’’ in its place. purposes for which it was set aside and regarding non-functionally integrated
■ 12. Revising paragraph (i)(8). such amount was taken into account by Type III supporting organizations
■ 13. Revising paragraph (l). the organization to meet the distribution effective before December 21, 2015.
The revisions and additions read as requirement imposed in this paragraph * * * * *
follows: (i)(5)(ii) for any taxable year.
* * * * * § 1.509(a)–4T [Removed].
§ 1.509(a)–4 Supporting organizations.
(8) Valuation of non-exempt-use ■ Par. 3. Section 1.509(a)–4T is
* * * * * removed.
(i) * * * assets. For purposes of determining its
(5) * * * distributable amount for a taxable year, John Dalrymple,
(ii) * * * a supporting organization determines its Deputy Commissioner for Services and
(B) Distributable amount. Except as minimum asset amount, as defined in Enforcement.
provided in paragraphs (i)(5)(ii)(D) and paragraph (i)(5)(ii)(C) of this section, by Approved: December 14, 2015.
(E) of this section, the distributable determining the aggregate fair market
Mark J. Mazur,
amount for a taxable year is an amount value of all of its non-exempt-use assets
Assistant Secretary of the Treasury (Tax
equal to the greater of 85 percent of the in the immediately preceding taxable
Policy).
supporting organization’s adjusted net year. For these purposes, the
[FR Doc. 2015–32146 Filed 12–21–15; 4:15 pm]
income (as determined by applying the determination of the aggregate fair
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principles of section 4942(f) and market value of all non-exempt-use
§ 53.4942(a)–2(d) of this chapter) for the assets shall be made using the valuation
taxable year immediately preceding the methods described in § 53.4942(a)–2(c)
taxable year of the required distribution of this chapter. The aggregate fair PENSION BENEFIT GUARANTY
(immediately preceding taxable year) or market value of the supporting CORPORATION
its minimum asset amount (as defined organization’s non-exempt-use assets
shall not be reduced by any amount that 29 CFR Part 4233
in paragraph (i)(5)(ii)(C) of this section)
for the immediately preceding taxable is set aside under paragraph (i)(6)(v) of RIN 1212–AB29
year, reduced by the amount of taxes this section. For these purposes, the
imposed on the supporting organization non-exempt use assets of the supporting Partitions of Eligible Multiemployer
under subtitle A of the Internal Revenue organization are all assets of the Plans
Code during the immediately preceding supporting organization other than— AGENCY: Pension Benefit Guaranty
taxable year. (i) Assets described in § 53.4942(a)– Corporation.
(C) Minimum asset amount. For 2(c)(2)(i) through (iv) of this chapter
ACTION: Final rule.
purposes of this paragraph (i)(5), a (with the term ‘‘supporting
supporting organization’s minimum organization’’ being substituted for SUMMARY: On June 19, 2015, PBGC
asset amount for the immediately ‘‘foundation’’ or ‘‘private foundation’’ published an interim final rule to
preceding taxable year is 3.5 percent of and the date ‘‘August 17, 2006’’ being implement the application process and
the excess of the aggregate fair market substituted for ‘‘December 31, 1969’’); notice requirements for partitions of
value of all of the supporting and eligible multiemployer plans under title
organization’s non-exempt-use assets (ii) Exempt-use assets, which are IV of the Employee Retirement Income
(determined under paragraph (i)(8) of assets that are used (or held for use) Security Act of 1974 (ERISA), as
this section) in that immediately directly in carrying out the exempt amended by the Multiemployer Pension
preceding taxable year over the purposes of the supporting Reform Act of 2014 (MPRA). PBGC is
acquisition indebtedness with respect to organization’s supported organization(s) making minor changes to the interim
such non-exempt-use assets (determined (determined by applying the principles final regulation in response to public
under section 514(c)(1) without regard described in § 53.4942(a)–2(c)(3) of this comments received on the interim final
to the taxable year in which the chapter) by either— rule.
indebtedness was incurred), increased (A) The supporting organization; or DATES: Effective January 22, 2016. See
by— (B) One or more supported Applicability in SUPPLEMENTARY
(1) Amounts received or accrued organizations, but only if the supporting INFORMATION.
during the immediately preceding organization makes the asset available to
the supported organization(s) at no cost FOR FURTHER INFORMATION CONTACT:
taxable year as repayments of amounts
(or nominal rent) to the supported Joseph J. Shelton (shelton.joseph@
which were taken into account by the
organization(s). pbgc.gov), Assistant General Counsel,
organization to meet the distribution
Office of the General Counsel, Pension
requirement imposed in this paragraph * * * * *
Benefit Guaranty Corporation, 1200 K
(i)(5)(ii) for any taxable year; (l) Effective/applicability dates.
Street NW., Washington, DC 20005–
(2) Amounts received or accrued Paragraphs (a)(6), (f)(5), (i)(1) through
4026; 202–326–4400, ext. 6559.
asabaliauskas on DSK5VPTVN1PROD with RULES
during the immediately preceding (i)(4)(ii)(B), (i)(4)(ii)(D) through (i)(5)(i),
taxable year from the sale or other (i)(5)(ii)(E) through (i)(5)(iii)(C), (i)(6)(i) SUPPLEMENTARY INFORMATION:
disposition of property to the extent that through (iii), (i)(6)(v) through (i)(7)(i), Executive Summary
the acquisition of such property was and (i)(9) through (11) of this section are
taken into account by the organization applicable on December 28, 2012. Purpose of the Regulatory Action
to meet the distribution requirement Paragraphs (i)(4)(ii)(C), (i)(5)(ii)(A) This final rule makes minor changes
imposed in this paragraph (i)(5)(ii) for through (i)(5)(ii)(D), (i)(5)(iii)(D), to part 4233 of PBGC’s regulations,
any taxable year; and (i)(6)(iv), (i)(7)(ii) and (i)(8) of this which was added by PBGC’s interim
VerDate Sep<11>2014 16:43 Dec 22, 2015 Jkt 238001 PO 00000 Frm 00033 Fmt 4700 Sfmt 4700 E:\FR\FM\23DER1.SGM 23DER1](https://thefederalregister.org/doc/80_FR_79930/page/4.svg)
Document Created: 2018-03-02 09:20:50
Document Modified: 2018-03-02 09:20:50
| Category | Regulatory Information | |
| Collection | Federal Register | |
| sudoc Class | AE 2.7: GS 4.107: AE 2.106: | |
| Publisher | Office of the Federal Register, National Archives and Records Administration | |
| Section | Rules and Regulations | |
| Action | Final regulations and removal of temporary regulations. | |
| Dates | Effective Date: These regulations are effective on December 21, 2015. | |
| Contact | Jonathan Carter at (202) 317-4394 or Mike Repass at (202) 317-6176 (not toll-free numbers). | |
| FR Citation | 80 FR 79684 | |
| RIN Number | 1545-BL44 | |
| CFR Associated | Income Taxes and Reporting and Recordkeeping Requirements |
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