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Legal Memorandum: Charity Enhancement Bill and Pension Protection Act

Issue: What effect might the Charity Enhancement Bill have upon the Pension Protection Act of 2006?

Area of Law: Employee Law, Tax Law
Keywords: Charity Enhancement Bill; Pension Protection Act of 2006
Jurisdiction: Federal
Cited Cases: None
Cited Statutes: The Charity Enhancement Act, H.R. 708 (2008); Pension Protection Act of 2006 (PPA); IRC §509(a)(3), §4940
Date: 10/01/2008

The Charity Enhancement Act, H.R. 708 (2008), limits the extent to which certain provisions in the Pension Protection Act of 2006 (PPA) will apply.  Key provisions include:

  • Removing from the definition of donor-advised funds those charitable funds created, funded and advised solely by one or more public charities or government agencies;
  • Removing from PPA’s restrictions on distributions from donor-advised funds legitimate and carefully monitored scholarship awards approved in advance by the charitable organization holding the donor-advised fund;
  • Repealing the special written acknowledgement required for charitable contributions to donor-advised funds stating that the sponsoring organization has exclusive legal control over the assets contributed;
  • Lifting excess-benefit restrictions and thus encouraging voluntary boards by allowing supporting organizations to pay substantial contributors reasonable compensation for services and reimburse reasonable and necessary expenses; and
  • Exempting from holdings and payout requirements certain pre-1970, fully funded Type III supporting organizations in which the original donors and family are no longer involved.

NOTE: The Charity Enhancement Act is a bipartisan bill and its eventual passage seems likely.

Temporary Regulations:  In streamlining the process for organizations seeking tax-exempt status as publicly-supported charities, the IRS issued temporary regulations requiring an organization which is unable to establish, within its sixth year,  that it is not a private foundation, such as a public charity or supporting organization under IRC §509(a)(3), to pay the IRC §4940 excise tax and […]

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