Part III. Administrative, Procedural, and Miscellaneous

Transitional Relief and Filing Procedures for Certain Charitable Trusts that Fail the Responsiveness Test for Type III Supporting Organizations

Notice 2008–6

PURPOSE

This notice provides transitional relief and filing procedures for certain charitable trusts that fail the responsiveness test for Type III supporting organizations.

These procedures are intended for:

mination recognizing their tax-exempt status under section 501(c)(3) and that met the requirements of section 509(a)(3) until August 17, 2007, and

in section 4947(a)(1), that are treated for certain purposes as organizations described in section 501(c)(3), and that met the requirements of section 509(a)(3) until August 17, 2007. See Rev. Proc. 72–50, 1972–2 C.B. 830.

BACKGROUND

Section 1.509(a)–4(i) of the Income Tax Regulations sets forth the requirements for organizations to qualify as section 509(a)(3) supporting organizations that are “operated in connection with” one or more publicly supported organizations (hereafter, “Type III” supporting organizations). Type III supporting organizations are required to meet a “responsiveness test” to show that they are responsive to the needs of the organizations they support. See section 1.509(a)–4(i)(1), (i)(2).

Prior to passage of the Pension Protection Act of 2006, Pub. L. No. 109–280, 120 Stat. 708 (2006) (PPA), there were two alternative ways for Type III supporting organizations to meet the responsiveness test.

1.509(a)–4(i)(2)(ii) generally provides that an organization meets the responsiveness test if the officers, directors, or trustees of the publicly supported

organization have a significant voice in the investment policies and grant-making of the supporting organization, and in otherwise directing the use of its income or assets.

1.509(a)–4(i)(2)(iii) provides that certain charitable trusts meet the responsiveness test requirement of section 1.509(a)–4(i)(2) if they are charitable trusts under state law, each publicly supported organization is a named beneficiary under the trust’s governing instrument, and each beneficiary organization has the power to enforce the trust and compel an accounting under state law.

Section 1241(c) of the PPA eliminated the charitable trust test, effective August 17, 2007. Consequently, as of August 17, 2007, trusts previously classified as Type III supporting organizations may be classified as private foundations as a result of the PPA. A trust will continue to qualify as a section 509(a)(3) supporting organization if it meets the significant voice test for Type III supporting organizations or if it is able to establish that it meets the requirements of a Type I or Type II supporting organization under section 1.509(a)–4(g) or (h).

DISCUSSION

Transitional Relief for Charitable Trusts

Because of the need for affected charitable trusts to adjust record-keeping systems to reflect private foundation status, and the administrative difficulties in processing returns reflecting a mid-year change of status, trusts that became private foundations during 2007 by virtue of section 1241(c) of the PPA may continue to file Form 990, Return of Organization Ex- empt From Income Tax, for taxable years beginning before January 1, 2008. An organization that is classified as a private foundation by virtue of section 1241(c) of the PPA will not be required to file an information return on Form 990–PF or pay excise taxes on investment income under section 4940 until its first taxable year beginning on or after January 1, 2008.

Filing Procedures for Charitable Trusts that Became Private Foundations Taxable years beginning before January 1, 2008:

vate foundations by virtue of section 1241(c) of the PPA should file Form 990 for taxable years beginning before January 1, 2008.

for filing Form 990 apply.

Taxable years beginning on or after January 1, 2008

vate foundations by virtue of section 1241(c) of the PPA must file Form 990–PF, Return of Private Foundation, for taxable years beginning on or after January 1, 2008.

or after January 1, 2008, file paper Form 990–PF. Write “ Notice 2008–6 status change ” at the top of Form 990–PF.

for filing Form 990–PF otherwise apply.

Filing Procedures for Charitable Trusts that Did Not Become Private Foundations

A charitable trust that meets the significant voice test for Type III supporting organizations (section 1.509(a)–4(i)(2)(ii)), or that can establish that it meets the requirements of a Type I or Type II supporting organization under section 1.509(a)–4(g) or (h), should continue to file Form 990 under currently applicable procedures for taxable years beginning on or after January 1, 2008. Such a trust should not file Form 990–PF.

DRAFTING INFORMATION

The principal author of this notice is Robert Fontenrose of the Exempt Organizations, Tax Exempt and Government Entities Division. For further information regarding this notice, contact Mr. Ronald Shoemaker at (202) 283–9475 (not a toll-free call).

2008–3 I.R.B. 275 January 22, 2008

Extension of Transitional Relief for Diversification Requirements for Certain Defined Contribution Plans

Notice 2008–7

I. PURPOSE

This notice extends the transitional guidance and transitional relief provided to certain defined contribution plans holding publicly traded employer securities under Notice 2006–107, 2006–51 I.R.B. 1114, until the regulations being issued under § 401(a)(35) of the Internal Revenue Code become effective.

II. BACKGROUND

Section 401(a)(35), added by section 901 of the Pension Protection Act of 2006, Public Law 109–280, 120 Stat. 780, provides diversification rights with respect to publicly traded employer securities held by a defined contribution plan. Section 401(a)(35) provides that, to remain qualified under § 401(a), a defined contribution plan (other than certain employee stock ownership plans) must provide applicable individuals with the right to divest employer securities in their accounts and reinvest those amounts in certain diversified investments, and generally prohibits a plan from imposing restrictions or conditions with respect to the investment of employer securities that are not imposed on the investment of other assets of the plan.

Notice 2006–107 provides transitional guidance with respect to § 401(a)(35). For example, Part III.D of Notice 2006–107 provides that a restriction or condition with respect to employer securities generally includes: (1) a restriction on an applicable individual’s rights to divest an investment in employer securities that is not imposed on an investment that is not in employer securities; and (2) a benefit that is conditioned on investment in employer securities. Notice 2006–107 also provides certain transitional relief with respect to the requirements of Part III.D of the notice. The relief set forth in paragraph 4 of Part III.D of Notice 2006–107 is limited to the period prior to January 1, 2008.

Notice 2006–107 also states that Treasury and the Service expect to issue regulations under § 401(a)(35) that will be con

sistent with the guidance in the notice and that will incorporate the transitional relief in the notice.

III. EXTENSION OF TRANSITIONAL RELIEF UNDER NOTICE 2006–107

The Treasury and the Service are issuing proposed regulations under § 401(a)(35). It is expected that these regulations, when finalized, will not be effective before plan years beginning on or after January 1, 2009. Except as otherwise provided in the proposed or final regulations, plans must continue to apply Notice 2006–107 until the regulations go into effect. For this purpose, the transitional relief provided for the period prior to January 1, 2008, in paragraph 4 of Part III.D of Notice 2006–107 will continue to apply after 2007 until the regulations go into effect.

IV. EFFECT ON OTHER DOCUMENTS

Notice 2006–107 is modified.

DRAFTING INFORMATION

The principal author of this notice is Robert M. Walsh of the Employee Plans, Tax Exempt and Government Entities Division. For further information regarding this notice, please call the Employee Plans taxpayer assistance number between 8 a.m. and 4:30 p.m. Eastern time, Monday through Friday at (877) 829–5500 (a toll-free number) or email Mr. Walsh at RetirementPlanQuestions@irs.gov .

Information Reporting Requirements Under Internal Revenue Code § 6039

Notice 2008–8