REQUIREMENTS FOR SUPPORTING ORGANIZATIONS.

SEC. 1241. REQUIREMENTS FOR SUPPORTING ORGANIZATIONS.(a) Types of Supporting Organizations.—Subparagraph (B) of section 509(a)(3) is amended to read as follows:“(B) is—“(i) operated, supervised, or controlled by one or more organizations described in paragraph (1) or (2),“(ii) supervised or controlled in connection with one or more such organizations, or“(iii) operated in connection with one or more such organizations, and”.(b) Requirements for Supporting Organizations.—Section 509 (relating to private foundation defined) is amended by adding at the end the following new subsection:“(f) Requirements for Supporting Organizations.—“(1) Type iii supporting organizations.—For purposes of subsection (a)(3)(B)(iii), an organization shall not be considered to be operated in connection with any organization described in paragraph (1) or (2) of subsection (a) unless such organization meets the following requirements:“(A) Responsiveness.—For each taxable year beginning after the date of the enactment of this subsection, the organization provides to each supported organization such information as the Secretary may require to ensure that such organization is responsive to the needs or demands of the supported organization.“(B) Foreign supported organizations.—“(i) In general.—The organization is not operated in connection with any supported organization that is not organized in the United States.“(ii) Transition rule for existing organizations.—If the organization is operated in connection with an organization that is not organized in the United States on the date of the enactment of this subsection, clause (i) shall not apply until the first day of the third taxable year of the organization beginning after the date of the enactment of this subsection.“(2) Organizations controlled by donors.—“(A) In general.—For purposes of subsection (a)(3)(B), an organization shall not be considered to be—“(i) operated, supervised, or controlled by any organization described in paragraph (1) or (2) of subsection (a), or“(ii) operated in connection with any organization described in paragraph (1) or (2) of subsection (a),if such organization accepts any gift or contribution from any person described in subparagraph (B).“(B) Person described.—A person is described in this subparagraph if, with respect to a supported organization 120 STAT. 1103 of an organization described in subparagraph (A), such person is—“(i) a person (other than an organization described in paragraph (1), (2), or (4) of section 509(a)) who directly or indirectly controls, either alone or together with persons described in clauses (ii) and (iii), the governing body of such supported organization,“(ii) a member of the family (determined under section 4958(f)(4)) of an individual described in clause (i), or“(iii) a 35-percent controlled entity (as defined in section 4958(f)(3) by substituting ‘persons described in clause (i) or (ii) of section 509(f)(2)(B)’ for ‘persons described in subparagraph (A) or (B) of paragraph (1)’ in subparagraph (A)(i) thereof).“(3) Supported organization.—For purposes of this subsection, the term ‘supported organization’ means, with respect to an organization described in subsection (a)(3), an organization described in paragraph (1) or (2) of subsection (a)—“(A) for whose benefit the organization described in subsection (a)(3) is organized and operated, or“(B) with respect to which the organization performs the functions of, or carries out the purposes of.”.(c) Charitable Trusts Which Are Type III Supporting Organizations.—For purposes of section 509(a)(3)(B)(iii) of the Internal Revenue Code of 1986, an organization which is a trust shall not be considered to be operated in connection with any organization described in paragraph (1) or (2) of section 509(a) of such Code solely because—(1) it is a charitable trust under State law,(2) the supported organization (as defined in section 509(f)(3) of such Code) is a beneficiary of such trust, and(3) the supported organization (as so defined) has the power to enforce the trust and compel an accounting.(d) Payout Requirements for Type III Supporting Organizations.—(1) In general.—The Secretary of the Treasury shall promulgate new regulations under section 509 of the Internal Revenue Code of 1986 on payments required by type III supporting organizations which are not functionally integrated type III supporting organizations. Such regulations shall require such organizations to make distributions of a percentage of either income or assets to supported organizations (as defined in section 509(f)(3) of such Code) in order to ensure that a significant amount is paid to such organizations.(2) Type iii supporting organization; functionally integrated type iii supporting organization.—For purposes of paragraph (1), the terms “type III supporting organization” and “functionally integrated type III supporting organization” have the meanings given such terms under subparagraphs (A) and (B) section 4943(f)(5) of the Internal Revenue Code of 1986 (as added by this Act), respectively.(e) Effective Dates.—(1) In general.—The amendments made by subsections (a) and (b) shall take effect on the date of the enactment of this Act.120 STAT. 1104(2) Charitable trusts which are type iii supporting organizations.—Subsection (c) shall take effect—(A) in the case of trusts operated in connection with an organization described in paragraph (1) or (2) of section 509(a) of the Internal Revenue Code of 1986 on the date of the enactment of this Act, on the date that is one year after the date of the enactment of this Act, and(B) in the case of any other trust, on the date of the enactment of this Act.