EXCESS BENEFIT TRANSACTIONS INVOLVING SUPPORTING ORGANIZATIONS.

SEC. 1242. EXCESS BENEFIT TRANSACTIONS INVOLVING SUPPORTING ORGANIZATIONS.(a) Disqualified Persons.—Paragraph (1) of section 4958(f), as amended by this Act, is amended by redesignating subparagraphs (D) and (E) as subparagraphs (E) and (F), respectively, and by adding after subparagraph (C) the following new subparagraph:“(D) any person who is described in subparagraph (A), (B), or (C) with respect to an organization described in section 509(a)(3) and organized and operated exclusively for the benefit of, to perform the functions of, or to carry out the purposes of the applicable tax-exempt organization.”.(b) Certain Transactions Treated as Excess Benefit Transactions.—Section 4958(c), as amended by this Act, is amended by redesignating paragraph (3) as paragraph (4) and by inserting after paragraph (2) the following new paragraph:“(3) Special rules for supporting organizations.—“(A) In general.—In the case of any organization described in section 509(a)(3)—“(i) the term ‘excess benefit transaction’ includes—“(I) any grant, loan, compensation, or other similar payment provided by such organization to a person described in subparagraph (B), and“(II) any loan provided by such organization to a disqualified person (other than an organization described in paragraph (1), (2), or (4) of section 509(a)), and“(ii) the term ‘excess benefit’ includes, with respect to any transaction described in clause (i), the amount of any such grant, loan, compensation, or other similar payment.“(B) Person described.—A person is described in this subparagraph if such person is—“(i) a substantial contributor to such 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 4958(c)(3)(B)’ for ‘persons described in subparagraph (A) or (B) of paragraph (1)’ in subparagraph (A)(i) thereof).“(C) Substantial contributor.—For purposes of this paragraph—“(i) In general.—The term ‘substantial contributor’ means any person who contributed or bequeathed an aggregate amount of more than $5,000 to the 120 STAT. 1105 organization, if such amount is more than 2 percent of the total contributions and bequests received by the organization before the close of the taxable year of the organization in which the contribution or bequest is received by the organization from such person. In the case of a trust, such term also means the creator of the trust. Rules similar to the rules of subparagraphs (B) and (C) of section 507(d)(2) shall apply for purposes of this subparagraph.“(ii) Exception.—Such term shall not include any organization described in paragraph (1), (2), or (4) of section 509(a).”.(c) Effective Dates.—(1) Subsection (a).—The amendments made by subsection (a) shall apply to transactions occurring after the date of the enactment of this Act.(2) Subsection (b).—The amendments made by subsection (a) shall apply to transactions occurring after July 25, 2006.