New Law Revises Tax-Exempt Organization Tax Rules

On August 17, the President signed the Pension Protection Act of 2006. The new law contains numerous changes to the tax law provisions affecting tax-exempt organizations. Key provisions include the following:

Controlling organizations must report income from and loans to controlled organizations as well as transfers between controlled and controlling organizations. This provision is effective for returns due (without regard to extensions) after the date of enactment.*

Section 501(c)(3) organizations must now disclose unrelated business income tax returns (Forms 990-T) and make them available for public inspection. This provision is effective for returns filed after the date of enactment.*

Private foundation and excess benefit penalty excise taxes are doubled.

Donor advised funds, supporting organizations, and credit counseling organizations are subject to new requirements.

Charitable contribution deductions for food, book, and certain conservation property are increased.

Charitable contribution deductions for monetary donations, certain easements, taxidermy property, clothing and household goods, and certain other items are limited.

Beginning in 2008, exempt organizations with gross receipts under $25,000 must file an annual notice.

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