897 
powers or responsibilities similar to those 
of the officers, directors, or trustees of the 
organization), or 
‘‘(iii) an owner of more than 20 per-
cent of— 
‘‘(I) the total combined voting 
power of a corporation, 
‘‘(II) the profits interest of a 
partnership, or 
‘‘(III) the beneficial interest of a 
trust or unincorporated enterprise, 
which is a substantial contributor (as so 
defined) to the organization. 
‘‘(5) TYPE
III
SUPPORTING
ORGANIZATION; 
FUNCTIONALLY INTEGRATED TYPE III SUPPORTING 
ORGANIZATION.—For purposes of this subsection— 
‘‘(A) TYPE
III
SUPPORTING
ORGANIZA-
TION.—The term ‘type III supporting organiza-
tion’ means an organization which meets the re-
quirements of subparagraphs (A) and (C) of 
section 509(a)(3) and which is operated in con-
nection with one or more organizations de-
scribed in paragraph (1) or (2) of section 
509(a). 
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898 
‘‘(B) FUNCTIONALLY
INTEGRATED
TYPE 
III
SUPPORTING
ORGANIZATION.—The term 
‘functionally integrated type III supporting or-
ganization’ means a type III supporting organi-
zation which is not required under regulations 
established by the Secretary to make payments 
to supported organizations (as defined under 
section 509(f)(3)) due to the activities of the 
organization related to performing the functions 
of, or carrying out the purposes of, such sup-
ported organizations. 
‘‘(6) SPECIAL RULE FOR CERTAIN HOLDINGS 
OF
TYPE
III
SUPPORTING
ORGANIZATIONS.—For 
purposes of this subsection, the term ‘excess busi-
ness holdings’ shall not include any holdings of a 
type III supporting organization in any business en-
terprise if, as of November 18, 2005, the holdings 
were held (and at all times thereafter, are held) for 
the benefit of the community pursuant to the direc-
tion of a State attorney general or a State official 
with jurisdiction over such organization. 
‘‘(7) PRESENT
HOLDINGS.—For purposes of 
this subsection, rules similar to the rules of para-
graphs (4), (5), and (6) of subsection (c) shall apply 
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899 
to organizations described in section 509(a)(3), ex-
cept that— 
‘‘(A) ‘the date of the enactment of this 
subsection’ shall be substituted for ‘May 26, 
1969’ each place it appears in paragraphs (4), 
(5), and (6), and 
‘‘(B) ‘January 1, 2007’ shall be sub-
stituted for ‘January 1, 1970’ in paragraph 
(4)(E).’’. 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to taxable years beginning after 
the date of the enactment of this Act. 
SEC. 1244. TREATMENT OF AMOUNTS PAID TO SUPPORTING 
ORGANIZATIONS BY PRIVATE FOUNDATIONS. 
(a) QUALIFYING DISTRIBUTIONS.—Paragraph (4) of 
section 4942(g) is amended to read as follows: 
‘‘(4) LIMITATION ON DISTRIBUTIONS BY NON-
OPERATING PRIVATE FOUNDATIONS TO SUPPORTING 
ORGANIZATIONS.— 
‘‘(A) IN GENERAL.—For purposes of this 
section, the term ‘qualifying distribution’ shall 
not include any amount paid by a private foun-
dation which is not an operating foundation 
to— 
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900 
‘‘(i) any type III supporting organiza-
tion (as defined in section 4943(f)(5)(A)) 
which is not a functionally integrated type 
III supporting organization (as defined in 
section 4943(f)(5)(B)), and 
‘‘(ii) any organization which is de-
scribed in subparagraph (B) or (C) if— 
‘‘(I) a disqualified person of the 
private foundation directly or indi-
rectly controls such organization or a 
supported organization (as defined in 
section 509(f)(3)) of such organiza-
tion, or 
‘‘(II) the Secretary determines by 
regulations that a distribution to such 
organization otherwise is inappro-
priate. 
‘‘(B) TYPE I AND TYPE II SUPPORTING OR-
GANIZATIONS.—An organization is described in 
this subparagraph if the organization meets the 
requirements of subparagraphs (A) and (C) of 
section 509(a)(3) and is— 
‘‘(i) operated, supervised, or controlled 
by one or more organizations described in 
paragraph (1) or (2) of section 509(a), or 
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901 
‘‘(ii) supervised or controlled in con-
nection with one or more such organiza-
tions. 
‘‘(C) FUNCTIONALLY
INTEGRATED
TYPE 
III SUPPORTING ORGANIZATIONS.—An organiza-
tion is described in this subparagraph if the or-
ganization is a functionally integrated type III 
supporting organization (as defined under sec-
tion 4943(f)(5)(B)).’’. 
(b) TAXABLE EXPENDITURES.—Subparagraph (A) 
of section 4945(d)(4) is amended to read as follows: 
‘‘(A) such organization— 
‘‘(i) is described in paragraph (1) or 
(2) of section 509(a), 
‘‘(ii) is an organization described in 
section 509(a)(3) (other than an organiza-
tion described in clause (i) or (ii) of section 
4942(g)(4)(A)), or 
‘‘(iii) is an exempt operating founda-
tion (as defined in section 4940(d)(2)), 
or’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to distributions and expenditures 
after the date of the enactment of this Act. 
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902 
SEC. 1245. RETURNS OF SUPPORTING ORGANIZATIONS. 
(a) REQUIREMENT
TO FILE RETURN.—Subpara-
graph (B) of section 6033(a)(3) is amended by inserting 
‘‘(other than an organization described in section 
509(a)(3))’’ after ‘‘paragraph (1)’’. 
(b) MATTERS INCLUDED
ON RETURNS.—Section 
6033, as amended by this Act, is amended by redesig-
nating subsection (l) as subsection (m) and by inserting 
after subsection (k) the following new subsection: 
‘‘(l) ADDITIONAL PROVISIONS RELATING TO SUP-
PORTING ORGANIZATIONS.—Every organization described 
in section 509(a)(3) shall, on the return required under 
subsection (a)— 
‘‘(1) list the supported organizations (as de-
fined in section 509(f)(3)) with respect to which 
such organization provides support, 
‘‘(2) indicate whether the organization meets 
the requirements of clause (i), (ii), or (iii) of section 
509(a)(3)(B), and 
‘‘(3) certify that the organization meets the re-
quirements of section 509(a)(3)(C).’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to returns filed for taxable years 
ending after the date of the enactment of this Act. 
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