The Pension Protection Act of 2006 brought many changes to the charitable sector. However, the most significant changes for private foundations are the new rules for making grants to some supporting organizations—a type of public charity. The Internal Revenue Service (IRS) is expected to issue guidance clarifying some ambiguities in the law. Nonetheless, private foundations should act now to review and update their policies to ensure they have appropriate grant-processing procedures in place to avoid potential IRS penalty taxes. Such a review and update of policies is necessary even for private foundations that only make grants to Section 501(c)(3) organizations. Simply checking a potential grantee’s Section 501(c)(3) status alone is no longer sufficient to comply with the law.
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