Jan 1, 2007 12:00 PM

By Gerald B. Treacy, Jr., partner, Law Office of Gerald B. Treacy, PLLC, Poulsbo, Wash.

The Pension Protection Act of 2006 (PPA), which so radically redefined the rules for supporting organizations, also transformed the rules for donor-advised funds (DAFs). The PPA for the first time accords DAFs express recognition in the Internal Revenue Code, a tribute to the recent rapid success of DAFs as well as the charities and commercial firms that sponsor them. But DAFs are given this recognition merely so they can be subjected to new taxes and restrictions — and the act imposes more than its fair share of these:

• there is a new tax imposed on what are called “taxable distributions” from DAFs;

• there is a new tax imposed (at the sobering rate of 125 percent) on what are termed “prohibited benefits;”

• the excise tax on “excess benefit transactions” is made expressly applicable to DAFs and their controlling charities, which the PPA terms “sponsoring organizations;”

• the excise tax on the “excess business holdings” of private foundations is stretched to encompass DAFs;

• changes are made to annual returns and applications for recognition of tax-exempt status by sponsoring organizations; and

• rigorous new restrictions and limitations are imposed on the deductibility of contributions to DAFs under the income, gift and estate tax provisions

Topics of Interest

Estate Tax	Donor Advised Funds
GSTs	Family Offices
Private Foundations	Life Insurance
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Topics of Interest

Estate Tax	Donor Advised Funds
GSTs	Family Offices
Private Foundations	Life Insurance
2010 Tax Act News	Industry Trends Surveys

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2011 Trust Glossary

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50 Years Ago This Month

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50 years ago, in May 1962, we featured articles such as: "Future of Canadian Trusteeship" by Arthur H. Mingay", "Training Trust Employees" by Ian M. Marr, "What is a Trust Officer?" by Eric J. Brown, and "Selling Services" by Donald I. Webb.

Conrad Teitell's Guide to Tax Benefits For Charitable Gifts

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