Watson Coleman: “One provision of Section 1220 of the Pension Protection Act of 2006 would create a new Section 501 (q)(2)(A)(ii) of the…”

“One provision of Section 1220 of the Pension Protection Act of 2006 would create a new Section 501 (q)(2)(A)(ii) of the Internal Revenue Code. This particular subsection contains one of several new requirements for credit counseling organizations to qualify for Federal tax exemption under Internal Revenue Code Section 501(c)(3). I wanted to clarify with the chairman that this particular provision is not intended to impose a limitation on all credit counseling organization revenues derived from debt management plans, but rather only on the revenues derived from what are commonly referred to as ``fair share'' payments from creditors to credit counseling agencies. These are payments made by creditors to credit counseling organizations that are attributable to the debt management plan services provided by credit counseling organizations to consumers whose debt is being repaid to the creditors. If the limitation were intended to include both ``fair share'' revenues paid by creditors and revenues received in the form of debt management plan fees paid by consumers, then virtually no existing credit counseling organizations, if any, would be able to qualify for tax-exempt status under Internal Revenue Code Section 501(c)(3). That is not the intent of Congress.”