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§ 13.9 MULTIORGANIZATION POOLED INCOME FUNDSpercentage of the fair market value of the fund assets or (2) any amount thattakes into account unrealized appreciation in the value of the fund assets.Also, no amount of net long-term capital gain may be considered permanentlyset aside for charitable purposes to the extent the trustee distributes proceedsfrom the sale or exchange of the fund assets as income. 85§ 13.9 MULTIORGANIZATION POOLED INCOME FUNDSThe conventional pooled income fund is established and maintained by onecharitable organization. The organization uses the fund as a fundraising vehicle:the gifts flow to the fund and thereafter the remainder interest portion in thegifts is transferred to that charitable organization.In some situations, however, a pooled income fund is established in circumstancesin which more than one charitable organization is the ultimate beneficiaryof the remainder interest in property transferred to the fund. There hasbeen some confusion and controversy over the extent to which there can be multiplecharitable beneficiaries of a pooled income fund.(a) National Organizations with AffiliatesIt is common for a national charitable organization to have local charitable organizations(such as state chapters) affiliated with it. The local organizations aregenerally under the supervision and control of the national organization; theseentities have an identity of aims and purposes.An issue presented to the IRS was whether a national organization such asthis can establish a pooled income fund that it will maintain for itself and forthose of the local organizations that expressly consent to participate in thefund. 86 The declaration of trust and instruments of transfer (collectively, the governinginstrument) meet all the other requirements of the law, so the fund willqualify as a pooled income fund if the maintenance requirement is satisfied. 87Under the terms of the governing instrument of this fund, a donor can designatethat the remainder interest in the gift be transferred either to the national charitableorganization or to one of the participating local charitable organizations.The governing instrument also provides that a designated local organizationmay not sever its interest in the fund prior to the death of the named incomebeneficiary. The governing instrument further provides that, if the designatedlocal organization is no longer affiliated with the national organization when theremainder interest is to be transferred, the remainder interest will be transferredto the national organization or to another affiliated local organization selectedby the national organization.The tax law requirements for a pooled income fund include the rule that thefund must be maintained “by the organization to which the remainder interest is85 Reg. § 1.642(c)-2(c), which is generally effective for tax years beginning after January 2, 2004. Reg. §1.664(c)-2(e).86 It is assumed for purposes of this analysis that the national organization and each of the participating local organizationsis the type of organization that is qualified to maintain a pooled income fund (that is, an organizationdescribed in at least one of the provisions of IRC § 170(b)(1)(A)(i)–(vi)). See § 13.1, text accompaniedby notes 8–10).87 That is, the qualification of the fund turned on compliance with IRC § 642(c)(5)(E). See § 13.2(e). 491