What is a supporting organization?
To oversimplify, a supporting organization is a
501(c)(3) that qualifies as a public charity (and not a private
foundation) because it has a close relationship with another publicly
supported 501(c)(3).
Usually, in order to qualify as a public charity,
an organization must receive at least one-third (or in special cases as
little as ten percent) of its support each year from gifts, grants and
contributions from a variety of sources.
A "supporting organization"
is not required to meet this "public support test" on its own if it
provides meaningful support (financial, programmatic or both) and gives
some degree of structural and operational control to another
organization that is already classified as a public charity, rather
than a private foundation.
Based upon the relationship of the
supporting organization to the public charity it supports, a supporting
organization will be classified as a type I, II or III. A supporting
organization may not be controlled by someone who is a disqualified
person with respect to the supporting organization.
What are the different classifications of a supporting organization?
As a general overview, supporting organizations fall into three
categories: type I, type II and type III. The type refers to the nature
of the relationship between the supporting organization and the charity
being supported.
- Type I: By far the most common, is often described as a
parent-subsidiary relationship and generally involves the charity
appointing a majority of the board of the supporting organization.
- Type II: The least common of the three, there is usually an
overlapping board relationship where at least a majority of the members
of the supporting organization board are also members of the supported
charity's board.
- Type III: These operate with a greater degree of independence from
the organization they support. Typically the supported organization
appoints one member of the governing board of the supporting
organization and institutes other procedures designed to ensure that
the supporting organization is responsive to it. Type III supporting
organizations may provide financial support to their supported
organization or they may directly carry out a program or function for
it.
New rules related to supporting organizations !
See overview in a PDF format at http://www.cof.org/files/Documents/Government/Charitable%20Reform%20Resource%20Center/06HR4EffectiveDates.pdf
