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Supporting Organizations
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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.
Additional Requirements for Supporting Organizations !On Feb. 19, 2016, the IRS published proposed regulations (REG-118867-10) providing guidance on certain requirements to qualify as Type I and Type III supporting organizations, which are described in Sec. 509(a)(3) and hence are eligible for public charity status. Final regulations published in 2015 (T.D. 9746) that govern how to qualify as Type III supporting organizations focus primarily on the "relationship test." There is a great article in the AICPA publication Tax Advisor by Annette B. Smith, CAP - "A Road Mpay to the Recent Regulations".
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