Supporting Organizations

November 15, 2017

Supporting organizations are important charitable tools that donors can use to achieve their specific philanthropic goals. Many of the Council’s members utilize supporting organizations to maximize their impact. Often, a supporting organization manages fundraising or investments for the supported organization to allow it to focus on its core charitable mission, whether grantmaking or providing direct services.

Under current law, three types of supporting organizations are classified as public charities. “Type I” supporting organizations are akin to a subsidiary of the supported organization in that the supported organization—generally a 501(c)(3) organization—exercises a substantial degree of direction over the policies, programs, and activities of the supporting organization. “Type II” supporting organizations, where persons supervising or controlling the supported organization exercise supervision or control over the supporting organization, are more akin to a brother-sister organization of the supported 501(c)(3). Finally, “Type III” organizations are operated in connection with one or more 501(c)(3) organizations, and must satisfy a notification requirement, a “responsiveness test,” and an “integral part test.” These rigorous standards reflect prior lawmaker attention, particularly during the Pension Protection Act of 2006 debates, ensuring that each type of supporting organization serves a valid charitable purpose.

The Council opposes any policy proposal that would eliminate types of supporting organizations and reduce the variety and flexibility of charitable giving tools available to foundations and donors alike.

Bills:

Council Comments & Analysis: