Supporting Organizations
A Supporting Organization is a separate non-profit charitable corporation, a kind of subdivision of the corporate structure of the Community Foundation. It qualifies as a public charity, not as a private foundation, because its basic purpose is to "support" the charitable work of the Community Foundation. Although it is a separate entity and files a separate tax return, it is structured so that one or more family members can be Board members of the Supporting Organization. The majority of Board members, however, must be named or appointed by the Community Foundation, and the organization must be organized and operated exclusively to carry out one or more of the purposes of the Community Foundation. The Lori and Lou Flagg Memorial Youth Fund is an example of a Supporting Organization.
This type of fund may offer several advantages to the right donor. If a trustee of a private foundation wants to terminate the foundation but continue to operate a more flexible fund, the private foundation can be "converted" into a Supporting Organization for the Community Foundation, and thus enjoy public charity tax treatment. A family with a tradition of local giving may want to maintain a separate entity which is designed to be permanent and which can take advantage of the Community Foundation's investment and grantmaking expertise. This option may be more appealing than a Donor Advised Fund because of its permanent nature.
To qualify as a Supporting Organization, the governing documents must meet three separate tests: an organizational and operational test, a relationship test, and a control test. All of these tests are designed to ensure that a Supporting Organization does not operate like a private foundation. Since this section of the Internal Revenue Code (509(a)3) is particularly complex, we recommend that anyone who wants to create a Supporting Organization consult first with the Community Foundation and our legal counsel for assistance.
For more information contact President/CEO, Dan Baldwin or call 831.375.9712, x 115.
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