Supporting organizations are a type of tax-exempt entity that is classified as a “public charity” by the Internal Revenue Code. Public charity status is achieved because a supporting organization carries out its tax-exempt purpose by supporting one or more other tax-exempt public charities, and in general is controlled or supervised by such other tax-exempt public charities. One primary advantage of public charity status is that a donor’s gifts to a properly qualifying supporting organization are subject to more favorable tax rules – a higher adjusted gross income percentage limitation compared to private foundations, and the ability for a donor to deduct the fair market value of the gift rather than the cost basis for certain types of appreciated property.
As with other tax-exempt entities, supporting organizations are subject to numerous complex rules. Among the most important is that the contributors to a supporting organization are prohibited from controlling the supporting organization.
We advise clients as to whether a supporting organization is right for their situation and, where appropriate, work with clients on the creation and administration of supporting organizations.