Also known as: supporting organizations · support org · SO
Written by attorneys — see sources below.
A tax-exempt organization under section 509(a)(3) of the Internal Revenue Code that is organized and operated exclusively to support one or more public charities or governmental entities. The relationship test ensures that the supporting organization's resources reach the supported public charity rather than remaining under private control.
Summit Bank creates a supporting organization to fund scholarships at a state university. The organization passes the relationship test by appointing university officials to its board. Because the structure satisfies the test, the entity qualifies as a supporting organization and avoids private foundation payout rules.
Sophia Singh forms a supporting organization to underwrite equipment purchases for a public hospital. The hospital holds the power to remove board members. The arrangement meets the relationship test and allows the supporting organization to receive tax-deductible contributions without private foundation restrictions.
Serena Soto establishes a supporting organization to pay salaries at a government research institute. The institute must approve all major expenditures. The control relationship satisfies the test and exempts the supporting organization from the excess business holdings rule.
Scott Summers sets up a supporting organization to maintain a public museum's collection. Museum trustees select the supporting organization's directors. The structure qualifies the entity as a supporting organization and shields it from the minimum distribution requirement.
Sasha Stone creates a supporting organization to provide after-school programs at a state college. The college president serves on the board and must approve budgets. The relationship test is satisfied, allowing the supporting organization to avoid private foundation status.
Sylvia Santos forms a supporting organization to acquire books for a state library network. Library officials hold veto power over grants. The arrangement meets the relationship test and permits the supporting organization to receive contributions without triggering private foundation excise taxes.
The supporting organization must satisfy a relationship test that gives the supported public charity or governmental entity a significant voice in the supporting organization's operations or governance. This test ensures funds flow to the public charity rather than remaining under private control.
The close relationship with a public charity or governmental entity makes it unlikely that the supporting organization's assets will be misused for private benefit. This structural safeguard justifies relief from the five-percent payout rule and the excess business holdings limitation.
Yes. A supporting organization may be organized to support multiple specified public charities or governmental entities provided the relationship test is met with respect to each supported organization.
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