Dan Weil
08/01/06
The IRS recognizes three primary types of nonprofit charitable organizations: the private foundation, the public charity and the supporting organization. The defining feature of a supporting organization is that it can show what the IRS terms "a strong relationship" with the charities it supports. A private foundation, on the other hand, can select a new roster of grantees every year.
The IRS rules governing supporting organizations separate them into three different types, based largely on the composition of the board. A private foundation can choose which type works best.
- In a Type I supporting organization, the
organization being supported appoints a majority of the board. Most family
foundations choose this option or Type III.
- In a Type II supporting organization, the family
foundation’s board members sit on the board of the supported organization and
vice versa.
- In a Type III supporting organization, the family funding the foundation may choose all of the board members. There is no requirement for formal control by the supported organizations, but a majority of the board must come from outside the donor’s family.
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