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May 22, 2018

How can a donor-sponsored supporting organization support an athlete’s charitable endeavors?

A charitable-giving vehicle that’s newly available is the donor-sponsored supporting organization (DSSO). It promises certain advantages to make athletes’ and celebrities’ charitable endeavors easier and more tax friendly.

This DSSO vehicle is an enhancement to the donor-advised fund program already offered by Morgan Stanley Global Impact Funding Trust (“Morgan Stanley GIFT”).

Specifically, a DSSO enables an individual to engage in broad-based fundraising to benefit a donor-advised fund account. In that regard, the DSSO serves as an excellent vehicle for athletes and celebrities who are committed to philanthropy and have a large personal following.

The organization can also be useful for other individuals strongly committed to raising funds for charity.

How a DSSO helps donors

Typically, the assets within a donor-advised fund account come from a single source, such as an individual, a married couple, a business or a family foundation.

Tax requirements and administrative concerns, however, usually make it impossible for large numbers of individuals to donate to a single donor-advised account. This typically prevents an individual who sets up a fund from growing the account by raising funds from the general public.

How a DSSO serves as an intermediary

This is where a donor-sponsored supporting organization comes in. A DSSO makes fundraising for the benefit of a donor-advised fund account possible by serving as an intermediary between contributing members of the general public and the fund.

The DSSO raises money from individuals, families, companies and other charities. It then aggregates the funds and periodically contributes them (net of expenses) to a donor-advised fund account at Morgan Stanley GIFT, managed by the organization. This leaves the fund with a single donor—the DSSO.

How a DSSO is a charitable corporation of its own

An organization is formed as a charitable corporation separate from Morgan Stanley GIFT, but with the purpose of supporting it. The organization’s relationship with Morgan Stanley GIFT allows the corporation to qualify as a tax-exempt organization described in Section 501(c)(3) of the Internal Revenue Code and as a public charity.

Contributions to the organization are eligible for an income tax charitable deduction.

How a DSSO is governed

As a corporation, a donor-sponsored supporting organization will have its own articles of incorporation and bylaws, as well as its own officers and directors.

The organization’s founder may serve as its president and may nominate many members of the board, including, if appropriate, family, friends and associates. A majority of the directors, however, will be appointed by Morgan Stanley GIFT and must be independent of the founder.

The officers and directors will meet periodically to discuss the organization’s fundraising efforts and the management of its donor-advised fund account at Morgan Stanley GIFT. Grant recommendations from the account will be handled by a committee of the board of directors.

Morgan Stanley GIFT and its third-party administrator will assist the organization in complying with necessary formalities, such as applying for tax-exempt status, registering to solicit contributions with appropriate state agencies and filing state and federal annual reports.

Jeffrey S. Gerson and Shawn P. Landau are financial advisors with the Wealth Management division of Morgan Stanley in New York City. The views expressed herein are those of the authors and may not necessarily reflect the views of Morgan Stanley Smith Barney LLC, member SIPC, http://www.sipc.org. Morgan Stanley Financial advisors engaged Worth to feature this article. Gerson and Landau may only transact business in states where they are registered or excluded or exempted from registration, http://fa.morganstanley.com/ggmgroup. Transacting business, follow-up and individualized responses involving either effecting or attempting to effect transactions in securities, or the rendering of personalized investment advice for compensation, will not be made to persons in states where Gerson and Landau are not registered or excluded or exempt from registration. Morgan Stanley Smith Barney LLC offers insurance products in conjunction with its licensed insurance agency affiliates. Morgan Stanley and its financial advisors  do not provide tax or legal advice. Individuals should seek advice based on their particular circumstances from an independent tax advisor. Certified Financial Planner Board of Standards Inc. owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER™ and federally registered CFP (with flame design) in the U.S. Morgan Stanley GIFT, Inc. is an organization described in Section 501(c)(3), of the Internal Revenue Code of 1986, as amended, and Morgan Stanley Global Impact Funding Trust is a donor-advised fund. Various divisions of Morgan Stanley Smith Barney, LLC provide investment management services to Morgan Stanley GIFT. CRC2041524 03/18

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