A lower-cost and tax-wise alternative to a private foundation.
Supporting organizations are separate public charities are under the management of the Area Foundation. You can hire staff and convene a board, while enjoying tax and legal advantages not available to private foundations. We handle the administrative oversight, including IRS-mandated tax returns and annual audits.
In simplest terms, a supporting organization can be described as a "hybrid" of a donor-advised fund and a private foundation.
Supporting organizations enjoy the following benefits:
- Independence - A supporting organization has its own board of directors and makes its own decisions about investments, spending policy and grant making.
- Efficiency and cost-savings - Gifts to supporting organizations entitle the donor to maximum tax benefits, including full deductions for contributions of real estate and closely held stock. There is no excise tax on investment income. The Area Foundation can perform a variety of back-office functions reducing or eliminating the need for the supporting organization to have paid staff.
- Flexibility - There is no 5% minimum annual distribution requirement, and the amount of support provided by the Area Foundation (and associated fees) are based upon the administrative needs of the supporting organization.
- Longevity - While the majority of the members are appointed by the Area Foundation, the Board of Directors has a duty to carry out the mission of the supporting organization as defined in its articles of incorporation and bylaws. This feature ensures that the intent of the original donor(s) is preserved in perpetuity.
A private foundation can convert into a "public charity". A supporting organization continues its separate legal existence. It continues to administer its program and can continue to invest its assets in an independent manner. It must meet certain requirements imposed by Section 509(a)(3) of the Internal Revenue Code. There are three basic types of supporting organizations, and each option reserves a varying degree of the supporting organization’s governance for the trustees of the supported public charity.