Charitable Trusts

A nonprofit support organization has some similarities with a private non-profit foundation, with some additional tax advantages derived from the public charities they support. Support organizations are less heavily regulated by the IRS than non-profit foundations, but the flip-side is that the donor has less control over how the assets are used, and how the organization is administered.

Support organizations are unique due to their closer relationship with one or more specific charities. These organizations are therefore classified as public charities, as opposed to private foundations. The organization itself manages the funds for the benefit of the associated charities. Unlike a donor advised fund or a private nonprofit foundation, however, the charities to be benefited by the support organization must be specified at the time of formation.

The tax advantages of support organizations are similar to other forms of nonprofit entities. You may donate appreciated assets while avoiding capital gains taxes, and deducting the entire appreciated amount. Thus they can be highly tax-efficient ways of supporting charity.

There are three primary requirements for an entity to qualify as a support organization:

• Organization — A support organization must be established and organized solely for the purpose of benefiting one or more specific charities, determined at the time of formation.
• Disqualified Persons — Certain people are disqualified by the IRS and Congress from controlling the organization or its assets, either directly or indirectly. Consult a qualified attorney for more information on this.
• Relationship — The organization must be closely related with its charities, to the point that the charities in effect operate, supervise, or control its activities and assets.

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