Private foundations and donor advised funds must follow special rules when making grants to certain supporting organizations.
Why is it important to determine if a public charity grantee is a supporting organization?
Supporting organizations are a type of Section 501(c)(3) public charity. Supporting organizations are further broken down into several types under Section 509(a)(3) of the Internal Revenue Code. The rules for making grants to supporting organizations can vary depending on the supporting organization’s type, and the presence of control. For example, grants to Type III non-functionally integrated supporting organizations must be made following special expenditure responsibility requirements if made from a private foundation or a donor advised fund, and will not count toward a private foundation’s minimum distribution (payout) requirement.