Contents

§ 3.4 PUBLIC CHARITIES AND PRIVATE FOUNDATIONSA supporting organization must be organized, and at all times thereafteroperated, exclusively for the benefit of, to perform the functions of, or to carry outthe purposes of one or more public charitable organizations. 420 A supportingorganization must be operated, supervised, or controlled by or in connection withone or more public charitable organizations. 421 Thus, the relationship between thesupporting and supported organizations must be one of three types: operated,supervised, or controlled by, supervised or controlled in connection with, or operated inconnection with. 422The distinguishing feature of the relationship between a supporting organizationand one or more supported public charitable organizations encompassed bythe phrase operated, supervised, or controlled by is the presence of a substantialdegree of direction by one or more public charitable organizations over the policies,programs, and activities of the supporting organization—a relationship comparableto that of a parent and subsidiary. 423 The distinguishing feature of therelationship between a supporting organization and one or more supported publiccharitable organizations encompassed by the phrase supervised or controlled inconnection with is the presence of common supervision or control by the personssupervising or controlling both the supporting organization and the supportedpublic charitable organization (or organizations), to ensure that the supportingorganization is responsive to the needs and requirements of the supported organization.424 The distinguishing feature of the relationship between a supportingorganization and one or more supported public charitable organizations encompassedby the phrase operated in connection with is that the supporting organizationis responsive to and significantly involved in the operations of the supportedpublic charitable organization. 425The supporting organization must engage solely in activities that support orbenefit the supported organization. 426 These activities may include making paymentsto or for the use of, or providing services or facilities for, individual membersof the charitable class benefited by the supported organization. Thesupporting organization need not pay over its income to the supported organization,but may carry on an independent program or activity that supports or benefitsthe supported organization. A supporting organization may also engage infundraising activities, such as solicitations, dinners, and unrelated trade or businessactivities, to raise funds for the supported organization or for permissiblebeneficiaries. 427A supporting organization can be created to support and benefit one or moretax-exempt social welfare organizations, 428 labor or agricultural organizations, 429420 IRC § 509(a)(3)(A); Reg. § 1.509(a)-4(a)(2).421 IRC § 509(a)(3)(B).422 Reg. §§ 1.509(a)-4(a)(3), 1.509(a)-4(f)(2).423 Reg. §§ 1.509(a)-4(f)(4), 1.509(a)-4(g)(1)(i).424 Reg. §§ 1.509(a)-4(f)(4), 1.509(a)-4(h)(1).425 Reg. § 1.509(a)-4(f)(4).426 Reg. § 1.509(a)-4(e)(1), (2).427 Reg. § 1.509(a)-4(e)(2).428 That is, organizations that are tax-exempt by reason of IRC § 501(c)(4). See Tax-Exempt Organizations ch. 12.429 That is, organizations that are tax-exempt by reason of IRC § 501(c)(5). See Tax-Exempt Organizations ch. 15. 113