Supporting Organization Notification Requirements

Supporting Organization Notification Requirements

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Affiliated tax-exempt organization groups are often structured with various components of a central overall mission delegated amongst the organizations in the group.

Organizations recognized as tax-exempt under Internal Revenue Code (“IRC”) §501(c)(3) can be further sub-classified as non-private foundations, or public charities, under IRC §509(a)(1), (2) or (3).  Organizations that are classified as public charities under IRC §509(a)(3) are “supporting organizations” in that they exist and operate to support and distribute substantially of their income to other public charities.

All supporting organizations must pass an organizational test, an operational test, a control test, a relationship test and a disqualified person control test. The organizational and operational tests require the supporting organization to be operating exclusively for the benefit of one or more supported organizations.

Supporting organizations are classified as Type I, Type II or Type III as follows:

  • Type I supporting organizations are “operated, supervised or controlled” by one or more supported organizations;
  • Type II supporting organizations are “supervised or controlled in connection with one or more” supported organizations; and
  • Type III supporting organizations are “operated in connection with” one or more supported organizations.

According to Internal Revenue Service (“IRS”) rules and regulations and as outlined on the IRS’ website, a Type III supporting organization must be operated in connection with one or more publicly supported organizations. All supporting organizations must be responsive to the needs and demands of, and must constitute an integral part of or maintain significant involvement in, their supported organizations. Type I and Type II supporting organizations are deemed to accomplish these responsiveness and integral part requirements by virtue of their control relationships. However, a Type III supporting organization is not subject to the same level of control by its supported organization(s). Therefore, in addition to a notification requirement, Type III supporting organizations must pass separate responsiveness and integral part tests.

Proposed Regulations

As outlined in Internal Revenue Bulletin 2016-10, the proposed regulations are reflective of statutory changes enacted by sections 1241 through 1243 of the Pension Protection Act of 2006 and made various changes to Type III supporting organization requirements. One of the changes is that a Type III supporting organization must annually provide to each of its supported organizations information required by the Treasury Department and the IRS to ensure that they are responsive to the needs or demands of the supported organization.

The effective date of the proposed regulations is on the date the Treasury decision adopting them as final or temporary regulations is published in the Federal Register. Taxpayers may rely on the provisions of the proposed regulations until final or temporary regulations are issued.

Annual Notification Requirements

An IRC§509(a)(3) Type III supporting organization, whether functionally or nonfunctionally integrated, must provide for each tax reporting year, under the proposed 2016 regulations the following documents to each of its supported organizations:

  • Written notice to the principle officer of the supported organization describing the type and amount of support that they provided to the supported organization during the supporting organization’s tax year immediately preceding the reporting year (and during any other taxable year ending after December 28, 2012, for which supporting information has not been provided);
  • A public disclosure copy of the supporting organizations most recently filed Form 990, Return of Organization Exempt from Income Tax; and
  • A copy of the supporting organization’s currently effective governing documents, including their articles of incorporation unless the documents were previously provided and not amended subsequently.

The above notification documents are required to be delivered, or electronically provided, by the last day of the fifth calendar month of the reporting year. Since the due date to provide these documents is not the same as the Form 990 due date, only the most recently filed 990 is required to be provided.


The proposed regulations were intended to ensure that IRC§509(a)(3), Type III supporting organizations would be accountable to and further the charitable purposes of their supported organizations. These rules, while complex must be followed to maintain Type III status.  In addition, Form 990, Schedule A, Public Charity Status and Public Support, Parts IV and V contain various questions that address the proposed regulations and notification requirements and are required to be answered. Please note that the date to satisfy the notification requirement for calendar year supporting organizations, May 31st, is quickly approaching.

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To ensure compliance with U.S. Treasury rules, unless expressly stated otherwise, any U.S. tax advice contained in this communication is not intended or written to be used, and cannot be used, by the recipient for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code.

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