Support Organization
A donor creates a separate entity to administer a large charitable fund benefiting Oxfam America (and perhaps other named charities) for a term of years or in perpetuity.
What is a support organization?
An Oxfam America support organization allows a donor to create a separate entity to administer a large charitable fund benefiting Oxfam America (and perhaps other named charities) for a term of years or in perpetuity. The support organization comes under the supervision of Oxfam America and has a board consisting of donor representatives, plus key Oxfam America officials. A support organization is very suitable for gifts of $1,000,000 or more and is an excellent vehicle for involving family in philanthropic endeavors.
What are some benefits of a support organization?
Combining the tax benefits of a public charity with features normally associated with a private foundation, a "support organization" makes it possible for a donor to benefit one or more charities while retaining significant influence over the support organization's assets and their ultimate use by the charity.
A donor may appoint family members to the support organization board or involve family members in other ways to reinforce personal values and commitments, although the donor and family may not maintain voting control. Minimum distributions do not apply to a support organization if a majority of the board is chosen by public charities.
A support organization is typically organized as a non-profit corporation or trust to support one or more public charities. It comes under the tax-exempt umbrella of a public charity, and it is not subject to the burdensome IRS "private foundation rules" which impose onerous penalties and excise taxes on certain prohibited transactions. For many donors, creating a support organization is more flexible and cost-effective than a private foundation, especially if Oxfam America bears the cost of providing professional investment, management, and consultation services. Under the right circumstances, a private foundation that has outgrown its usefulness may be terminated and rolled-over to a support organization.
What are some details and tax issues regarding support organizations?
Securities and other contributions to a support organization qualify for the more favorable tax treatment that contributions to a public charity are allowed. The more stringent limitations placed on contributions to private foundations do not apply.
As a tax-exempt organization, the investment activities and earnings of a support organization are generally not subject to income taxation. However, earnings from business activities which are unrelated to the organization's charitable purpose are taxable.
Income generated by the support organization is not taxable to the donor, and the donated assets are not included in the donor's estate.
Contact our gift planning specialist for more information.