The Tax Law of Charitable Giving. Bruce R. Hopkins

benefit of, to perform the functions of, or to carry out the purposes of one or more qualified supported organizations.⁴⁵⁸ This type of organization must be operated, supervised, or controlled by one or more qualified supported organizations, supervised or controlled in connection with one or more such organizations, or operated in connection with one or more such organizations.⁴⁵⁹ Thus, the relationship between the supporting and supported organizations must be one of three types: (1) operated, supervised, or controlled by; (2) supervised or controlled in connection with; or (3) operated in connection with.⁴⁶⁰

A supporting organization is not considered to be operated in connection with a supported organization unless the supporting organization (1) annually provides to each supported organization sufficient information to ensure that the organization is responsive to the needs or demands of the supported organization(s)⁴⁶¹ and (2) is not operated in connection with any supported organization that is not organized in the United States.⁴⁶² An organization is not considered to be operated, supervised, or controlled by a qualified supported organization or operated in connection with a supported organization if the organization accepts a contribution from a person (other than a qualified supported organization) who, directly or indirectly, controls, either alone or with family members or certain controlled entities, the governing body of a supported organization.⁴⁶³

The distinguishing feature of the relationship between a supporting organization and one or more supported public charitable organizations encompassed by the phrase operated, supervised, or controlled by is the presence of a substantial degree of direction by one or more public charitable organizations over the policies, programs, and activities of the supporting organization—a relationship comparable to that of a parent and subsidiary.⁴⁶⁴ The distinguishing feature of the relationship between a supporting organization and one or more supported public charitable organizations encompassed by the phrase supervised or controlled in connection with is the presence of common supervision or control by the persons supervising or controlling both the supporting organization and the supported public charitable organization (or organizations), to ensure that the supporting organization is responsive to the needs and requirements of the supported organization.⁴⁶⁵ The distinguishing feature of the relationship between a supporting organization and one or more supported public charitable organizations encompassed by the phrase operated in connection with is that the supporting organization is responsive to and significantly involved in the operations of the supported public charitable organization.⁴⁶⁶

The supporting organization must engage solely in activities that support or benefit the supported organization.⁴⁶⁷ These activities may include making payments to or for the use of, or providing services or facilities for, individual members of the charitable class benefited by the supported organization. A supporting organization, other than a nonfunctionally integrated Type III supporting organization,⁴⁶⁸ may, but need not, distribute income to a supported organization. It may carry on an independent program that supports one or more supported organizations.⁴⁶⁹ A supporting organization must be organized and operated to support or benefit one or more specified supported organizations, with the manner of the specification being dependent on which type of supporting organization is involved.⁴⁷⁰

A supporting organization is operated in connection with one or more supported organizations, and thus is a Type III entity, only if it satisfies a notification requirement, a responsiveness test, and an integral part test.⁴⁷¹

An organization is an integral part of a supported organization if it is “significantly involved in the operations of the supported organization and the supported organization is dependent upon the supporting organization for the type of support the supporting organization provides.”⁴⁷² An organization is an integral part of a supported organization only if it satisfies the requirements for functionally integrated Type III supporting organizations or for nonfunctionally integrated Type III supporting organizations.⁴⁷³

A supporting organization meets the responsiveness test if it is “responsive to the needs or demands” of a supported organization.⁴⁷⁴ This test is generally satisfied if (1) one or more trustees, directors, or officers of the supporting organization are elected or appointed by the supported organization; (2) one or more members of the governing body of the supported organization are also trustees, directors, or officers of, or hold other important offices in, the supporting organization; or (3) the trustees, directors, or officers of the supporting organization maintain a “close and continuous” working relationship with the trustees, directors, or officers of the supported organization.

      Also, by reason of one of these three elements, the trustees, directors, or officers of the supported organization must, for the responsiveness test to be satisfied, have a “significant voice” in the investment policies of the supporting organization, the timing of grants, the manner of making them, and the selection of recipients by the supported organization, and in otherwise directing the use of the income or assets of the supporting organization.

A supporting organization meets the integral part test as a functionally integrated Type III supporting organization in one of three ways. One way to meet this test is for the organization to engage in activities (1) substantially all of which directly further the exempt purposes of the supported organization(s) by performing the functions of, or carrying out the purposes of, the supported organization(s), and (2) that, but for the involvement of the supporting organization, would normally be engaged in by the supported organization(s).⁴⁷⁵ Fundraising, investing, and managing non-exempt-use property, and making grants to the supported organization or elsewhere, are not activities that meet the directly further standard.

The second way this test is met is for the supporting organization to be the parent of each of its supported organizations. This relationship exists where (1) the supporting organization exercises a “substantial degree of direction” over the policies, programs, and activities of the supported organization, and (2) a majority of the trustees, directors, or officers of the supported organization is appointed or elected by the supporting organization.⁴⁷⁶

The third way for this test to be met is for the supporting organization to support a governmental entity.⁴⁷⁷

A supporting organization meets the integral part test as a nonfunctionally integrated Type III supporting organization in one of two ways. One way to meet this test is to satisfy a distribution requirement and an attentiveness requirement.⁴⁷⁸

Pursuant to the distribution