The Supporting Organization Option
Philanthropically minded individuals sometimes believe that the only way for them to be truly involved in significant charitable giving is to begin their own private foundation.  However, start-up costs, administrative and reporting burdens as well as the lack of privacy, excise taxes and payout requirements are just a few of the possible disadvantages that exist with a private foundation. Often, these donors choose to partner with The Community Foundation of Louisville (CFL) to create a donor advised endowment fund or a supporting organization instead.

Our donors have found they can make as great a charitable impact and enjoy the same level of recognition and family involvement as with a private foundation, while receiving greater tax benefits. And, unlike operating on their own through a private foundation or with a commercial gift fund at a financial institution, our donors can benefit from the expertise and personal service that come from working with an experienced, local philanthropic partner. To compare the primary distinctions of these types of gifts, click here.

Supporting organization status (detailed in Internal Revenue Code Section 509(a)(3) and the related regulations) gives an organization many of the advantages of private foundation status with few of its disadvantages.  The favorable tax status granted to the Foundation’s supporting organizations results from the relationship between each supporting organization and The Community Foundation of Louisville, a public charity.  

The Community Foundation of Louisville currently only partners with Type I Supporting Organizations.

For an in-depth look at this type of charitable relationship with CFL, visit The Felix E. Martin, Jr. Foundation website here.

Key points of the involvement of each party:

The Supporting Organization	The Community Foundation of Louisville
Begins with a contribution of cash, securities or other assets valued at $2 million or more.	Appoints a majority of the members of the Supporting Organization’s board, in consultation with the donor or the existing trustees. This satisfies the Internal Revenue Service’s requirement that a supporting organization be “operated, supervised or controlled by” the public charity.
Is a separate legal entity from the Community Foundation and has its own 501(c)(3) tax-exempt status from the Internal Revenue Service.	Offers technical assistance as needed.
Has its own board of directors, makes its own decisions about investments, spending policy, grantmaking, etc.	Researches grant proposals, processes grant payments, and acknowledges donors.
Selects an agent to administer and invest its monies.	Reports the Supporting Organization in its Annual Report.
The Board of Directors of the Supporting Organization may not be controlled by disqualified persons, such as a major contributor, members of the contributor’s family, or a corporation, partnership, trust or estate controlled by the major contributor.	Issues regular financial reports to the Supporting Organization’s board of trustees.
Benefits from tax treatment as a publicly supported charity, but because of its relationship with the Community Foundation, does not have to meet the “public support” test that would otherwise be required by the IRS.  For example, contributions to the Supporting Organization receive the maximum possible charitable tax deduction, there are no annual payout requirements, and no excise taxes are imposed.	Oversees preparation of the Supporting Organization’s annual tax return (Form 990).
Included as part of the Community Foundation of Louisville audit and files a separate tax return (Form 990).
Board of Directors makes grants and takes other actions without needing approval of the Community Foundation’s Board of Directors.
Has its own “corporate identity” – i.e., letterhead, check stock paper, logo, etc.

What are the Costs?

Start Up Costs: There are one-time start-up expenses associated with a supporting organization, which include attorney fees for incorporation documents and IRS application, and filing fees. Initial start-up costs are estimated at $3,250.

Annual fee: Once established, The Community Foundation of Louisville (CFL) charges its basic administration fee to the Supporting Organization which covers the following:

1. Oversee development of SO organizing documents
2. Oversee development and submission of IRS 990 application
3. Establish and maintain general ledger
4. Inclusion in annual audit of CFL
5. Creation of quarterly financial statements
6. Investment oversight as directed by the Supporting Organization’s Board of Directors
7. Develop standard Grant Application and RFP Program
8. Process Grant Applications via CFL’s grantmaking software
9. Postage for routine mailing
10. Oversight of research program by CFL management
11. Use of Foundation grantmaking and financial software
12. Meeting space for all board/program meetings at CFL office

Operating expenses:  Tax return, audit and investment management fees, and appropriate directors and officers liability insurance (coverage up to $1 million) are separately charged to the Supporting Organization. 

Other:  If research or support by a senior staff member, and/or administrative assistance for board meeting preparation is requested to be performed by our administrative staff, CFL will charge for such additional services at an hourly rate based upon salary, benefits and overhead of individual staff member(s) providing support.

Optional Direct Costs:  Depending upon the size of the Supporting Organization, and the scope of work envisioned by its Board of Directors, optional direct costs may include, but are not limited to, the following:

Publicity support (press releases, speeches, development of website pages on CFL website)

Oversight of grantmaking program by CFL Management

Oversight of dedicated employee by CFL Management

Office support in CFL office (office for dedicated employee, computer, phone line, internet access, use of copy machine, fax machine, etc.)

All supplemental fees and expenses for office space, program staff and program expenses shall be separately charged to the Supporting Organization.

For more information, please contact:

Linda S. Speed, J.D.
Vice President, Development and Stewardship
The Community Foundation of Louisville, Inc.
325 W. Main Street, #1110
Louisville, KY  40202
502.585.4649, x1015
502.587.7484 (Fax)
e-mail:  lindas@cflouisville.org