Foundation for Abington School District (F ASD) Abington School District Meeting of the Board of School Directors April 24, 2018
IRC SE CTION 509(A) SUPPORTING ORGANIZATIONS The Basics…
• A supporting organization under IRC Section 509(a) is an organization that carries out its exempt purposes by supporting other exempt organizations, usually other public charities or governmental entities. This classification is important because it is one way a charity can avoid classification as a private foundation, a tax- exempt status that is subject to a more restrictive regulatory regime. • Because the FASD will be receiving most, if not all, of its funding from a single source, it will not qualify as publicly supported under the Internal Revenue Code. Supporting Organizations
• All supporting organizations under IRC Section 509(a) must pass an (1) organizational test, (2) an operational test, (3) a control test and (4) a relationship test. Supporting organizations are classified as Type I, Type II or Type III supporting organizations based on how they satisfy the relationship test. To Qualify as a Supporting Organization FOUR TE STS Must be Satisfied…
• A supporting organization must be organized exclusively for the benefit of, to perform the functions of, or to carry out the purposes of one or more specified charitable, educational, religious or publicly supported organizations. • The organization’s articles of incorporation must state the specified publicly supported organization on whose behalf the supporting organization is to be operated. • To satisfy the organizational test, the Articles of Incorporation of the FASD will be amended and restated to eliminate any doubt that its assets may only be used to support the Abington School District. Organizational Test
• A supporting organization must engage solely in activities that support or benefit its supported organization. • To satisfy the operational test, the Articles of Incorporation of the FASD will be amended and restated to assure that its assets may only be used to support the Abington School District. Operational Test
• The supporting organization must be under the “control” of its supported organization. Control means the practical ability to require the organization to perform any act which significantly affects its operations, or to prevent any such act. • To satisfy the control test, the FASD’s Bylaws will be amended and restated to make certain that the FASD’s Board of Directors will be under the control of the Board of School Directors of the Abington School District. • The FASD’s amended and restated Bylaws provide that the leadership of the School Board and the School District’s chief administrators and legal counsel will be ex officio members of the FASD’s Board of Directors, thereby ensuring that the FASD stays under the control of the Abington School District. Control Test
• A supporting organization is classified as a Type I, Type II or Type III supporting organization based on the type of relationship it has with its supported organization. • A Type I supporting organization must be operated, supervised or controlled by its supported organization, typically by giving the supported organization the power to regularly appoint or elect a majority of the directors of the supporting organization. • The relationship between the supported organization and the supporting organization is sometimes described as similar to a parent-subsidiary relationship. Relationship Test
• To satisfy the relationship test, the FASD’s Bylaws will be amended and restated to give the Abington School District (i.e., the supported organization) the power to appoint the FASD’s Board of Directors (i.e., the supporting organization). • The FASD’s amended and restated Bylaws provide that the President and Vice President of the School Board and the Superintendent will have the sole authority (by majority vote) to appoint the FASD’s Board of Directors, thereby ensuring that the Abington School District (the supported organization) holds the power to appoint the majority of the directors of the FASD (its supporting organization). Relationship Test – cont.
• All records, such as annual federal tax reports, annual reports, and audited financial statements will be posted to ASD’s website or otherwise made available to the public upon request. • The Corporation shall operate in accordance with the requirements of the Pennsylvania Sunshine Act , and the Pennsylvania Right-To-Know Law Transparency
• Only reimbursement of reasonable expenses. No Compensation of Directors/ Officers
• Bylaws are revised to make distinction clear between FASD and District Clarifications
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