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supports at least one supported

appoint or elect, directly or indirectly, a

organization’s distributable amount for the

organization that is a governmental entity

majority of the officers, directors, or

current tax year. The form also allows for

to which the supporting organization is

trustees of every supported organization;

reporting the organization’s adjusted net

responsive (as discussed in instructions

and (2) exercise a substantial degree of

income for the current tax year for use in

for Section D, lines 2 and 3, earlier) and

direction over the policies, programs, and

next year’s calculations; this reporting is

(2) engages in activities for or on behalf of

activities of every supported organization.

optional but may be helpful if the

such governmental supported

organization anticipates being required to

Part V. Type III

organization that performs the functions or

complete Part V next year.

carries out the purposes of such

Non-Functionally

Definition. Adjusted net income is gross

governmental supported organization and

Integrated 509(a)(3)

income for the tax year less deductions

that, but for the involvement of the

allowable to a corporation subject to tax

Supporting Organizations

supporting organization, would normally

under section 11, with certain

be engaged in by the governmental

A Type III supporting organization (other

modifications discussed in the line

supported organization itself. See Notice

than a Type III functionally integrated

instructions later. In computing gross

2014-4. A Type III supporting organization

supporting organization) generally must

income and deductions, the principles of

that claims to meet the integral part test for

satisfy a distribution requirement

the income tax provisions of the Code

a functionally integrated supporting

described in Regulations section

apply (except to the extent inconsistent

organization by supporting a

1.509(a)-4(i)(5)(ii) along with an

with section 4942 or the underlying

governmental entity must describe in Part

attentiveness requirement described in

regulations), but exclusions, deductions,

VI how it met these requirements for the

Regulations section 1.509(a)-4(i)(5)(iii) to

and credits are not allowed unless

tax year.

meet the integral part test for a Type III

expressly provided for under section 4942

relationship. To satisfy the distribution

Line 2. Activities Test. To meet the

or the underlying regulations. See

activities test of a Type III functionally

requirement, the organization must make

Regulations section 53.4942(a)-2(d)(1).

integrated supporting organization,

a minimum amount (distributable amount)

Line 1. Report the organization’s net

substantially all of the supporting

of distributions to or for the use of one or

short-term capital gain, if any. Long-term

more supported organizations. Carryovers

organization’s activities must (1) directly

capital gains and losses from the sale or

of excess distributions from certain prior

further the exempt purposes of the

disposition of property are not taken into

supported organization(s) to which the

years may be used for this purpose.

account in determining adjusted net

supporting organization was responsive,

income (unless reportable on line 2 as

Sections A through E of Part V show

and (2) be activities that such supported

recoveries of prior-year distributions). Net

whether the organization has satisfied its

organization(s) would normally be

short-term capital loss cannot be carried

distribution and attentiveness

engaged in but for the supporting

back or forward to other tax years.

requirements for its tax year. Sections A

organization’s involvement.

Amounts treated as long-term capital

and B determine the organization’s

gains include capital gain dividends from a

Direct furtherance. Substantially all

adjusted net income and minimum asset

regulated investment company and net

of the supporting organization’s activities

amount, which amounts are used in

section 1231 gains (but net section 1231

must be “direct furtherance” activities.

determining the distributable amount in

losses are treated as ordinary losses and

Direct furtherance activities are conducted

Section C. Section D determines the

thus taken into account). If the fair market

by the supporting organization itself, rather

organization’s distributions that count

value of property distributed for charitable

than by a supported organization. Holding

toward the distributable amount and

purposes exceeds adjusted basis, the

title to exempt-use assets and managing

determines whether the attentiveness

excess is not deemed includible in

them are direct furtherance activities.

requirement is met. Section E determines

income.

Fundraising, investing and managing

whether the distributable amount is

non-exempt-use assets, grant-making to

satisfied through current distributions and

Adjusted basis. The adjusted basis for

organizations, and grant-making to

prior-year carryovers, and determines

purposes of determining gain from the

individuals (unless it meets the

carryovers to future years.

sale or other disposition of property is the

requirements of Regulations section

greater of:

A trust is excepted from the general

1.509(a)-4(i)(4)(ii)(D)) are not direct

distribution and attentiveness

1. The fair market value of such

furtherance activities.

requirements (and need not complete

property on August 17, 2006, plus or

But for. In addition, the direct

Sections A through E) if on November 20,

minus all adjustments thereafter and

furtherance activities must be activities in

1970, it met and continues to meet the

before the date of disposition under

which, but for the supporting

requirements set forth in Regulations

sections 1011–1023, if the property was

organization’s involvement, the supported

section 1.509(a)-4(i)(9). A trust that claims

held continuously from August 17, 2006,

organization would normally be involved.

this status by checking the box on line 1 at

to the date of disposition.

the beginning of Part V must explain in

Examples include holding and

2. The adjusted basis under sections

Part VI how it meets each of the

managing facilities used by a church for its

1011–1023, without regard to section

requirements. A trust that has obtained a

religious purposes, operating a food

362(c). If assets acquired before August

ruling from the IRS on this issue must so

pantry for a group of churches that

17, 2006, were subject to depreciation or

indicate in Part VI.

normally would operate food pantries

depletion, to determine the adjustments to

themselves, and maintaining local parks

Section A. Adjusted Net Income

basis between the date of acquisition and

for a community foundation that otherwise

August 17, 2006, straight line depreciation

The principles of section 4942(f) and

would maintain those parks. See

or cost depletion must be taken into

Regulations section 53.4942(a)-2(d) apply

Regulations section 1.509(a)-4(i)(4)(v) for

account. Any other adjustments that would

in determining adjusted net income. See

more detailed examples.

have been made during such period (such

Regulations section

as a change in useful life based upon

Line 3. Parent of Supported Organiza-

1.509(a)-4T(i)(5)(ii)(B).

additional data or a change in facts) must

tions. To qualify as the parent of all the

also be taken into account.

Prior and current year columns. The

supported organizations, a supporting

organization’s adjusted net income for the

organization must (1) have the power to

prior tax year is used in determining the

Instructions for Schedule A (Form 990 or 990-EZ)

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Instructions For Schedule A (Form 990 Or 990-Ez) - Public Charity Status And Public Support - 2014 Page 13

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