Know your “friends”

Fascinating story about a “friends of” organization for a library that decided to close its store because of an issue over control of its decision-making. Since many markets have these type of supporting organization relationships, it’s very important that they understand how these work, especially in understanding the different types of a supporting org, according to the IRS:

Type I 

A Type I supporting organization must be operated, supervised or controlled by its supported organization(s), typically by giving the supported organization(s) the power to regularly appoint or elect a majority of the directors or trustees of the supporting organization. The relationship between the supported organization(s) and the supporting organization is sometimes described as similar to a parent-subsidiary relationship.

Type II

A Type II supporting organization must be supervised or controlled in connection with its supported organization(s), typically by having a majority of the directors or trustees of the supported organization(s) serve as a majority of the trustees or directors of the supporting organization. The relationship between the supported organization(s) and the supporting organization is sometimes described as similar to a brother-sister relationship.

Type III

A Type III supporting organization must be operated in connection with one or more publicly supported organizations. All supporting organizations must be responsive to the needs and demands of, and must constitute an integral part of or maintain significant involvement in, their supported organizations. Type I and Type II supporting organizations are deemed to accomplish these responsiveness and integral part requirements by virtue of their control relationships. However, a Type III supporting organization is not subject to the same level of control by its supported organization(s). Therefore, in addition to a notification requirement, Type III supporting organizations must pass separate responsiveness and integral part tests.

The friends of entity in this story wasn’t one of those types, but instead was set up as its own 501 (c) (3) which was part of the issue.

From the story:

Friends board member Beth Schneider said the nonprofit will still raise funds for the Santa Maria Public Library. They are running a book sale from September 20–22 and donate books online through Amazon. Schneider asserts that the relationship between the library and the Friends remains: “We’re still the Friends of the Santa Maria Public Library.”

Mary Housel, library director, said that the library and the city will need to sign some form of contract in the future, although what that would entail, and why it is necessary if they are not utilizing city property to function, was not disclosed. Schneider said that they weren’t likely to take on any contract—“not as long as the city has taken the stance that it has.”

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