Indiana Law Review Volume 39 2006 Number 2 ARTICLES SUPPORTING THE SUPPORTING ORGANIZATION: THE POTENTIAL AND EXPLOITATION OF 509(A)(3) CHARITIES ALYSSA A. DIRusso' "One of the serious obstacles to the improvement of our race is indiscriminate charity." Andrew Carnegie' SUMMARY Supporting organizations, a type of charity defined in section 509(a)(3) of the Internal Revenue Code, have vast potential for philanthropic impact but perhaps equally vast potential for abuse. Donors who establish supporting organizations may retain inappropriate levels of control over the assets they contribute, hoard funds within the organization rather than actually using them to accomplish a charitable benefit, or engage in abusive financial transactions with their supporting organization. This Article discusses the complex tax rules that apply to supporting organizations and explains their unique role in charitable giving. It then explores the allegations of abuse in the supporting organization realm and reviews current proposals for reforming the system. The Article concludes by recommending that the public disclosure rules be amended to require fuller transparency of the activities of supporting organizations and greater availability of this information. TABLE OF CONTENTS Introduction 209 I. History of Supporting Organizations 210 • Assistant Professor of Law, Samford University, Cumberland School of Law; J.D., University of Texas School of Law; B.S., Carnegie Mellon University. The author wishes to thank the Cumberland School of Law for a summer research grant that supported work on this Article, participants in the faculty seminar at Cumberland, faculty who attended the presentation of this Article at Florida State University, and the following individuals for their commentsandassistance: research assistant Andrea Weed, Brannon Denning, Joshua Tate, Joseph Dodge, Kathleen M. Sablone, Jim Exum, Jedidiah McKeehan. and Ayanna Sterling-Jones. I.