Foundation Tax Structure


What does it mean for the Robertson Foundation to be a “supporting organization”?

In 1969, Congress amended the Internal Revenue Code to add section 509, which classified 501(c)(3) exempt organizations into two categories: public charities and private foundations. By the 1969 amendment, Congress also created a new sub-category of public charities known as “supporting organizations.” A “supporting organization” is “operated, supervised, or controlled by” another public charity (a Type I supporting organization), “supervised or controlled in connection with” another public charity (Type II) or “operated in connection with” another public charity (Type III). According to the Internal Revenue Service: “The key feature of a supporting organization is a strong relationship with an organization it supports. The strong relationship enables the supported organization to oversee the operations of the supporting organization.” [Document: Excerpt from IRS Website (.pdf)] There are approximately 45,000 supporting organizations in the United States. [See: www.nptrust.org/philanthropy/philanthropy_stats.asp]

The Robertson Foundation is a Type I supporting organization, “operated, supervised, or controlled by” Princeton. This means that by requirement and by design the Robertson Foundation exists solely to support Princeton, and its governance structure is tightly bound up with Princeton University.

For an overview of a number of the key issues in this dispute, see Robertson v. Princeton -- Perspective and Context, prepared by Victoria B. Bjorklund. Ms. Bjorklund is a member of the law firm Simpson Thacher & Bartlett LLP, which, together with Lowenstein Sandler PC, serves as litigation counsel to Princeton University and the individual defendants in the Robertson litigation.

How did the Robertson Foundation become a supporting organization?

In 1970, following the enactment of the Tax Reform Act of 1969, the Robertson Foundation requested classification as a public charity by reason of being a supporting organization controlled by the University within the meaning of section 509(a)(3) of the Internal Revenue Code. In its application to the IRS, the Foundation described its relationship to Princeton and in particular Princeton’s “control” over the Foundation. Charles Robertson, the donor’s husband and president of the Foundation, represented to the IRS that the Foundation should be classified as a “supporting organization” of Princeton University because:

  • the Foundation is “operated exclusively for the benefit of Princeton”
  • the Foundation is “controlled by Princeton”
  • the University’s requirement of “effective control” of the Foundation in order to “undertake the long term commitment involved in the project” was “agreed to by the donors,” and
  • the Foundation is a public charity within the sub-category of supporting organizations, and not a private foundation.

Charles Robertson’s representations to the government are available here: [Document: Excerpt from Charles Robertson's August 20, 1970 Notification Concerning Foundation Status (.pdf)]. By letter dated November 9, 1970, the IRS classified the Foundation as a public charity (i.e., “an organization that is not a private foundation as defined in section 509(a) of the Internal Revenue Code”). [Document: IRS Letter (.pdf)]

May the Robertson family control the Foundation?

No. The Internal Revenue Code imposes several requirements to ensure that a supporting organization such as the Robertson Foundation is overseen by a public charity. In order to retain its classification as a Type I supporting organization, the Robertson Foundation must be “operated, supervised, or controlled by” Princeton University. As the Robertson family has understood for more than 45 years, Princeton’s 4-3 majority on the board makes the Foundation compliant with this requirement of federal law. In addition, Robertson family members are expressly prohibited under federal tax law from controlling the supporting organization. As descendants of a contributor, they are deemed “disqualified persons” under the tax code.