We are a 501(c)(3) charitable nonprofit. Our “endowment” is held by a 509 (a)(3) type 3 non-functionally integrated supporting organization. Can we sue the supporting organization for not meeting required yearly financial payments or for not providing their tax returns for 5 years in a row?
Whether you can sue to obtain an annual distribution probably depends on the terms of the governing documents of the supporting organization and/or the terms of the funds being held for your benefit. But supporting organizations have a whole lot of requirements to see that the supported organizations are actually supported. (See Ready Reference Page: “Supporting Organizations Qualify As Public Charities”) If your supporting organization is not providing the information required, the IRS may be interested.
Because your supporting organization is type 3 “non-functionally integrated,” by definition you don’t control it. You don’t have enough seats on the board to force payments to you. It may be supporting other charities as well who also have a legitimate call on the money you think is yours. The governing documents may say if it is required to make annual payments to you, in which case you probably have a right to sue to enforce the obligation. You should also try to find out the terms of the gifts of any money you think is held for you. It may be considered held in trust for your benefit and you would probably have a claim to sue on that basis. If they are unwilling to help you with this information, the Attorney General of your state may be interested.
You also raise the question about the tax returns. They should be available on GuideStar for you to see even if the SO doesn’t give you copies. But the supporting organization regulations require that you get a copy and the Tax Code requires that copies be given to anyone who asks. If the supporting organization doesn’t comply with your request, you should notify the IRS, which can enforce the obligation with a fine if the SO refuses to comply.
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You probably want to meet in private with the Executive Director of the Supporting Organization. Go in with the attitude that all past problems were self-inflicted. What was the problem that you were causing the SO? Are you not documenting your needs, your achievements, your expenses? Are you meeting your reporting requirements but not on a timely basis? Is your sponsor like United Way, and you are below the cut-off line for who gets 2018-19 funding? Whatever, the first step would seem to be a meeting. Don't take more than 2 or 3 people (your CEO, CFO, perhaps your counsel) to such a working meeting. Don't record the meeting with any electrical device other than a laptop's note taker (Word, OneNote). Just be nice. Most SO want you to succeed, and yours probably wants you to succeed also.
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