Supporting orgs come in a variety of different shapes and sizes. The most common, by far, is the "single organization support organization," (e.g., the "Friends of ...", guilds, "XZY Org. Foundation", etc.)(NTEE = _11). Only these and the intra-NTEE major group fundraising and fund distribution organizations (NTEE = _12) are marked as "supporting" in the level2 variable. The rationale (important for economic analyses) is that contributions given to these organizations are potentially double-counted if the organizations make contributions ("indirect" on the 990) to other orgs within the same major group. On the other hand, supporting orgs such as trade associations, policy & research orgs, and others are fulfilling unique services (not funding) and can be counted for at least some research purposes, unless the focus is solely on organizations providing direct services.
What's the difference between a supporting public charity and a private foundation? The difference is in the tax code, NOT necessarily in the behavior of the organizations. For the single org. support orgs (a specific basis for obtaining tax exempt status), the intent of Congress was to continue to permit charities to establish fundraising and support orgs that the charities control without penalizing them with the private foundations' more onerous tax deductibility rules and reporting standards.
Also, to complicate things, if you are focused on finances, contributions may be double-counted but the balance sheets for supporting orgs should probably be added to the balance sheets of operating orgs -- e.g., the total assets controlled by a private university is it's own assets plus those of the "university foundation" that it controls.
Summary
Should supporting organizations (whether defined by the LEVEL2 variable or some other definition) be included in most research projects? It really depends on the research question you are trying to answser.
Other Sources
A May 2005 paper by Pollak and Durnford deals primarily with complex large single organization supporting organizations, mostly in the hospital field.
http://www.urban.org/publications/411175.html
The findings from this paper are probably not applicable to the vast majority of smaller supporting orgs.
The Level2 Variable
This variable is created based on the NTEE codes alone:
- All T2, T3, T6, T7, T90, T6, and T99s
- All single organization supporting organizations (2nd 2 characters of the NTEE = 11 or 12)
Sample SQL Code for Updating LEVEL2
UPDATE x SET LEVEL3 = CASE
WHEN (SUBSTRING(NTEECC,2,2) ='11') THEN 'ZA'
WHEN (SUBSTRING(NTEECC,2,2) ='12') THEN 'ZB'
WHEN (SUBSTRING(NTEECC,1,1) = 'T' and SUBSTRING(NTEECC,2,1) = '2') THEN 'ZC'
WHEN (SUBSTRING(NTEECC,1,1) = 'T' and SUBSTRING(NTEECC,2,1) = '3') THEN 'ZD'
WHEN (SUBSTRING(NTEECC,1,1) = 'T' and SUBSTRING(NTEECC,2,1) = '7') THEN 'ZE'
WHEN (SUBSTRING(NTEECC,1,1) = 'T' and SUBSTRING(NTEECC,2,2) = '90') THEN 'ZF'
WHEN (SUBSTRING(NTEECC,1,1) = 'T' and SUBSTRING(NTEECC,2,2) = '99') THEN 'ZF'
WHEN (SUBSTRING(NTEECC,1,1) = 'T' and SUBSTRING(NTEECC,2,1)= '6') THEN 'ZF'
...
UPDATE x SET LEVEL2 = CASE
WHEN SUBSTRING(level3,1,1) = 'Z' THEN 'S'
WHEN SUBSTRING( NTEECC,1,1) = 'Y' THEN 'M'
ELSE 'O'
Level 3 Definitions
'AR' = 'Arts'
'EN' = 'Environment'
'HE' = 'Health'
'HS' = 'Human Services'
'ED' = 'Education'
'IN' = 'International'
'MR' = 'Mutual, retirement'
'MO' = 'Mutual, other'
'PB' = 'Public, societal benefit'
'RE' = 'Religion'
'UN' = 'Unknown'
'ZA' = 'Single org. support'
'ZB' = 'Fundraising w/n maj grp'
'ZC' = 'Priv.grantmaking fdn'
'ZD' = 'Public fndns'
'ZE' = 'General fundraising'
'ZF' = 'Other sup.pub.ben'