As discussed in last week’s Nonprofit Law Jargon Buster, there are some organizations that are, by their very nature, considered public. These include churches, schools, and hospitals. Other types of charitable organizations must pass one of two mathematical tests calculated on a four year rolling average to qualify is public.
To better coordinate their philanthropy, many companies choose to create corporate foundations to organize, focus, track, and publicize their philanthropic efforts.
Each year, the IRS publishes a report detailing what its focus will be regarding nonprofit organizations and compliance during the year to come. The following are some of the highlights from the 2012 Exempt Organizations Work Plan.
The defining characteristic of a private foundation is donor control. Private foundations are usually privately created, funded, and operated by a single individual, family, or company. As a result, private foundations are generally not dependent upon the support of outside donors and are therefore not subject to the same degree of public scrutiny as public charities that depend on outside funding for their survival.
Private foundations are subject to a more strict regulatory regime than public charities. There are penalties for “self-dealing” transactions, failure to distribute sufficient income for charitable purposes, holding concentrated interests in business enterprises, making risky investments, and for making certain types of expenditures.
Most states require you to register your organization if you solicit donations from their residents. Many states also require registration if your organization collects substantial or ongoing donations from their residents, even if you aren’t specifically targeting donors in that state. Download our comprehensive list of each state’s requirements.
Download our free guide to learn about the many elements needed to run a successful nonprofit organization, as well as how to avoid common pitfalls and mistakes.