Giving donors the power to restrict their gifts for a specific purpose or program or to restrict the timing and amount of expenditures can be a powerful giving incentive. Restrictions give donors comfort that their gift will be used as they envision.
From time to time, charities are faced with what to do with a restricted gift when the terms of the donor’s restriction can no longer be fulfilled. The doctrine of cy pres permits the courts to modify the charitable purpose of a charitable trust to a purpose that reasonably approximates the designated purpose, where the designated charitable purpose becomes unlawful, impossible, or impracticable to carry out or where it becomes wasteful to apply all of the property to the designated purpose.
The trouble with obtaining grants from foundations is that you either have to be very well known, like a children’s hospital or a well-established school, or you have to have a very strong in. Most non profits, especially new ones, typically have neither. However, if your program is fulfilling a compelling need in a new and creative way, you may still attract those elusive grants.
Proponents of the Act argue that registration of charities is important for several reasons. The first of which is that a list of registered charities can serve as a resource for the Attorney General and the public. Additionally, a potential donor will be able to consult the list to ensure that a charity is current in its filings which will help in making an informed decision about contributing. Lastly, the registration requirement serves to remind anyone who operates or plans to operate a charity of the seriousness of the fiduciary duty one undertakes as a director or trustee of a charity.
Detractors of the Act can point to numerous cases of overreaching by State Attorneys General over the years as well as existing multistate registration burdens on charities that fundraise in multiple jurisdictions.
The Pension Protection Act of 2006 (“Act”) offered the first definition of a donor-advised fund. According to the Act, a fund must have the following three characteristics to be a donor-advised fund, and if any of these characteristics is missing, the fund is not a donor-advised fund.
Most non-profits understand that if a fund is a permanent endowment, the principal must be preserved in perpetuity. Still, in my practice I am often surprised by how little some fundraising professionals understand about the mechanics of gift restrictions – particularly the implications of permanent restrictions and legal meaning of the term endowment.
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.