... charity, identified by the Internal Revenue Servic

1
Fort Monroe

• Considerations regarding a Charitable Foundation

2
Why use a foundation?

• Contributions to the FMFADA are, in fact,
  deductible under 26 USC 170(a)(1) because the
  FMFADA is a qualifying organization under 26 USC
  170(c)(1).
• Many organizations that might be interested in
  contributing to the mission of the FMFADA,
  however, are limited to contributing to
  traditional 501(c)(3) organizations.

3
Why use a foundation?

• Contributions to foundations are deductible under
  26 USC 170(c)(2) if
• The foundation is created in the US or any State
• Is organized and operated exclusively for
  religious, charitable, scientific, literary, or
  educational purposes, to foster national or
  international amateur sports competition, or for
  the prevention of cruelty to children or animals

4
Why use a foundation?

• Contributions to foundations are deductible under
  26 USC 170(c)(2) if (cont.)
• No part of the net earnings inure to the benefit
  of any private shareholder or individual and
• Is not disqualified for tax exemption under
  section 501 (c)(3) by reason of
• attempting to influence legislation
• does not participate in, or intervene in any
  political campaign on behalf of (or in opposition
  to) any candidate for public office.

5
501(c)(3) Organizations

• Section 501(c)(3) is a tax law provision granting
  exemption from the federal income tax to
  non-profit organizations.
• 501(c)(3) exemptions apply to corporations, and
  any community chest, fund, or foundation,
  organized and operated exclusively for religious,
  charitable, scientific, testing for public
  safety, literary, or educational purposes, or to
  foster national or international amateur sports
  competition, or for the prevention of cruelty to
  children or animals.

6
501(c)(3) Organizations

• The three principal classifications of 501(c)(3)
  organizations are as follows
• A public charity, identified by the Internal
  Revenue Service (IRS) as "not a private
  foundation," normally receives a substantial part
  of its income, directly or indirectly, from the
  general public or from the government. The public
  support must be fairly broad, not limited to a
  few individuals or families. Public charities are
  defined in the Internal Revenue Code under
  sections 509(a)(1) through 509(a)(4).

7
501(c)(3) Organizations

• A private foundation, sometimes called a
  non-operating foundation, receives most of its
  income from investments and endowments. This
  income is used to make grants to other
  organizations, rather than being disbursed
  directly for charitable activities. Private
  foundations are defined in the Internal Revenue
  Code under section 509(a) as 501(c)(3)
  organizations which do not qualify as public
  charities.
• A private operating foundation is a private
  foundation that devotes most of its earnings and
  assets directly to the conduct of its tax exempt
  purposes, rather than to making grants to other
  organizations for these purposes. Private
  operating foundations are defined in the Internal
  Revenue Code under section 4942(j)(3).

8
Obtaining 501(c)(3) status

• Some organizations automatically acquire
  501(c)(3) status upon filing of proper
  organizational documents (e.g., articles of
  incorporation as a church).
• Others will not receive 501(c)(3) status until
  they file an application and supporting
  documentation to the IRS and have a certification
  letter issued.
• To cover donations made before the letter is
  issued, the regulations require prompt filing of
  the application after organization, or after an
  existing organization satisfies the criteria for
  501(c)(3), or after exceeding the income
  threshold.

9
Relations to other nonprofit organizations

• Many 501(c)(3) organizations are part of
  nonprofit "conglomerates, having organizational
  control relationships with other nonprofit
  organizations.
• The board of a 501(c)(4) advocacy organization
  may create a 501(c)(3) that operates solely for
  "educational" purposes.
• The League of Women Voters advocates positions on
  issues and evaluates candidates as a 501(c)(4)
  and there is a similarly named 501(c)(3)
  organization, League of Women Voters Education
  Fund, which provides nonpartisan voter
  information.
• The board of a 501(c)(6) business league may
  create a 501(c)(3) organization with the purpose
  of conducting research related to the business
  focus.

10
Relations to other nonprofit organizations

• While 501(c)(3) organizations may be similarly
  named to other organizations, they cannot be
  owned by other organzations, and cannot also have
  private owners.
• 501(c)(3) organizations should usually be
  chartered as independent organizations.

11
Why Use a 501(c)(3)?

• Many charitable foundations, which could be the
  source of significant funding opportunities, are
  limited to making contributions to 501(c)(3)
  organizations in order to protect their own
  status.
• Most people understand what a 501(c)(3) is. They
  dont really understand the nuances of how
  Sections 170 and 501 work together.

12
How do we get there?

• Direct the staff to study national models, to
  include
• Jamestown-Yorktown Foundation
• Non profits affiliated with state museums
• Jekyll  Island State Park Authority and its
  Foundation
• Others suggested by the Historic Preservation
  advisors and the stakeholders
• Colonial Williamsburg, which has a for profit arm

13
How do we get there?

• Carefully define the duties of the charitable and
  educational foundation to support the goals,
  mission and objectives of the FMFADA.
• FMFADA would normally be oriented toward policy,
  management, redevelopment/reuse consistent with
  plan
• Foundation would normally raise funds and
  identify sources of funding for activities of the
  FMFADA and for educational and charitable
  activities either conducted by the FMFADA or on
  its own behalf

14
How do we get there?

• Establish the level of control and overlap
  between the Foundation Board and the FMFADA
  Board, as well as make up and size of the
  Foundation Board.
• Hire experienced counsel to help create the
  Foundation and obtain 501(c)(3) certification.