I Want My Own Charity
December 21, 2017 7:44 PM Subscribe
Can I create and fund my own non-profit/charitable foundation to help people in my community?
I've been generally dissatisfied with the process and lack of local impact associated with contributing to large charitable organizations (Red Cross, Salvation Army, etc). It occurs to me that I know plenty of people that need help - the single mother I know from the gym without a washer/dryer, my elderly neighbor that needs her tree cut down, the kid I see down the block riding a bike without a proper seat - but lack the formal process to use my annual charitable contribution budget to help them in a tax advantaged way.
I assume this is as simple as setting up a 501(3)(c) but there are probably details I don't understand. For instance - how best to fund the charity? Is it possible to fund via a Donor Advised Fund? Could the charity itself be a DAF?
Is this a terrible idea? Anyone already done this that can advise?
I've been generally dissatisfied with the process and lack of local impact associated with contributing to large charitable organizations (Red Cross, Salvation Army, etc). It occurs to me that I know plenty of people that need help - the single mother I know from the gym without a washer/dryer, my elderly neighbor that needs her tree cut down, the kid I see down the block riding a bike without a proper seat - but lack the formal process to use my annual charitable contribution budget to help them in a tax advantaged way.
I assume this is as simple as setting up a 501(3)(c) but there are probably details I don't understand. For instance - how best to fund the charity? Is it possible to fund via a Donor Advised Fund? Could the charity itself be a DAF?
Is this a terrible idea? Anyone already done this that can advise?
this is as simple as setting up a 501(3)(c)
Mileage will vary, but the people I know who have been involved in setting up a 501(3)(c) do not describe it as simple. Part of it will depend on your state and the amount of money, but you may be better off funneling money to established non-profits than spending time and money setting up your own.
posted by Candleman at 9:59 PM on December 21, 2017 [10 favorites]
Mileage will vary, but the people I know who have been involved in setting up a 501(3)(c) do not describe it as simple. Part of it will depend on your state and the amount of money, but you may be better off funneling money to established non-profits than spending time and money setting up your own.
posted by Candleman at 9:59 PM on December 21, 2017 [10 favorites]
You could find a charity that will sponsor you as a continuing project in exchange for a management fee until you meet the IRS requirements for developing a new non-profit organisation.
posted by parmanparman at 4:12 AM on December 22, 2017 [1 favorite]
posted by parmanparman at 4:12 AM on December 22, 2017 [1 favorite]
Setting up a donor-advised fund at your local community foundation is infinitely easier than setting up your own non-profit.
posted by Sweetie Darling at 6:21 AM on December 22, 2017 [10 favorites]
posted by Sweetie Darling at 6:21 AM on December 22, 2017 [10 favorites]
I know plenty of people that need help - the single mother I know from the gym without a washer/dryer, my elderly neighbor that needs her tree cut down, the kid I see down the block riding a bike without a proper seat - but lack the formal process to use my annual charitable contribution budget to help them in a tax advantaged way.
My understanding is that tax-deductible donations can’t be earmarked by the donor to benefit a particular individual. It’s not just the lack of a formal process: the Salvatiom Army can’t accept that sort of limitation on its use of donated funds.
IANAL but the idea that a donor could set up a nonprofit and gain tax personal deductions while maintaining sole control of where the money goes seems improbable.
posted by jon1270 at 6:29 AM on December 22, 2017 [1 favorite]
My understanding is that tax-deductible donations can’t be earmarked by the donor to benefit a particular individual. It’s not just the lack of a formal process: the Salvatiom Army can’t accept that sort of limitation on its use of donated funds.
IANAL but the idea that a donor could set up a nonprofit and gain tax personal deductions while maintaining sole control of where the money goes seems improbable.
posted by jon1270 at 6:29 AM on December 22, 2017 [1 favorite]
Look at Modest Needs for the type of things you’re talking about.
posted by bunderful at 6:59 AM on December 22, 2017 [1 favorite]
posted by bunderful at 6:59 AM on December 22, 2017 [1 favorite]
Two suggestions:
There is a model out there that usually goes by the name "100 Women" or "Impact 100" or "Power of 100" or similar. It's a grassroots thing, but the basic idea is that you organize 100 women (or whoever) who each give $100 (or give $100 a few times a year), and then you've got $10,000 to disburse. The group members then accept grant requests and make decisions about who gets charitable aid. It's pretty low-to-the ground, kind of a giving club, but organized under nonprofit statute so the gifts are tax-deductible. You could see if a "100" group is active in your area, or you could start your own.
Another idea many people are unaware of is that many US counties, states and even some cities have community charitable organizations called "community foundations". Search your location + "community foundation." These organizations are focused specifically on needs within your area and are really well positioned to understand what's going on and respond in ways that are locally meaningful. They are also accountable locally.
Being your own charity is pretty impractical. There are costs involved, which presumably would draw away from your available funds to give, and you would be required to have a board and required to meet with them annually, and might be required to get an annual audit, depending on your state. It's unwieldily to have your own charity unless you have a lot of time and a pretty significant amount of money to give. Nonprofit FAQ
Finally, you can just give money and let the tax advantage go. You're entitled to give money away without a 501(c)3. And it might not even matter soon, because as I understand the new GOP tax plan, you'd have to itemize at a pretty high level to beat the new standard deduction, which will remove a lot of charitable giving incentive anyway. So depending on your tax bracket, you might not be losing any tax advantage by next year.
posted by Miko at 7:10 AM on December 22, 2017 [13 favorites]
There is a model out there that usually goes by the name "100 Women" or "Impact 100" or "Power of 100" or similar. It's a grassroots thing, but the basic idea is that you organize 100 women (or whoever) who each give $100 (or give $100 a few times a year), and then you've got $10,000 to disburse. The group members then accept grant requests and make decisions about who gets charitable aid. It's pretty low-to-the ground, kind of a giving club, but organized under nonprofit statute so the gifts are tax-deductible. You could see if a "100" group is active in your area, or you could start your own.
Another idea many people are unaware of is that many US counties, states and even some cities have community charitable organizations called "community foundations". Search your location + "community foundation." These organizations are focused specifically on needs within your area and are really well positioned to understand what's going on and respond in ways that are locally meaningful. They are also accountable locally.
Being your own charity is pretty impractical. There are costs involved, which presumably would draw away from your available funds to give, and you would be required to have a board and required to meet with them annually, and might be required to get an annual audit, depending on your state. It's unwieldily to have your own charity unless you have a lot of time and a pretty significant amount of money to give. Nonprofit FAQ
Finally, you can just give money and let the tax advantage go. You're entitled to give money away without a 501(c)3. And it might not even matter soon, because as I understand the new GOP tax plan, you'd have to itemize at a pretty high level to beat the new standard deduction, which will remove a lot of charitable giving incentive anyway. So depending on your tax bracket, you might not be losing any tax advantage by next year.
posted by Miko at 7:10 AM on December 22, 2017 [13 favorites]
Seconding others in this thread for more feasible alternatives, but if you really plan on going through with this, I strongly recommend contacting a pro bono clearinghouse in your area to be referred to lawyers who've experience assisting nonprofits registering as a 501(3)(c) organization pro bono for professional advice first.
posted by postmortemsalmon at 11:33 AM on December 22, 2017
posted by postmortemsalmon at 11:33 AM on December 22, 2017
In theory, entirely do-able. The tax side makes it a little complicated: if most of the donations come from you, it would be a private foundation, and direct aid to individuals has to meet certain tests from tax law. For example, you'd need to give money pursuant to procedures approved by the IRS. And there's all sorts of traps for the unwary with private foundations.
But, with an attorney or accountant to advise, and if you could get sufficient funding from third parties to be a public charity, I'll go against the tide and say it's totally doable.
That said, someone else mentions using a local charity as a "fiscal sponsor," which wouldn't be a bad idea. You can probably google around for fiscal sponsors in your area. That might be the easiest way to do it.
posted by jpe at 2:38 PM on December 22, 2017 [1 favorite]
But, with an attorney or accountant to advise, and if you could get sufficient funding from third parties to be a public charity, I'll go against the tide and say it's totally doable.
That said, someone else mentions using a local charity as a "fiscal sponsor," which wouldn't be a bad idea. You can probably google around for fiscal sponsors in your area. That might be the easiest way to do it.
posted by jpe at 2:38 PM on December 22, 2017 [1 favorite]
club, but organized under nonprofit statute so the gifts are tax-deductible.
I am part of a group like this, and all of our money has to go to registered charities for it to be deductible. It doesn't get to be deductible just because there are a lot of you doing it together.
posted by the agents of KAOS at 2:55 PM on December 22, 2017
I am part of a group like this, and all of our money has to go to registered charities for it to be deductible. It doesn't get to be deductible just because there are a lot of you doing it together.
posted by the agents of KAOS at 2:55 PM on December 22, 2017
No, it doesn't, but it would if you organized under nonprofit statute (which means becoming a 501(c)3 or a chapter of an existing 501(c)3). Which is not that hard to do. Many 100 groups have done so, though others, like the one you mention, operate purely as a pass-through.
posted by Miko at 5:16 PM on December 22, 2017
posted by Miko at 5:16 PM on December 22, 2017
Ah, I see - I thought you were mentioning that as an alternative to being a 501(c)3.
posted by the agents of KAOS at 6:07 PM on December 23, 2017
posted by the agents of KAOS at 6:07 PM on December 23, 2017
No, I really just meant it as an alternative to the non-local, distant-seeming charitable efforts. At least it is close to direct impact in that you choose the orgs/projects you will support.
posted by Miko at 6:37 PM on December 23, 2017
posted by Miko at 6:37 PM on December 23, 2017
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I’m sure there are some benefits to establishing your own foundation but unless you are giving $100K+ donations I doubt it would be worth it.
posted by fieldtrip at 9:53 PM on December 21, 2017 [14 favorites]