United Philanthropy Forum
Section of the Internal Revenue Code that designates an organization as charitable and tax-exempt. Organizations qualifying under this section include religious, educational, charitable, amateur athletic, scientific or literary groups, organizations testing for public safety or organizations involved in prevention of cruelty to children or animals.
Section of the tax code that defines public charities (as opposed to private foundations). A 501(c)(3) organization also must have a 509(a) designation to further define the agency as a public charity. (See Public Support Test)
The federal information tax return form required of all nonprofit organizations with annual gross receipts exceeding $25,000.
The federal information tax return form used for all private foundations filing under tax-exempt status.
The federal tax form that must be filed by any nonprofits (including private foundations) that have gross unrelated trade or business income of $1,000 or more (see Unrelated Business Income Tax below).
Foundations must be accountable to the public because foundation donors and the institutions they create receive important tax benefits and are consequently required to serve valid public purposes as defined by law. Foundations are stewards of public as well as private trusts, and must reflect this stewardship in everything they do.
A group of individuals, who offer advice, inform or notify. An advisory board differs from an elected board in that they do not have any oversight responsibilities.
Affiliate funds operate like freestanding community foundations for smaller communities. By affiliating with a local community foundation, these communities can enjoy the benefits of a community foundation without having to file incorporation papers, apply to the IRS for Section 501(c)(3) status, arrange for annual audits, or raise funding for staff. Affiliates have a local board of directors who raise the initial investment, create awareness about the foundation within their communities, and determine recipients for grants.
See: funder networks
Altruism, like passion, is the key intent that philanthropy expresses; a concern for the welfare of others; selflessness.
A voluntary report published by a foundation or corporation describing its grant activities.
Cash, stocks, bonds, real estate or other holdings of a foundation. Generally, assets are invested and the income is used to make grants. (See Payout Requirement)
An independent examination of the accounting records and other evidence relating to an organization to support the expression of an impartial expert opinion about the reliability of the financial statements.
A bequest can be a legacy; a sum of money committed to an organization and donated upon the donor's death.
Board of Directors:
An organized body of advisors with oversight responsibility.
Rules governing the internal operation of a nonprofit corporation. Bylaws often provide the methods for the selection of directors, the creation of committees, and the conduct of meetings.
Charitable Gift Annuity:
With a charitable gift annuity, the donor contributes cash or marketable securities in exchange for a contractual promise to pay the donor (and/or another annuitant) a guaranteed income for life. The rate of that income is based on the age(s) of the annuitant(s). A charitable gift annuity pays a fixed, guaranteed amount for life to one or two persons. In almost every instance, a portion of the payments will be tax-free, plus the donor receives an income tax deduction for a portion of the value of the assets contributed.
Charitable Gift Fund:
Charitable gift funds are vehicles for giving that are established as charitable affiliates of for-profit financial institutions such as banks and mutual fund companies. These funds are donor-advised funds; therefore, distribution is made to nonprofit organizations at the advice of the donor, with final authority in the board of the charitable affiliate.
A grant that is made on the condition that other funding be secured, either on a matching basis or some other formula, usually within a specified period of time, with the objective of encouraging expanded fundraising from additional sources.
Charitable Giving Plan:
A plan that best reflects one's life experiences, values, goals and passions that structures giving to charitable organizations.
Charitable Lead Trust:
A legal device used to set aside the money or property of one person for the benefit of one or more persons or organizations. Specifically, this type of trust allows for a regular, fixed amount to go to a charity for a specific number of years. At the end of that time, the remainder of the trust passes to one's heirs.
Charitable Remainder Trust:
A legal device used to set aside money or property of one person for the benefit of one or more persons or organizations. Specifically, this type of trust allows one to take a deduction for a gift to the trust in the year in which the trust is formed. One receives income from this type of trust for life and after one's death, the assets pass to the charity you designated.
In its traditional legal meaning, the word "charity" encompasses religion, education, and assistance to the government, promotion of health, relief of poverty or distress and other purposes that benefit the community. Nonprofit organizations that are organized and operated to further one of these purposes generally will be recognized as exempt from federal income tax under Section 501(c)(3) of the Internal Revenue Code and will be eligible to receive tax-deductible charitable gifts.
Often used to describe nongovernmental organizations, sometimes used interchangeably with “nonprofit sector.”
A community foundation is a tax-exempt, nonprofit, autonomous, publicly-supported philanthropic institution composed primarily of permanent funds established by many separate donors. It benefits the long-term diverse, charitable benefit of the residents of a defined geographic area. Typically, a community foundation serves an area no larger than a state. Community foundations provide an array of services to donors who wish to establish endowed and non-endowed funds without incurring the administrative and legal costs of starting independent foundations.
Conflict of Interest:
A situation in which the private interests of someone involved with an organization could cause him or her to make decisions that are not in the best interest of the organization.
A corporate (company-sponsored) foundation is a private foundation that derives its grantmaking funds primarily from the contributions of a profit-making business. The company-sponsored foundation often maintains close ties with the donor company, but it is a separate, legal organization, sometimes with its own endowment. Corporate foundations are subject to the same rules and regulations as other private foundations.
Corporate Giving Program:
A corporate giving program (or direct giving program) is a grantmaking program established and administered within a profit-making company. Gifts or grants go directly to charitable organizations from the corporation. Giving programs do not have a separate endowment; their expense is planned as part of the company's annual budgeting process and usually is funded with pre-tax income.
A type of restricted fund in which the fund beneficiaries are specified by the grantors.
Grant funds distributed at the discretion of one or more trustees that usually do not require prior approval by the full board of directors. The governing board can delegate discretionary authority to staff.
A private foundation's officers, directors, trustees, key employees, substantial contributors, their family members, and certain entities associated with any of these individuals. Federal self-dealing laws prohibit a wide range of transactions between a private foundation and any disqualified persons.
The receiving organization of a donor's resources. (Also know as a grantee.)
A donor is anyone who gives resources - financial, social, intellectual and time - to a nonprofit organization, public charity or fund. A donor is committed to making a difference in society. (Also known as a grantor.)
Donor Advised Fund:
A fund held by a community foundation or other public charity, where the donor (or a committee appointed by the donor), may recommend eligible charitable recipients for grants from the fund. The public charity's governing body must be free to accept or reject the recommendations.
A term sometimes used interchangably with "giving circle." Donor circles, however, often refer to a group of donors giving to a single organization, such as a university.
Donor Designated Fund:
A fund held by a community foundation where the donor has specified that the fund's income or assets be used for the benefit of one or more specific public charities. These funds are sometimes established by a transfer of assets by a public charity to a fund designated for its own benefit, in which case they may be known as grantee endowments. The community foundation's governing body must have the power to redirect resources in the fund if it determines that the donor's restriction is unnecessary, incapable of fulfillment or inconsistent with the charitable needs of the community or area served.
The vision, legacy and intentions of a foundation’s original donor for the foundation’s mission.
A stipulation that the donated assets to a foundation must be maintained permanently, permitting expenditure of only the income or net appreciation of the donated assets. A gift for endowment is a donor restriction.
The process through which a grantmaker researches a nonprofit’s financial and organizational health to guide a grantmaking decision.
A grant is earmarked if the grantee is required to use the grant funds for a specific purpose or recipient, or if the grantor has the right to impose such a requirement.
While there is no legal definition of endowment, most people commonly understood it to be a gift of cash, assets or other property donated to an institution for eternity (in perpetuity). Typically, the gift is converted into cash—if it isn’t cash already—and placed into an endowment fund. In this endowed fund, the amount of the original gift is never touched, but is invested to produce income.
An annual federal tax that private foundations must pay on one or two percent of their investment income. The IRS can also impose penalty excise taxes on private foundations, and in some cases their managers, for violations of certain federal laws.
"Family foundation" is not a legal term, and therefore, it has no precise definition. Yet, approximately two-thirds of the estimated 44,000 private foundations in this country are believed to be family managed. The Council on Foundations defines a family foundation as a foundation whose funds are derived from members of a single family. At least one family member must continue to serve as an officer or board member of the foundation. Most family foundations concentrate their giving locally, in their communities.
A centralized campaign whereby one organization raises money for its member agencies. These annual workplace giving campaigns raise millions of dollars for distribution to local, state, and national nonprofit organizations. The United Way campaign and Community Works are examples.
An individual or entity responsible to manage assets for the benefit of others.
Presentation of financial data including balance sheets, income statements and statements of cash flow, or any supporting statement that is intended to communicate an entity's financial position at a point in time and its results of operations for a period then ended.
Field of Interest Fund:
A fund held by a community foundation that is used for a specific charitable purpose such as education or health research.
An organization or a legal entity managing the funds for a nonprofit organization.
An arrangement where an established nonprofit provides financial support for a project that may be independent or which has yet to obtain its own tax-exempt status.
Term used by the Forum referring to collaborations between a regional association of grantmakers and funder networks with a presence in the area the regional association serves.
Also referred to as “affinity groups,” funder networks are groups of grantmakers that act collectively to support a particular population, region, interest, or other identifying characteristic.
A pooled fund that makes grants and is managed by the funds donors. Giving circles pool time, talent and resources between people who share a common interest in a social cause or issue, and allow for a wide range in charitable styles, philosophies and politics, structure, size, and focus through a very hands-on approach. Occasionally referred to as donor circles. See the Forum's Giving Circle Knowledge Center.
The overall picture of the types of projects and programs that a donor has supported historically. The past record may include areas of interest, geographic locations, dollar amount of funding, or kinds of organizations supported. Grant: An award of funds to an organization or individual to undertake charitable activities.
A legally binding written understanding between a grantmaker and a grantee specifying terms for a grant's expenditure and reporting.
The ongoing assessment of the progress of the activities funded by a donor, with the objective of determining if the terms and conditions of the grant are being met and if the goal of the grant is likely to be achieved.
An individual or organization that receives a grant.
An individual or organization that awards a grant. Grantmaking: The word “grant” refers to the monetary awards made to nonprofits by foundations, corporations, or government agencies. The term “grantmaking” therefore refers to the practice of giving money.
The practice of raising money.
The individual or organization that makes a grant.
Identity funds, or focus funds as they are sometimes called, are grantmaking organizations created by people who are connected not just by location, but by shared experience and culture, such as race, ethnicity, gender, or sexual orientation.
A donation of goods or services rather than cash or appreciated property.
An individual usually establishes these private foundations, often by bequest. They are occasionally termed "nonoperating" because they do not run their own programs. Sometimes individuals or groups of people, such as family members, form a foundation while the donors are still living. Private foundations must make charitable expenditures of approximately five percent of the market value of their assets each year. Although exempt from federal income tax, private foundations must pay a yearly excise tax of one to two percent of their net investment income. The Ford Foundation and the John D. and Catherine T. MacArthur Foundation are two examples of well-known "independent" private foundations.
Process designed to provide reasonable assurance regarding achievement of various management objectives, such as the reliability of financial reports.
IRC Election 501(h):
A section of the Internal Revenue Code that provides specific guidance on how much a public charity can spend on lobbying activities. Any charity that files IRS Form 5768 can choose to be treated under the lobbying expenditure test in Section 501(h), which many organizations find more advantageous than other federal laws on lobbying expenditures. (The 501(h) election does not apply to private foundations.)
An investment that risks a foundation's ability to carry out its exempt purposes. Federal tax law provides that certain risky investments or investment strategies may constitute "jeopardizing investments" that subject a foundation to private foundation excise taxes.
The gift that an individual leaves, both in the details of their will and in the tradition of giving they shared with their descendents. (See bequest)
A method of grantmaking practiced by some foundations and individual donors, leverage occurs when a small amount of money is given with the express purpose of attracting funding from other sources or of providing the organization with the tools it needs to raise other kinds of funds; sometimes known as the "multiplier effect."
Life Insurance Gift:
A gift of life insurance may be made either by designating a charity as a beneficiary of a policy or by arranging for it to become the owner of the policy. The former entails many of the same advantages as a bequest, whereas the latter can result in current income tax savings.
Any attempt to influence public officials in support of, or in opposition to, any legislation that has been introduced, or any draft legislation that may be introduced, in any legislative body.
A person who is compensated for multiple lobbying contacts and whose lobbying activities constitute at least 20 percent of his or her services for an organization during any six-month period.
Matching Gifts Program:
A grant or contributions program that will match employees' or directors' gifts made to qualifying educational, arts and cultural, health or other organizations. Specific guidelines are established by each employer or foundation. (Some foundations also use this program for their trustees.)
A grant or gift made with the specification that the amount donated must be matched on a one-for-one basis or according to some other prescribed formula.
To commemorate; to present a memorial to; to honor the memory of an individual or group by donating resources or establishing a fund that reflects the gifts, values or concerns of the individual or group.
A term describing the Internal Revenue Service's designation of an organization whose income is not used for the benefit or private gain of stockholders, directors, or any other persons with an interest in the company. A nonprofit organization's income must be used solely to support its operations and stated purpose.
Also called private operating foundations, operating foundations are private foundations that use the bulk of their income to provide charitable services or to run charitable programs of their own. They make few, if any, grants to outside organizations. To qualify as an operating foundation, specific rules -- in addition to the applicable rules for private foundations -- must be followed. The Carnegie Endowment for International Peace and the Getty Trust are examples of operating foundations.
A contribution given to cover an organization's day-to-day, ongoing expenses, such as salaries, utilities, or office supplies.
Boundless enthusiasm; deep and positive emotion; fervent expression of hope; belief in the essential connection of individual and community; and love of humanity. Passion, like altruism, is essential to the action of giving and the purpose of philanthropy.
The pass-through foundation is a private grantmaking organization that distributes all of the contributions it receives each year (not just the minimum five percent of assets). The pass-through election may be made or revoked on a year-to-year basis.
The minimum amount that a private foundation is required to expend for charitable purposes (includes grants and necessary and reasonable administrative expenses). In general, a private foundation must annually pay out approximately five percent of the average market value of its assets.
A person who loves humanity, is committed deeply to making society a better place, who believes that each individual, each dollar and each action makes a difference.
Philanthropy is defined in different ways. The origin of the word philanthropy is Greek and means love for mankind. Today, philanthropy includes the concept of voluntary giving by an individual or group to promote the common good. Philanthropy also commonly refers to grants of money given by foundations to nonprofit organizations. Philanthropy addresses the contribution of an individual or group to other organizations that in turn work to improve the quality of life for all citizens or residents. Philanthropic giving supports a variety of activities, including research, health, education, arts and culture, as well as alleviating poverty.
A promise to make future contributions to an organization. For example, some donors make multiyear pledges promising to grant a specific amount of money each year.
Pooled Income Fund:
A pooled income fund is a life-income arrangement wherein the income from the donor's gift is paid to the donor (and/or designated friends and family members) for life at the rate earned by the total pool of gifts. A pooled income fund contribution has some of the same features as a mutual fund investment. Upon the death of the last beneficiary, the remaining funds pass to the charity or charities designated.
A nongovernmental, nonprofit organization with funds (usually from a single source, such as an individual, family or corporation) and program managed by its own trustees or directors, established to maintain or aid social, educational, religious or other charitable activities serving the common welfare, primarily through grantmaking. U.S. private foundations are tax-exempt under Section 501(c)(3) of the Internal Revenue Code and are classified by the IRS as a private foundation as defined in the code.
Individuals who assist in planning and executing charitable giving through providing information on giving options according to one's specific financial situation. Types of professional advisors include: attorney, accountant, estate planner, financial planner, stockbroker, insurance broker, planned giving officer, and philanthropy consultant.
A nonprofit organization that is exempt from federal income tax under Section 501(c)(3) of the Internal Revenue Code and that receives its financial support from a broad segment of the general public. Religious, educational and medical institutions are deemed to be public charities. Other organizations exempt under Section 501(c)(3) must pass a public support test (See Public Support Test, below) to be considered public charities, or must be formed to benefit an organization that is a public charity (see Supporting Organizations). Charitable organizations that are not public charities are private foundations and are subject to more stringent regulatory and reporting requirements (See Private Foundations, above).
Public foundations are nonprofit organizations that receive at least one-third of their income from the general public. Public foundations may make grants or engage in charitable activities. The IRS recognizes public foundations, along with community foundations, as public charities. Religious, educational and medical institutions are deemed to be public charities.
Those organizations in society other than for-profit corporations, or organizations that serve the public good, including government.
Public Support Test:
This test is used to assure a minimum percentage of broad-based public support in an organization's total support pattern. So, the "one-third support test" means qualifying support divided by total support must equal at least one-third. An organization qualifies as publicly supported if it normally receives at least one-third of its total support from government, from contributions by the general public, or from a combination of these. See IRS Publication 557 for full details.
Qualified Terminable Interest Property (QTIP):
A qualified terminable interest property trust will provide the donor's spouse the right to income for life. Upon the spouse's death, the trust property will be passed on to a designated charity or charities. This arrangement is more flexible than the charitable remainder trust. Here, the trustee may be given broader powers including the right to invade trust principal for the support and comfort of the surviving spouse.
Regional Associations of Grantmakers:
A regional association (no abbreviation) is a staffed organization with a defined governance and financial structure that serves grantmakers in a metropolitan area, a single state, or a multi-state region. Its membership includes a variety of grantmaking institutions and programs.
Assets or income that is restricted in its use, in the types of organizations that may receive grants from it, or in the procedures used to make grants from such funds.
A general term describing the process of analyzing risk in all aspects of an organization’s management and operations and developing strategies to reduce the exposure to such risks.
A grant or contribution used to start a new project or organization.
A fact-finding visit that a foundation’s staff and/or board members make to a grant applicant’s or grantee’s office location or area of operation. This may involve meeting with the nonprofit’s staff, directors, and/or recipients of its services. Site visits are normally conducted before a grant is approved, during project implementation and/or during project evaluation.
Also referred to as ethical investing and socially responsible investing, this is the practice of aligning a foundation's investment policies with its mission. This may include making program-related investments and refraining from investing in corporations with products or policies inconsistent with the foundation's values.
Engaging in philanthropy in a strategic manner to make a major philanthropic impact through making better choices surrounding how much one spends, invests and gives back to society.
A supporting organization is a charity not required to meet the public support test because it supports a public charity. To be a supporting organization, a charity must meet one of three complex legal tests that assure, at a minimum, that the organization being supported has some influence over the actions of the supporting organization. Although a supporting organization may be formed to benefit any type of public charity, the use of this form is particularly common in connection with community foundations. Supporting organizations are distinguishable from donor-advised funds because they are distinct legal entities.
Organizations that do not have to pay state and/or federal income taxes. Organizations other than churches seeking recognition of their status as exempt under Section 501(c)(3) of the Internal Revenue Code must apply to the Internal Revenue Service. Charities may also be exempt from state income, sales and local property tax.
Operational or management assistance given to a nonprofit organization. It can include fundraising assistance, budgeting and financial planning, program planning, legal advice, marketing and other aid to management. Assistance may be offered directly by a foundation or corporate staff member or in the form of a grant to pay for the services of an outside consultant.
A belief, found in many faiths, of giving 10 percent - the first and best part - back to a place of worship.
Transparency is the opposite of privacy; an activity or organization is transparent if all information about it is open and freely available. Being transparent helps a private foundation fulfill its obligation to be accountable to the public, and can also help improve its effectiveness. When foundations make their information open and freely available, doing so can help them do their jobs better by clarifying the objectives they are seeking, informing potential grantees of priority interests, and making the general public aware of their accomplishments.
A legal device used to set aside money or property of one person for the benefit of one or more persons or organizations.
The person(s) or institutions responsible for the administration of a trust.
United Philanthropy Forum:
The United Philanthropy Forum (the Forum) is a national philanthropic leader and a network of 32 regional associations of grantmakers. It supports philanthropy by strengthening the ability of all regional associations to fulfill their missions; these associations promote the growth and effectiveness of philanthropy in order to improve life in their communities.
Unrelated Business Income Tax (UBIT):
Federal tax on income that is the result of any legal trade or business conducted by a nonprofit organization to make money in a way not directly related to its tax-exempt mission.
Normally found at community foundations, an unrestricted fund is one that is not specifically designated to particular uses by the donor, or for which restrictions have expired or been removed.
Unsolicited Grant Proposal:
A proposal sent to a foundation without invitation or prior knowledge on the part of the foundation, usually in response to a foundation’s application guidelines. Some foundations will not accept unsolicited proposals or applications.
A philanthropy that borrows some of the best practices of the venture capital world to invest deeply in nonprofits to build their capacity effectively. Venture philanthropists value their donor dollars in terms of the social return of investment.
Performing an act of kindness, freely giving of your talent, time, and effort for the simple fulfillment of community expectations. Voluntarism often refers to the field or study of volunteering; volunteerism often refers to concerns of the specific management or actions of volunteers.
Considered by some to be the next frontier of the women's movement, women's giving builds on the tradition of volunteerism and is empowered with women's financial resources.