As a current or former NFL player, you are uniquely positioned to give back. What do you see when you imagine your legacy? What change do you hope to make in society?
Whether your goal is to become a seasoned philanthropist, to create a nonprofit organization to build upon your legacy, or to help your favorite charity grow its mission working as a volunteer ambassador, a solid plan and strategy is critical to your success.
Foundation Fundamentals is your no-cost philanthropy coach, providing you with the playbook needed to maximize community impact. Learn about the many different ways to give, Philanthropy 101 strategies and best practices, and questions to ask yourself to see whether you’re ready to start a foundation or various ways to support charitable causes.
There are many ways to give back.
Discover the four most common types of charities below.Click below
To be tax-exempt under section 501(c)(3) of the Internal Revenue Code, an organization must be organized and operated exclusively for exempt purposes set forth in section 501(c)(3), and none of its earnings may inure to any private shareholder or individual. In addition, it may not be an action organization, i.e., it may not attempt to influence legislation as a substantial part of its activities and it may not participate in any campaign activity for or against political candidates.
Organizations described in section 501(c)(3) are commonly referred to as charitable organizations. Organizations described in section 501(c)(3), other than testing for public safety organizations, are eligible to receive tax-deductible contributions in accordance with Code section 170.
The organization must not be organized or operated for the benefit of private interests, and no part of a section 501(c)(3) organization’s net earnings may inure to the benefit of any private shareholder or individual. If the organization engages in an excess benefit transaction with a person having substantial influence over the organization, an excise tax may be imposed on the person and any organization managers agreeing to the transaction.
Section 501(c)(3) organizations are restricted in how much political and legislative (lobbying) activities they may conduct. For a detailed discussion, see Political and Lobbying Activities. For more information about lobbying activities by charities, see the article Lobbying Issues; for more information about political activities of charities, see the FY-2002 CPE topic Election Year Issues.
Every organization that qualifies for tax exemption as an organization described in section 501(c)(3) is a private foundation unless it falls into one of the categories specifically excluded from the definition of that term (referred to in section 509(a)). In addition, certain nonexempt charitable trusts are also treated as private foundations. Organizations that fall into the excluded categories are institutions such as hospitals or universities and those that generally have broad public support or actively function in a supporting relationship to such organizations.
Even if an organization falls within one of the categories excluded from the definition of private foundation, it will be presumed to be a private foundation, with some exceptions, unless it gives timely notice to the IRS that it is not a private foundation. If an organization is required to file the notice, it generally must do so within 27 months from the end of the month in which it was organized. Generally, organizations use Form 1023, Application for Recognition of Exemption, for this purpose.
A private foundation cannot be tax exempt nor will contributions to it be deductible as charitable contributions unless its governing instrument contains special provisions in addition to those that apply to all organizations described in 501(c)(3).
Donor Advised Fund
Generally, a donor advised fund is a separately identified fund or account that is maintained and operated by a section 501(c)(3) organization, which is called a sponsoring organization. Each account is composed of contributions made by individual donors. Once the donor makes the contribution, the organization has legal control over it. However, the donor, or the donor’s representative, retains advisory privileges with respect to the distribution of funds and the investment of assets in the account.
An easy way to think about a donor-advised fund is like a charitable savings account: a donor contributes to the fund as frequently as they like and then recommends grants to their favorite charity when they are ready. DAF’s are relatively straight-forward models:
1. You make an irrevocable contribution of personal assets.
2. You immediately receive the maximum tax deduction that the IRS allows.
3. You name your donor-advised fund account, advisors, and any successors or charitable beneficiaries.
4. Your contribution is placed into a donor-advised fund account where it can be invested and grow tax-free.
5. At any time afterward, you can recommend grants from your account to qualified charities.
The role of the fiscal sponsor can include performing many different administrative functions on behalf of the sponsored organization or program, including taking on the responsibility of receiving and administering charitable contributions on behalf of the sponsored organization. Some fiscal sponsors do a lot more, such as performing back-office functions.
It is quite common and perfectly acceptable for the fiscal sponsor to charge an administrative fee for its services, which is usually a percentage of the budget of the sponsored organization or program. Using a fiscal sponsor satisfies IRS requirements as long as the fiscal sponsor maintains the right to decide, at its own discretion, how it will use contributions. Maintaining control over the donated funds is a requirement of a legitimate fiscal sponsor arrangement.
Fiscal sponsorship is often used by newly formed nonprofits that need to raise money during the start-up phase, before they are recognized as tax-exempt by the IRS. Using a fiscal sponsor enables a program or organization that does not itself qualify as tax-exempt to attract funding for its operations that will — through the fiscal sponsor – be tax-deductible to donors. Therefore fiscal sponsor arrangements benefit organizations or programs that are not tax-exempt by providing a flow-through pathway for revenue that the organization may not otherwise be in a position to receive.
Donors are not able to claim a tax deduction unless they itemize deductions and donate to an organization that is recognized by the IRS as tax-exempt pursuant to IRS Code Section 501(c)(3). See IRS Publication 557.
Additionally, the guidelines of most private foundations explicitly require grantees to be recognized as tax-exempt by the IRS. Consequently, groups that are not formally recognized by the IRS as tax-exempt are generally not eligible for grants from private foundations.
Fiscal sponsorship might be chosen by a newly formed nonprofit that seeks to test-drive its ideas to determine whether there is a market or a desire among the public to fund the end product.
Some organizations/programs remain in a fiscal sponsorship relationship for a long time, deciding that their mission can be achieved in that structure without creating a new entity.
Some organizations – including those that are tax-exempt – find that utilizing a fiscal sponsor to outsource administrative responsibilities, whether back-office tasks, or those relating to fundraising and disbursement of funds, is the right business model for them. This structure might be particularly well-suited for all-volunteer organizations.
The IRS defines more than 30 types of tax-exempt nonprofit organizations. Categorized as 501(c)(3) by the IRS Revenue Tax Code, public charities are the largest category of nonprofit organizations. Within these organizations are various models that are established, each carrying different rules and IRS requirements and compliances.
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Starting a nonprofit is much like starting a for-profit business. The difference is you’ll have to find donors, maybe even investors, who are passionate about your cause and want to help make a difference rather than a profit.
Do your research and locate other nonprofits that have a similar mission to what you’d like to accomplish. If there are organizations you’ve researched that have the same mission and they do a good job, it is going to be challenging to attract donors, foundation grants, or any other support if you do not have the right team to help support your efforts. Likewise, one of the top reasons why charities fail is because they do not have a vision and value proposition that “sells.”
How do you go about figuring out if you have a winner? Conduct a survey or other research before you launch a new foundation. This is called a “needs assessment” to determine if there is a need in your community for the services you propose to offer.
To learn more about foundation basics or get assistance with starting your nonprofit, explore more options below.
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- Consult with your financial planner and/or tax attorney to properly advise you step-by-step.
- Contact your local community foundation for a consultation regarding your philanthropic goals.
- Determine if a Donor Advised Fund, Foundation or Fiscally Sponsored Project is the best option for you.
- Research the expertise, experience, client list and references of your prospective philanthropy partner.
- Schedule an in-person visit or set-up a conference call with your philanthropy partner to help field questions and get the right answers.
Fact: There are more than 2.4 million tax exempt nonprofit organizations with combined assets over $6 trillion dollars and income of more than $4 trillion.
There are many companies to help with your philanthropic needs. Before you create a foundation, contact Foundation Fundamentals for a no-cost consultation to ensure you are on the right path to success with the right partner. We can help you:
Crowdfunding and giving circles.
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Crowdfunding is a term that refers to any effort to raise money with donations from a large number of people.
The success of crowdfunded projects is typically realized through the donor’s ability to easily share their fundraising effort via Facebook, Twitter, or any other social media platforms with an “ask” that motivates their network to donate. Because of the large reach that many players have on social media to friends, family, fans, coaches, and fellow players, this method of fundraising can be particularly effective when raising funds for charity.
Giving Circles are a form of participatory philanthropy where groups of individuals donate their own money or time to a pooled fund, deciding where to donate those funds to as a group decision by vote.
Beyond donating money, giving circle members may contribute their time and skills to support local causes, too. Those involved in a giving circle also often seek to increase their own awareness of and engagement in the issues covered by the charity or community project that their circle has chosen. The benefits of participating in a giving circle are many; however, the most obvious benefits surrounding giving circles are that they increase the level of funding available to charitable efforts while allowing individual donors to have more active involvement when giving.
There are many ways to support the community through the different types of nonprofit models. Recent trends in giving also includes models like crowdfunding and giving circles that provide alternate ways to make an impact.
The NFLPA has partnered with the Giving Back Fund to help player members establish crowdfunding or giving circle opportunities for greater collective giving and impact. Read below to learn more about this growing trend in giving and how each provides greater giving outcomes and opportunities.
Want to learn more? Are you interested in creating or joining a crowdfunding or giving circle opportunity? Get in touch with Foundation Fundamentals below.
Fast Facts About Nonprofits
- Creating a charity requires upfront filing and legal fees.
- A successful nonprofit organization requires a great deal of on-going maintenance with annual fees such as directors and officers liability insurance, general liability coverage, annual audit fees, tax preparation fees, registering nationally to fundraise, and much more.
- Funds given to a public charity are subject to tremendous scrutiny – from the public.
- Assets are controlled by the nonprofit’s board of directors. Even if the Foundation dons your name, you no longer have control of funds after they’ve been donated.
- Charity funds must be spent in the specific manner for which they were raised.
- If online fundraising is part of your strategy (e.g., auctioning signed memorabilia online), you must be registered in all 40 states to solicit the public in these states.
Although there is a lot to learn before starting a foundation as well as legal considerations, don’t let the learning curve deter you. The Foundation Fundamentals advisors are here to help. To get advisory assistance with starting a nonprofit or have questions about your philanthropy needs, contact Foundation Fundamentals at 1-855-GIVE-123 or send us a message here.