I am a board member of a small family foundation based in
Massachusetts and I am also a family member. The board of trustees
consists of my two parents and my other three siblings. I am
interested in starting a non-profit similar to the following:
www.tompaine.com
www.csmonitor.com
http://www.commondreams.org/
http://www.worldpress.org/
All of the above are non-profit web sites which focus on news, current
events and issues. monitor and worldpress also have print versions
which are also non-profit.
The web site I’m thinking of doing would be more mainstream than
tompaine.com and commondreams, and would focus on current events from
an overall center-left perspective. The orientation of the non-profit
I would create to run it would be educational providing information on
current events, the world, government, science, technology, the
environment and similar areas.
A family member or two might be interested in supporting the start-up
and each of us on the board- including myself - has a small
discretionary fund we can make grants out of, and I’m hoping we can
make grants towards this non-profit. The foundation administrator is
somewhat conservative and doesn’t like to research the things I
outline below so I want to go to one or two of my siblings (and later
to him) with this information already clarified to make the process
smooth. Also, while my siblings and one parent are likely to be very
much behind such a site, the other parent may have reservations.
Generally speaking, everyone leaves each other’s discretionary choices
alone (the bulk of the money is given in common anyway) and approval
for them is not needed as long as such grants are charitable in
nature.
Still, since there is a chance of opposition and I have already spent
six weeks planning and researching the site, I want to become more
clear on a large number of the following and have information at hand
which supports what I’m aiming for. Background information, similar
cases, and sites which address this will all be helpful. If there are
gray areas, I can clarify those with a lawyer as needed though I
prefer to do much of the work myself since I have very little money
for this unless and until a grant occurs, and even then it will be
somewhat limited until the site is up and going and other people
support it.
Here’s some detail on the types of information I’m seeking:
a) Under what circumstances can a family foundation donate to a
non-profit being started by a family member/trustee? Are there any
conflict of interest rulings or statutes which place certain
limitations on this or prohibit it altogether? I’m pretty sure it’s
allowed in some way, shape or form and want to find info confirming
this and describing any restrictions related to it.
b) Can such a grant be used for the start-up costs of the non-profit,
including incorporating (which happens on the state level), applying
for 501 (c) (3) status (you have to apply to the IRS for this with
10-15 pages of paperwork and it normally takes them about a half year
to respond), part-time staffing (including myself), a web designer and
other related costs? Since the chances are significant that the
non-profit would receive 501 (c) (3) tax-deductible status (though
there is a chance the IRS can deny it) yet it takes all told at least
7 months to achieve such status, can a foundation provide a grant for
those first months since it believes the non-profit’s purposes are
educational and charitable in nature and because it expects in good
faith the new non-profit will receive tax-exempt 501 (c) (3) status?
We are not talking sizeable allocations and the total grant would
amount to only a half percent of the foundation’s annual giving.
In case it is helpful (and the Google instructions say to include all
I already know), I have what is known as the Declaration of Trust for
the charitable trust which runs our foundation with articles outlining
the broad aspects of how the trust will run. It states that:
~ Distributions (grants) may be made “to or for the use of such
charitable organizations, within the meaning of that term as defined
in paragraph C.... or directly for such charitable purposes, within
the meaning of that term as defined in paragraph D... without making
use of any other charitable organization.” This basically means that
grants can be made either to charitable organizations or directly to
everyday individuals or projects with charitable purposes.
Paragraph C states: “It is intended that the organizations described
in this paragraph C shall be entitled to exemption from federal income
tax under section 501 (c) (3) of the Code.” Paragraph D states that
charitable purposes shall be limited to only religious, charitable,
scientific, literary, or educational purposes within the meaning of
those terms as used in section 501(c)(3) of the Code.” That said, I
recall making a grant via the foundation a few years back to an
organization in a similar situation - it was not a non-profit and was
thinking about becoming one. The foundation administrator said he
thought it was okay for them to use the grant to start it up - hire a
lawyer and other steps, and if they during the process chose to not
become a non-profit - the money could be put toward something
charitable in nature or returned to the foundation. Nevertheless, he
may have already forgotten this and he also works for the parent who
may have reservations, so I’d like to be prepared with good
information - IRS statements on the subject, articles or summaries
from legal sites or journals, or cases which are very close to this -
things that I can point to.
c) Would my non-profit need a “fiscal sponsor” to receive the
donation on its behalf during this early time period? A fiscal
sponsor is typically an existing 501-c-3 non-profit which receives the
donation (from a foundation or individual donor) and passes it along
to the non-profit which lacks the 501-c-3 status - acting as its
“fiscal agent.” I’m guessing this is not required since the
foundation itself has 501-c-3 status it could in a sense be a fiscal
agent for the start-up. Yet, due to the fact I’m a trustee, or
perhaps for some reason foundations are restricted from being fiscal
agents, maybe a fiscal agent will be needed. Any info you locate
which clarifies any of these particulars would be helpful.
For an example of a news site which receives tax-deductible donations
through a fiscal agent, see
http://docs.indymedia.org/view/Global/FrequentlyAskedQuestionEn#donate.
The challenge with fiscal agents is that they often charge 5% of the
total grant for their services and you often have to have a
relationship with them, since they are taking a risk in sponsoring you
(basically vouching for your charitable nature and activities at risk
of losing their own 501-3-c.
d) Any information on highly similar educational non-profit sites and
what language they used with the IRS to obtain 501-c-3 status.
The closest one I’ve found might be mediachannel.org - see items 1, 8
and 9 of http://www.mediachannel.org/about/FAQ.shtml - b/c they
receive grants from numerous foundations and can receive
tax-deductible donations from the public written to mediachannel (i.e.
no fiscal agent), which most likely means they have 501-3-c status.
Here is a link to the press release of its launch three years ago.
They appear to be almost entirely web-oriented and are a separate
non-profit, unlike some below. It does, however, appear to share the
same address (575 8th Avenue, New York NY 10018) as one of the two
main foundations which launched it - the Global Center, so it may be
that someone on the board of the Global Center at the time, or closely
affiliated with it, was involved in founding mediachannel, which would
make it even more similar to my situation.
The Christian Science Monitor may relate though the fact they are a
large organization with probably multiple arms and more than one
non-profit entity may cloud the similarity. Tompaine.com is a project
of the Florence Fund (see - http://www.tompaine.com/about.cfm) which
is a 501-c-3, which gets a lot of its funding from one foundation, the
Florence and John Schumann Foundation, and from what I can tell, there
are interconnections - quite likely family ones based on the
similarity in names of the two entities, so this might be a relevant
one to research.
World Press is run directly by the Stanley Foundation - see
http://www.stanleyfoundation.org/about/index.html, which I believe
would make them an operating foundation - a legal term for a found.
that directly operates its own charitable activities and projects with
its money under the same legal umbrella, as opposed to making grants
to other organizations or individuals. The non-profit I create to
publish the web site would be run separately from the foundation, so
the similarity may be lacking in this case. Commondreams.org comes
somewhat close, yet it appears they are still applying for 501-c-3
status (http://www.commondreams.org/econtributor2.htm), so the info
may not be public and we won’t even know if their appl. was
successful. I guess the two closest in similarity are mediachannel
and tompaine.com.
By similar “sites” I’m looking for sites which have a focus on current
events, with links to articles from other sites etc. I’m not looking
for educational non-profit sites dedicated to physics,or
mountain-climbing etc. It’s important that it be current events or
news or issues to show that such sites are not always for-profit
commercial sites (as some may assume).
e) The “Declaration of Trust” also states: “No part of the net
earnings of this trust shall inure or be payable to or for the benefit
of any private shareholder or individual,....” and later uses the
exact same statement with regards to monies donated to any charitable
organization. I’m not sure what is meant by “the benefit of” - whether
that means “the non-charitable benefit” or means “any benefit at all”.
I’m guessing it means a charity can receive the money and pay its
employees for work done, yet the employees can’t benefit by getting
extra cash. I also know for certain that we are able to make grants
to individuals, for example, to take a course at a university. We
give them the money based on an understanding they will be using it
for an educational, charitable purpose - which in a sense is a
benefit, yet different from the “benefit,” for example, of buying a
TV. This item is perhaps lowest priority of these 5 items.
If you happen to come across the names of any lawyers who are already
heavily versed in the above areas, particularly in the state of
Massachusetts, please include, though this is also of lower priority
since I have a few leads.
Since there are five areas above, I am not expecting significant
information on all of them. I would be satisfied to receive a bunch
of information on three of the first four - like I said the fifth one
is pretty low priority - threw it in in case it’s an easy find or you
come across it. My guess is that once I’m reading the info you
provide in three areas I’ll locate a link(s) which takes me to the
fourth area.
I also thought it best to include these in one listing since it’s very
likely some of the areas will overlap and once you’re in all the
non-profit web sites you’ll be closer to the various info. I also
included lots of detail above per the Google tips so you’re aware of
what I know and am looking for and hopefully some of the specifics I
gave will increase the speed plus specificity of searches. Feel free
to let me know if otherwise. |
