How do you confirm public charity status for potential grantees?
Private foundations are authorized to provide grants to organizations that are officially recognized by the Internal Revenue Service (IRS) as public charities. To ensure transparency and accountability, the IRS maintains an online database, called Pub 78, which allows you to verify whether a potential grantee is registered as a public charity. The Pub 78 database site allows you to search all organizations that are officially authorized to receive tax-deductible charitable contributions. The site offers a user-friendly search tool that enables users to look up organizations based on their names, locations, or employer identification numbers.
As part of responsible due diligence, private foundations can go a step further by accessing the "Automatic Revocation of Exemption List." This list provides information about organizations whose federal tax exemption has been automatically revoked due to their failure to file annual tax returns for three consecutive years. Reviewing this list can help foundations avoid funding entities that have lost their federal tax-exempt status.
It is essential to note that certain groups, such as churches, synagogues, mosques, and other religious organizations, are automatically considered tax-exempt under the First Amendment to the Constitution, which guarantees religious freedom. As a result, these religious groups may not appear in the IRS database of public charities. Similarly, government-related entities, including schools, parks, and municipalities, generally qualify to receive grants, but they are typically not listed in the IRS database.
For private foundations, it is crucial to ensure that the recipient organization is an officially recognized public charity, religious group, or government-related entity. If a grant is given to an organization that does not fall into these categories, it may not count towards satisfying the annual 5% minimum distribution requirement of the foundation's assets. Furthermore, such a situation could expose the foundation to severe penalties from the IRS.
By conducting thorough research and utilizing the resources provided by the IRS, private foundations can confirm that the organizations they wish to support are eligible to receive tax-deductible charitable contributions.
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