Below are some frequently asked questions and responses specific to donor-advised funds. If you have a question that you’d like to see discussed on this page, please contact us.
Who can make grant recommendations from my fund?
Only fund advisors listed on the original Fund Agreement are permitted to make grant recommendations from a fund. If you would like to add additional fund advisors, such as children or grandchildren, please let us know in writing.
What exactly is 501(c)(3) status?
According to the IRS, an organization described as 501(c)(3) is tax-exempt and eligible to receive tax-deductible contributions. It must be organized and operated exclusively for one or more charitable purposes including: relief of the poor, the distressed, or the underprivileged; advancement of religion; advancement of education or science; erection or maintenance of public buildings, monuments, or works; lessening the burdens of government; lessening of neighborhood tensions; elimination of prejudice and discrimination; defense of human and civil rights secured by law; and combating community deterioration and juvenile delinquency. It may not engage in lobbying or other attempts to influence legislation as a substantial part of its activities and it may not be operated to benefit private interests.
Churches, schools, hospitals, and governmental units with 509(a)(1) status and public safety groups with 509(a)(4) status are also eligible for grants from donor-advised funds since both of these designations are sub-categories of 501(c)(3) status.
Can a grant be made to an organization without 501(c)(3) status?
This is not encouraged, but it is possible if the project that you wish to donate to has a fiscal sponsor who is classified as a nonprofit 501(c)(3) organization. A grant can be issued to the fiscal sponsor if the fiscal sponsor understands that they, legally, have financial responsibility for the use of the funds.
May I recommend a grant to an individual?
No. As a community foundation, the Princeton Area Community Foundation may make distributions only to qualifying nonprofit organizations. Scholarships and grants made as part of achievement award programs are sometimes exceptions. Grants of this sort require a formal application and selection process. For information about scholarship or achievement award grants, please contact us at 609-219-1800.
What are some common types of grants?
Here is a list of the most common types of grants made to nonprofit organizations:
- General Operating Support – provides for the day-to-day costs of running the nonprofit organization.
- Project or Program – supports a specific activity or program.
- Endowment – increases the organization’s restricted long-term funds.
- Capital – provides support for the purchase of property, the construction of a facility, the remodeling/expansion of a facility, or the purchase of equipment.
- Unrestricted – allows the nonprofit to support the organization where most needed.
- Seed – helps to jump start a new organization, a new project, or launch a capital campaign.
- Challenge or Matching – helps a nonprofit leverage additional dollars through a fundraising campaign.
Can I make a grant to a particular group anonymously?
You always have a choice about whether or not you would like to be identified as the donor of a particular grant. To give anonymously, let us know and we will remove all references to your fund in the information that the grantee receives.
Will I receive a report from each organization as to how my grant was used?
Normally, the Princeton Area Community Foundation does not require organizations to submit a final report unless they received a grant of $25,000 or more. If you would like to receive a report for a particular grant, please let us know and we will include this as a requirement of the grant in the letter that is sent to the grantee.
Why can’t I make a pledge payment with a grant from my fund?
The word pledge implies a legal obligation. If you were to pay that pledge from your donor-advised fund, the IRS would see it as discharging a personal debt that you have and you would owe taxes on the value you received.
You can make a multi-year grant recommendation from your donor-advised fund as long as there are sufficient funds available to cover the full amount of the grant at the time of submitting the grant to the Princeton Area Community Foundation for approval. This scenario is different from a pledge because the Community Foundation will be approving the grant. Once approved, this grant will be considered a commitment to the nonprofit organization. When you recommend the grant, please indicate both the amount and schedule of distribution. The scheduled distributions will be sent out automatically on the dates that you have determined.
May I pay for tickets to a benefit dinner from my donor-advised fund?
No. No portion of event expenses can be paid through your donor-advised fund. In 2006, the IRS ruled that the costs associated with fundraising events cannot be separated, and therefore, you must personally cover all of these costs (not just the “non-deductible” amount, as was allowed in the past). Please note that this process, known as bifurcation, is not permitted for attending events or for purchasing items at silent or live auctions or raffles. Thus, you will now need to cover all event-related support of charities personally and not through your donor-advised fund.