Fort Monroe

1. Fort Monroe Considerations regarding a Charitable Foundation

2. Why use a foundation? • Contributions to the FMFADA are, in fact, deductible under 26 USC 170(a)(1) because the FMFADA is a qualifying organization under 26 USC 170(c)(1). • Many organizations that might be interested in contributing to the mission of the FMFADA, however, are limited to contributing to traditional “501(c)(3)” organizations.

3. Why use a foundation? • Contributions to foundations are deductible under 26 USC 170(c)(2) if: • The foundation is created in the US or any State • Is organized and operated exclusively for religious, charitable, scientific, literary, or educational purposes, to foster national or international amateur sports competition, or for the prevention of cruelty to children or animals

4. Why use a foundation? • Contributions to foundations are deductible under 26 USC 170(c)(2) if (cont.): • No part of the net earnings inure to the benefit of any private shareholder or individual; and • Is not disqualified for tax exemption under section 501(c)(3) by reason of • attempting to influence legislation • does not participate in, or intervene in any political campaign on behalf of (or in opposition to) any candidate for public office.

5. 501(c)(3) Organizations • Section 501(c)(3) is a tax law provision granting exemption from the federal income tax to non-profit organizations. • 501(c)(3) exemptions apply to corporations, and any community chest, fund, or foundation, organized and operated exclusively for religious, charitable, scientific, testing for public safety, literary, or educational purposes, or to foster national or international amateur sports competition, or for the prevention of cruelty to children or animals.

6. 501(c)(3) Organizations • The three principal classifications of 501(c)(3) organizations are as follows: • A public charity, identified by the Internal Revenue Service (IRS) as "not a private foundation," normally receives a substantial part of its income, directly or indirectly, from the general public or from the government. The public support must be fairly broad, not limited to a few individuals or families. Public charities are defined in the Internal Revenue Code under sections 509(a)(1) through 509(a)(4).

7. 501(c)(3) Organizations • A private foundation, sometimes called a non-operating foundation, receives most of its income from investments and endowments. This income is used to make grants to other organizations, rather than being disbursed directly for charitable activities. Private foundations are defined in the Internal Revenue Code under section 509(a) as 501(c)(3) organizations which do not qualify as public charities. • A private operating foundation is a private foundation that devotes most of its earnings and assets directly to the conduct of its tax exempt purposes, rather than to making grants to other organizations for these purposes. Private operating foundations are defined in the Internal Revenue Code under section 4942(j)(3).

8. Obtaining 501(c)(3) status • Some organizations automatically acquire 501(c)(3) status upon filing of proper organizational documents (e.g., articles of incorporation as a church). • Others will not receive 501(c)(3) status until they file an application and supporting documentation to the IRS and have a certification letter issued. • To cover donations made before the letter is issued, the regulations require prompt filing of the application after organization, or after an existing organization satisfies the criteria for 501(c)(3), or after exceeding the income threshold.

9. Relations to other nonprofit organizations • Many 501(c)(3) organizations are part of nonprofit "conglomerates,“ having organizational control relationships with other nonprofit organizations. • The board of a 501(c)(4) advocacy organization may create a 501(c)(3) that operates solely for "educational" purposes. • The League of Women Voters advocates positions on issues and evaluates candidates as a 501(c)(4) and there is a similarly named 501(c)(3) organization, League of Women Voters Education Fund, which provides nonpartisan voter information. • The board of a 501(c)(6) business league may create a 501(c)(3) organization with the purpose of conducting research related to the business focus.

10. Relations to other nonprofit organizations • While 501(c)(3) organizations may be similarly named to other organizations, they cannot be owned by other organzations, and cannot also have private owners. • 501(c)(3) organizations should usually be chartered as independent organizations.

11. Why Use a 501(c)(3)? • Many charitable foundations, which could be the source of significant funding opportunities, are limited to making contributions to 501(c)(3) organizations in order to protect their own status. • Most people understand what a 501(c)(3) is. They don’t really understand the nuances of how Sections 170 and 501 work together.

12. How do we get there? • Direct the staff to study national models, to include: • Jamestown-Yorktown Foundation • Non profits affiliated with state museums • Jekyll  Island State Park Authority and its Foundation • Others suggested by the Historic Preservation advisors and the stakeholders • Colonial Williamsburg, which has a for profit arm

13. How do we get there? • Carefully define the duties of the charitable and educational foundation to support the goals, mission and objectives of the FMFADA. • FMFADA would normally be oriented toward policy, management, redevelopment/reuse consistent with plan • Foundation would normally raise funds and identify sources of funding for activities of the FMFADA and for educational and charitable activities either conducted by the FMFADA or on its own behalf

14. How do we get there? • Establish the level of control and overlap between the Foundation Board and the FMFADA Board, as well as make up and size of the Foundation Board. • Hire experienced counsel to help create the Foundation and obtain 501(c)(3) certification.