While vetting a charity can be challenging in any environment, vetting a charity without interacting in person can be especially challenging. In this three-part blog series, I hope to share a few tips to help you pick and support amazing charities from the comfort of your home.
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Contributed by: Jaclyn Jackson, CAP®
Answering the Call
According to a study done by the Urban Institute, nonprofits need our support more than ever. The study revealed 4 in 10 small charities experienced a dip in donations amid pandemic and economic concerns. Likewise, 29% of large nonprofits faced the same fate. The timing couldn't be worse as the demand for services provided by nonprofits has increased.
Luckily for nonprofits, the gifting season is here, and people across the nation open their hearts and pockets to wonderful nonprofits. Chances are, if you're reading this blog series, you're probably one of those soft-hearted individuals.
Let the Vetting Process Begin: Important Documents
You want to give wisely, and I want to support your efforts. Let's get started! In part one of this series, I'll outline the documents you'll need to assess a nonprofit. These documents are usually available on a nonprofit's website. However, you may have to do a little digging. Utilize navigation menus commonly found at the bottom of website homepages; go to the "about" page to find leads; use site search fields to search for reports by name.
Form 1023 - Application for Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code: This tells you the organization is, in fact, a 501(c)(3) nonprofit. Aside from religious institutions (which have a different tax identification code), individuals most commonly support 501 (c)(3)s charities. Sometimes, nonprofits will provide their Employer Identification Number (EIN) instead of this form. You can use the number to confirm 501(c)(3) status on the IRS website.
Annual Report: Use this holy grail document to gain a comprehensive view of the nonprofit you're considering. Annual reports generally contain a charity's mission statement and focus, projects initiated (fundraising events, volunteer efforts, community programs), financial information, potential donors, and an account of significant contributions.
Form 990 - Return of Organization Exempt From Income Tax Form: Similar to how individuals tell the IRS about their financial activity, Form 990 provides the government and the public with a snapshot of the charity's activities for that year.
Bonus Documents
If you're thinking about giving a larger-than-normal contribution or becoming a long-term donor, inquire about the following policy documents. These items are not always on websites, so you may need to make an email request or call the nonprofit.
Code of Ethics or a Statement of Values: Company guidelines to help employees, volunteers, and board members make ethical choices and create accountability for those choices.
Whistleblower Protection Policies: This shows a charity is open to hearing concerns or complaints about its practices by demonstrating that it values transparency and accountability practices.
Governance Policies for nonprofit boards, internal controls, and conflict of interest policies help to ensure ethical leadership practices.
We've covered key documents to help you pick a great nonprofit. In part two of our series, I'll show you how to determine whether money donated to nonprofits actually goes towards programs & initiatives.
Reminder: If you plan on donating this year, don't forget tax-advantaged opportunities extended to donors through the CARES Act:
In addition to the standard deduction, non-itemizers can take an above-the-line deduction for $300 of charitable contributions per person. Joint filers can deduct up to $600. Additionally, itemizers can now deduct donations up to 100% of their AGI.
Are you working on your year-end tax planning? Check this out! Have questions? Don't hesitate to reach out: contact@centerfinplan.com.
Jaclyn Jackson, CAP® is a Portfolio Manager at Center for Financial Planning, Inc.® She manages client portfolios and performs investment research.
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