Our 501(c)(3) organization is formed for “community betterment” purposes. We want to start making Community Grants to "do good" types, be they individuals, the scouts, or the XYZ Senior Center. One candidate is the retired carpenter who builds "public benches" for the town commercial area. He donates his time and skills but would like the material costs to be covered. May we make grants to individuals, or must we make our grants only to other 501(c)(3) charities?
An individual may claim a charitable contribution deduction only for a gift to a 501(c)(3) organization and not directly to a “worthy individual” who has needs of a type that are often covered by charitable organizations. But 501(c)(3) organizations can — and regularly do — make grants and provide services to qualified individuals, to feed the hungry, house the homeless, pay for medical costs, provide scholarships, etc. They fulfill their charitable purposes by helping individuals, often making direct grants to individuals. (One caveat: You can’t make grants to individuals from donor advised funds. (See Ready Reference Page: Congress Passes Charitable Reforms”))
If you do make grants to individuals, you must be sure that they help you fulfill your exempt purpose. You also ought to set up a set of criteria and a process that provides a more objective result and precludes any claims of favoritism for those related to the organization.
Comments
What happens if someone makes a charitable contribution to a charity and
does not know at the time of the contribution what it will be used for.
Later on the charity uses the contribution to make a grant to an individual.
Does the charity then have to inform the donor that their contributions
isn't tax-deductible? --D.L. via email
As long as the donor's gift was not "earmarked" for a specific individual when given, the contribution is still deductible. The donor may be aware that the gift will be used for the benefit of an individual, but so long as the organization, and not the donor, selects the beneficiary, the contribution is good. --Don Kramer
We regularly give to individuals who are fulfilling our mission. One example - we gave $100.00 to a woman artist to buy supplies to paint murals on day care centers in underprivileged neighborhoods. Glad to hear we having been following the law! --V. via email
From this discussion, may I assume that we, as a 501(c)3 religious organization providing religious services and support for the incarcerated and/or recently released, can provide a personal cash donation directly to a jail employee to purchase inmate training materials not covered by the jail's budget? --C. via email
I don't know of any tax reason why you cannot give to the employee for the benefit of the inmates. You should be sure to check with the authorities to be sure it is not against the facility's rules. --Don Kramer
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