Independent foundations are non-governmental, nonprofit organizations with an endowment and program managed by its own trustees or directors. Private foundations are established to maintain or aid social, educational, religious, or other charitable activities serving the common welfare, primarily through the making of grants.
This type of foundations comprise the largest group of foundations in the United States. Their endowment is usually donated by a single source, such as an individual, family, or corporation, which also define the mission and the program of the foundation.
Company-sponsored foundations, also called “corporate foundations”, are private foundations created by business and corporations. They are separate legal entities that maintain close ties with the parent company, and their giving usually reflects company interests. They must follow the laws and regulations governing private foundations, including filing an annual Form 990-PF with the Internal Revenue Service.
Some business and corporations provide support to nonprofit organizations not just through their company-sponsored foundations by through direct-giving corporate programs.
Photo by Artworks, a non-profit, art-based job training program.Operating foundations are private organizations established to operate research, social welfare, or other charitable programs deemed worthwhile by the donor or governing body of the foundation. The central characteristic of this type of foundations is that they are exclusively created to manage a specific program or group or programs, and if they give grants, it is solely within the sphere of their program.
Community foundations are 501(c)(3) organizations that make grants for charitable purposes in a specific community or region. The funds available to a community foundation are usually derived from many donors and held in an endowment that is independently administered; income earned by the endowment is then used to make grants. Although a community foundation may be classified by the IRS as a private foundation, most are classified as public charities and are thus eligible for maximum tax-deductible contributions from the general public.
Grantmakers typically fund nonprofit organizations that qualify for public charity status under section 501(c)(3) of the Internal Revenue Code. These are organizations whose purposes are charitable, educational, environmental, humanitarian, scientific, religious, literary, or cultural.
Public schools, libraries, and other government organizations also qualify as public charities, although they usually do not need to apply for 501(c)(3) status
Occasionally, foundations will make grants to organizations whose tax-exempt status is still pending, but most will ask for proof of nonprofit status before considering an organization’ proposal for funding.
Corporations provide support to nonprofit organizations through direct-giving programs, or through private foundations, or both.
Corporate direct-giving programs are not separately incorporated and do not adhere to private foundation laws or regulations, or file a Form 990-PF. They enable the corporation to deduct up to ten percent of its pre-tax income.
Photo by Artworks, a non-profit, art-based job training program.Company-sponsored foundations are separate legal entities that maintain close ties with the parent company, and their giving usually reflects company interests. They must follow the laws and regulations governing private foundations, including filing an annual Form 990-PF with the Internal Revenue Service.
Typically, corporations give to nonprofit organizations whose programs benefit the communities where their employees live and work. Corporate support can be cash grants or in-kind gifts.
There are several issues that grantmakers look for in a grantee. First and foremost, they will ascertain that the purpose of an organization or project matches the foundation’s purpose or interests. Other issues that may well concern a grantmaker, and which help to establish the grant seeking organization’s credibility, include:
In order to procure and file the appropriate forms required to incorporate as a nonprofit and apply for tax-exempt status, you may want to contact your state’s charity registration office. Be aware that procedures vary from state to state; you may need to consult with an attorney or a technical assistance agency whose staff has experience in this area. Your local bar association may be able to direct you to free or reduced-cost legal services as well.
In the State of Michigan, the contact information for the charity registration office is:
To find the contact information for the appropriate charity registration office for all other States, you can visit the following web site:
To apply for a non-profit status — 501(c)(3) — with the Internal Revenue Service in the following web site you will find all the necessary information:
The success in obtaining a grant or funding for a project is the result of a careful and thorough thinking and planning. This thinking and planning clarifies the nature of the project, its objective and the resources that it may take. How can this be done? Here are some suggestions:
Once you have clarified for yourself the nature, objective and goals of the project, and once you have designed a plan of action that will make the project a reality, you are ready to start looking for potential funders. This may seem a daunting task, but there are many resources available at your local public library and on the Internet that can help to narrow the search to those potential foundations or grantmakers which may be interested in your project. At your local library you can inquire for directories of foundations and other organizations, private and governmental, which regularly provide funding for diverse kinds of projects. For directories of foundations and grant seeking resources on the Internet visit our “Helpful Web Sites” page.
Before a request is made to a foundation for a grant or program-related investment, a brief letter of inquiry is advisable to determine whether the foundation’s present interests and funds permit consideration of the request.
The letter of inquiry should include a brief description of the following elements:
After receiving the inquiry letter, once it is agreed that the request can be considered, the foundation’s staff members may ask the grant seeker to submit a formal proposal. Some foundations or grantmakers have a specific proposal form but most do not. Whether with a specific application form or without it, it is always the responsibility of the grant seeker to put together the proposal. For this, it is important to always follow the exact guidelines specified by the grantmakers.
In general terms, a proposal should include:
Some foundations have grantmaking cycles and deadlines for accepting proposals during their fiscal year. Others do not. These ones accept applications throughout the year and review proposals regularly. It is important, therefore, for the grant seeker to inquire to the specific foundation to which it will apply if there are any deadlines for the submission of a proposal.
After the submission of a proposal, the work of the grant seeker does not end. Usually, foundations and grantmakers take their time to study proposals. During this process, some foundations may ask for additional documentation or a third-party evaluation of the need and environment in which the project is to take place. It is, therefore, important for the grant seeker to be patient and diligent during this time and regularly be in contact with the foundation reviewing the request.
If the proposal results in a grant, it is important to thank the donor through a letter. After this, you will probably be given indications of what you need to do next.
