[Foundation-l] Optional advertisement on wikipedia

Mon Apr 24 00:06:13 UTC 2006

On 4/23/06, Delirium <delirium at hackish.org> wrote:
> Michael R. Irwin wrote:
> > Delirium wrote:
> >
> >> The general rule is that a non-profit organization should have at least
> >> one-third of its annual income come from a combination of: governmental
> >> donations, donations from other public charities, and small (less than
> >> 2% of total income each) donations from the general public and private
> >> charities (large donations can still have the first 2% counted).  If
> >> that all adds up to less than 1/3, things get considerably more complicated.
> >>
> >> Whether advertising income would cause a problem depends on how much we
> >> expect to get, and how much in large donations from private individuals
> >> and charities we typically get.
> >>
> > Interesting information.   Do you have any further detail.   Is the
> > above a good general guideline because it is mandated by law;  accepted
> > as good practice by accountants, IRS, rating organization, possible
> > donors or other?
> >
> > Any background you care to provide regarding where you gained this
> > knowledge would also be appreciated but I can follow up elsewhere if you
> > do not care to provide that private information on a public mailing list.
> >
>
> The official guidelines on the subject are in IRS publication 557,
> "Tax-Exempt Status for Your Organization".  The relevant chapter for the
> Wikimedia Foundation is chapter 3 on 501(c)(3) organizations (online:
> http://www.irs.gov/publications/p557/ch03.html).
>
> I was a bit imprecise; these aren't requirements for all non-profit
> organizations, but specifically for 501(c)(3) organizations, the type
> that are required to be public charities.  That gives added benefits
> over private charities (like the Gates foundation), such as allowing
> people who donate money to deduct those donations from their taxes.

I thought the Gates Foundation *was* a 501(c)(3) organization.  I
could be wrong about that, though.  Either way, a 501(c)(3) can be a
private foundation *or* a public charity.  In fact, all 501(c)(3)
organizations which make more than $5000 other than churches are by
default considered private foundations unless they apply for and
qualify as public charities under 509(a).  (see IRC 508(b) and 509(a)
at http://www.access.gpo.gov/uscode/title26/subtitlea_chapter1_subchapterf_partii_.html).

Also, donations to private foundations generally *are* tax deductible,
just to a lesser extent (30% of AGI vs. 50% for most individual
taxpayers).

> One-third support seems to be the
> official line above which the organization is safe; if the public
> support is less than that but above 10%, it's still possible to maintain
> the status, but things get trickier.
>
The 1/3 test is 509(a)(2).  The other (trickier) tests are 509(a)(1),
509(a)(3), and 509(a)(4).

Anthony