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. It
also includes added requirements; for example, they must serve a public
purpose (rather than a community or niche purpose), must spend their
money on activities that advance that public purpose (not social
activities), and must receive a substantial amount of their monetary
support from the general public, either directly or through government
entities or other public charities. 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.
Excellent expansion and clarification Mark! Thank you very much. I
think that gives me as much knowledge as I wish to have on this subject
for the moment. I do appreciate the links to further specific
information and will file this note for future reference if I ever get
involved in assisting with the launch or maintenance of a non profit.
Thanks again!
Sincerely,
Michael R. Irwin