Can you tell me what percentage of income a 501(c)(3) organization must spend each year to retain its charitable status?
A Section 501(c)(3) charity which is classified as a private foundation must make qualifying distributions (which can include certain administrative costs) of at least 5% of its net investment assets (not its income) each year or pay an excise tax for failure to do so. If it fails to do so repeatedly, the IRS can tax it out of existence.
There is no percentage requirement for expenditures by a public charity, although it must carry on a legitimate charitable program or it will eventually lose its exempt status.
Planned giving sounds complicated, with its CRUTs and CRATs, CLUTs and CLATS, and CGAs. It can be incredibly complicated, but it needn’t be. Keeping it simple may be the best way to start a planned giving program for a charity that hasn’t already put one in place.
This webinar offered a review of major planned giving instruments and a discussion of ones that make the most sense to emphasize in starting a planned giving program. It discussed the advantages of integrating planned giving into an existing development program, targeting the best prospects, getting buy-in from the board that is likely to generate results, and setting a structure to make it all happen.
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