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May 05, 2011

Types of Grantmakers: What Do the Terms Mean?

Foundation Directory Online's Search Grantmakers database allows you to find grantmakers — among many other options — by type. Basic, Plus, and Premium users can choose among independent, company-sponsored, and operating foundations. Platinum and Professional users have those options plus corporate giving programs and grantmaking public charities. What do these terms mean, and what do those definitions mean for you?

Private Foundations

There are three types of private foundations listed in FDO and available to all plan levels, defined in the Grantspace Knowledge Base as follows:

The Foundation Center defines a private foundation as a nongovernmental, nonprofit organization having a principal fund managed by its own trustees or directors. Private foundations maintain or aid charitable, educational, religious, or other activities serving the public good, primarily through the making of grants to other nonprofit organizations. Every U.S. and foreign charity that qualifies under Section 501(c)(3) of the Internal Revenue Service Code as tax-exempt is a "private foundation" unless it demonstrates to the IRS that it falls into another category.

In FDO, private foundations are divided into three categories, which are available in the Type of Grantmaker index menu.

Independent foundation: A grantmaking organization usually classified by the IRS as a private foundation. Independent foundations might also be known as family foundations, general purpose foundations, special purpose foundations, or private non-operating foundations. The Foundation Center defines independent foundations and company-sponsored foundations separately; however, federal law normally classifies both as private, non-operating foundations subject to the same rules and requirements.

Company-sponsored foundation: A private foundation whose grant funds are derived primarily from the contributions of a for-profit business organization. The company-sponsored foundation might maintain close ties with the donor company, but it is an independent organization with its own endowment and is subject to the same rules and regulations as other private foundations.

Operating foundation: A 501(c)(3) organization classified by the IRS as a private foundation whose primary purpose is to operate research, social welfare, or other programs determined by its governing body or establishment charter. Some grants might be made, but the sum is generally small relative to the funds used for the foundation's own programs.

Other Grantmakers

Corporate giving program: A grantmaking program established and administered within a for-profit business organization. Corporate giving programs do not have a separate endowment and their annual grant totals are generally more directly related to current profits. They are not subject to the same reporting requirements as private foundations. Some companies make charitable contributions through both a corporate giving program and a company-sponsored foundation.

Public charity: In general, an organization that is tax-exempt under code section 501(c) and is classified by the IRS as a public charity and not a private foundation. Although some public charities engage in grantmaking activities, most conduct direct service or other tax-exempt activities. Some are also referred to as "public foundations" or "publicly supported organizations" and might use the term "foundation" in their names.

All these definitions and many more can be found in the Foundation Dictory Online help section. Just log into FDO, then click Help > Welcome > Glossary of Terms.

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Comments

The company-sponsored foundation might maintain close ties with the donor company, but it is an independent organization with its own endowment and is subject to the same rules and regulations as other private foundations.

IRS as a private foundation whose primary purpose is to operate research, social welfare, or other programs determined by its governing body or establishment charter

They are not subject to the same reporting requirements as private foundations. Some companies make charitable contributions through both a corporate giving program and a company-sponsored foundation.

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