With mass closures of schools and businesses leaving many individuals and families struggling to meet basic needs, how can nonprofit organizations help?
First and foremost, we hope you are staying well. All of us are feeling the impact of this unprecedented public health crisis. With mass closures of schools and businesses leaving many individuals and families struggling to meet basic needs, it’s no surprise many of our clients are asking, “How can we help?”
What Type of Help is Charitable?
The current pandemic has created a variety of urgent needs, not only health concerns related to the COVID-19 virus but also pandemic-created economic, educational, and other societal disruptions. These needs are both immediate, such caring for people infected with the virus, and longer term, such as helping people who lose their livelihoods due to the crisis.
In general, for a 501(c)(3) organization to provide assistance using tax-deductible contributions, the beneficiaries of that assistance must be a “charitable class” – a reasonably large group of indefinite membership with a clear need – rather than a pre-selected group of individuals or businesses that you might want to help. A charity may operate a program to help a group of people affiliated with a particular organization or business, but the program must be open-ended enough to assist similarly situated people in future disasters. During or in the immediate aftermath of a crisis, a charity may provide emergency assistance such as hot meals or urgent medical assistance to all who are affected, but for longer term assistance, a charity must have a reasonable process for determining whether the beneficiaries of assistance are truly in need of the charitable support.
This is not to say that you cannot create a program to assist a particular individual, family, or business, but these worthy efforts may not be funded with tax-deductible charitable contributions.
What Organization Should House the Effort?
Once you know what you want to do, you will need to decide which organization should carry out the effort. You have several options:
Work with an existing charity already providing direct assistance. Even in unprecedented circumstances, local charities often know best what assistance is needed and understand the social and cultural context of a disaster like the COVID-19 pandemic. For example, the United Way has set up a COVID-19 Community Response and Recovery Fund, and the Red Cross is organizing blood drives to address a blood shortage brought about by the coronavirus outbreak. Supporting existing organizations dedicated to disaster relief through grantmaking or by volunteering may be the most efficient use of resources at this time.
Establish a program at an existing charity. If you are an existing charity, you may provide relief to individuals impacted by the COVID-19 pandemic even if you were not specifically organized to do so, without obtaining prior permission from the IRS. However, you will have to report this new activity on your next annual IRS 990 tax return.
If you have an idea for a project to provide relief to individuals in need due to COVID-19, you may partner with an existing charity to establish a charitable project through a fiscal sponsorship. A fiscal sponsorship is an arrangement in which an existing charity receives tax-deductible funds on behalf of the charitable project and provides oversight and administrative and financial support to that project (often taking a portion of the funds raised to cover the costs of these services).
Consider establishing a new charitable organization. If no existing charity has the ability to carry out an effective COVID-19 emergency relief program or if you believe your charitable project has long-term goals extending beyond the immediate crisis, you may want to consider establishing a new charitable organization and applying for tax-exempt status. The process for applying for and receiving IRS recognition of a new organization’s tax-exempt status often takes months, and although the organization may operate while the application is pending, some donors may be reluctant to give prior to the IRS ruling. However, the IRS may grant a request for expedited handling of your exemption application if you are providing immediate assistance and can demonstrate that the people you serve will be adversely impacted if action on the application is delayed.
Consider the Safety of Your Staff, Volunteers, and the People You Want to Help
In the midst of this pandemic, it is also important to remember that your efforts to provide help to those in need should not make the problem worse. Try to structure your effort to avoid the risk of spreading the COVID-19 virus further through contact between the people working on your effort and the people you seek to assist. Follow public health guidelines about avoiding exposure and transmission through hygiene and social distancing. Discourage in-person participation by people who have been exposed to the virus or who are in high-risk groups.
Getting through the current crisis will require all of us to work together. Whatever type of help you want to provide, whomever you want to help, and whether you want to work with an existing organization or create a new charitable organization, we at Harmon Curran can help you. Please feel free to contact us. In the meantime, we hope that all of you and your families, colleagues, and loved ones stay safe and healthy.
For more information, we recommend the IRS publication Disaster Relief: Providing Assistance through Charitable Organizations.