Why do you think Basefund has to limit itself to the “US legal definition of harship” because of its US charitable status?
I inferred from that statement that we’re doing this for the charitable purpose of encouraging donations to effective charities wasn’t enough to persuade IRS that there was no more than incidental private benefit involved. Rather, Bob’s statement makes me think IRS approved Basefund as the equivalent of a benelovence fund of the sort often operated by religious groups. A benevolence fund for adherents of Qualy the Lightbulb, as it were.
It’s well-established that operating a benevolence fund that makes discretionary distributions to members of a defined charitable class on the basis of hardship is a valid thing for a 501(c)(3) to do. Furthermore, when a nonprofit makes appropriate grants on the basis of need “out of detached and disinterested generosity rather than to fulfill any moral or legal duty,” Rev. Rul. 2003-12, its grants are gifts and thus not income to the recipient under I.R.C. 102.
If that is how the Service views Basefund, then it’s likely going to be hard to scale a Basefund-like program to reach large donations under a 501(c)(3). Certainly the limit on allowable benevolence payments for hardship isn’t 2K, but 20K would probably be pushing it in ordinary circumstances, and 200K is pretty unlikely to fly in my opinion (except in fairly extreme circumstances). Also, in your hypo, the refunds made to needy donors would ordinarily be income under the extremely broad Glenshaw Glass definition, and seem to be made out of a sense of moral or legal duty rather than detached and disinterested generosity. So I’d be concerned that they are also income to the donor-refundee.
Why do you think Basefund has to limit itself to the “US legal definition of harship” because of its US charitable status?
I inferred from that statement that we’re doing this for the charitable purpose of encouraging donations to effective charities wasn’t enough to persuade IRS that there was no more than incidental private benefit involved. Rather, Bob’s statement makes me think IRS approved Basefund as the equivalent of a benelovence fund of the sort often operated by religious groups. A benevolence fund for adherents of Qualy the Lightbulb, as it were.
It’s well-established that operating a benevolence fund that makes discretionary distributions to members of a defined charitable class on the basis of hardship is a valid thing for a 501(c)(3) to do. Furthermore, when a nonprofit makes appropriate grants on the basis of need “out of detached and disinterested generosity rather than to fulfill any moral or legal duty,” Rev. Rul. 2003-12, its grants are gifts and thus not income to the recipient under I.R.C. 102.
If that is how the Service views Basefund, then it’s likely going to be hard to scale a Basefund-like program to reach large donations under a 501(c)(3). Certainly the limit on allowable benevolence payments for hardship isn’t 2K, but 20K would probably be pushing it in ordinary circumstances, and 200K is pretty unlikely to fly in my opinion (except in fairly extreme circumstances). Also, in your hypo, the refunds made to needy donors would ordinarily be income under the extremely broad Glenshaw Glass definition, and seem to be made out of a sense of moral or legal duty rather than detached and disinterested generosity. So I’d be concerned that they are also income to the donor-refundee.