Liberating Philanthropic Capital for those outside of the Non-profit Industrial Complex: i.e. A Guide for making Grants to Non-Registered Grantees

Many foundations, intermediaries, and other registered charities struggle to make grants to non-registered organizations. Charitable law is intentionally complex and opaque, and even if you can afford it, lawyers will often recommend risk aversion when trying to flow money to those outside of the 501c3 or charitable registration system. Our hack will create gateways for those working to redistribute wealth and power to move from fear and risk aversion to thoughtful risk taking and building pathways for more folks to flow money thoughtfully and legally to those who are traditionally excluded from access to philanthropic funds. 

We will be conducting research, and working in collaboration with others doing this work, to create a detailed guide of all of the ways to flow money to non-501c3 organizations and individuals.  There are a number of aspects of the wealth defense industry that show up as part of this hack, the first surrounds the individual’s tax deductible gift. Individual funders who do not need a tax deduction, are able to make direct gifts to non-registered charities and individuals up to a certain amount without tax implications. Many individual funders never hear about this option because it is not shared by their wealth advisors and is not a widely known or understood tool. In the cases where the donor does take a tax deduction, the charity that receives the fund is required to ensure that it is used only for charitable purposes. This can create an administrative burden for the registered charity when they want to make grants to non-registered charities and individuals. Most lawyers advise them to follow IRS regulations for private foundations, even though this is much more conservative than is necessary. Additionally, the IRS regulations for grants to non registered charities and individuals are incredibly vague and complex, causing these groups to never have clarity around how much risk they are taking when deploying money to non-registered charities. Ultimately many groups choose to not make these types of grants at all, even though they are legally allowed.  Getting funding to non-registered organizations is important because there are increasingly more community-led and grassroots groups that lack the resources to become registered as charities, or they consciously choose not to, feeling that this complexity will limit their work of serving their community or movement goals, or in some cases, feel like formal registration will deteriorate trust with their community. Vague and complex charitable regulations are another aspect of the wealth defense industry that create a barrier for charities working to flow funds in service to communities. There are a handful of underutilized strategies for providing flexible funding to those working outside of the registered charity space. They are often not used by funders and intermediaries because of the perceived risks, and sometimes the administrative cost of managing those risks. We have begun to map out some of these strategies, along with the people who are working to use them, to identify successes, pitfalls, and some of the other wrap-around issues that might come up when deploying funding in this way, such as tax or reporting implications that need to be understood by everyone in the process.  We plan to compile all of this information in a way that provides more clarity and structure so that groups wanting to deploy money to non-registered organizations have clear pathways to do so, and feel that they can make thoughtful and informed decisions. We also want to work with a designer to ensure that this information is presented in a way that is easy to digest and accessible for many different audiences. We also hope that by sharing this resource widely we can mobilize lawyers, and those working with lawyers, to have more clear and defined pathways for deploying money to non-registered charities. UK Context: My understanding is that this work will also benefit organizations working in the UK. I've heard from colleagues in the UK that flowing larger amounts of money to non-registered charities is equally challenging as in the US, and there are many community groups who choose note to register with the UK Charities Commission for similar reasons as in the US.

More funders and intermediaries will feel confident and have the tools and resources necessary in order to make grants to non-registered charities to further their critical work in the world. We also consider this work to be a form of direct action, we know that the IRS will often change or update their regulations if they see that a large number of groups are utilizing a similar approach, and our hope is that this guide would be something eventually the IRS would consent to.