Page 74 - Washington Nonprofit Handbook 2018 Edition

organization may be entitled to an income tax deduction, a gift and estate tax
deduction, or both. Donors are subject to limitations on the deductions they can
claim for charitable contributions in any given year. Donors should consult their
tax advisors regarding the tax implications of their gifts.

(ii) Grants From Private Foundations

Private foundations, which often are grantmaking organizations, typically will
distribute funds only to 501(c)(3) organizations that qualify as “public charities.”
(Private foundation status and public charity status are discussed below.) It is
worth noting that private foundations are, in fact, permitted to make grants to any
type of entity, provided that such grants are made in furtherance of the private
foundation’s 501(c)(3) purposes and provided that the private foundation complies
with certain administrative requirements under section 4945 of the Code; however,
because these administrative requirements can be burdensome, many private
foundations choose to make grants only to 501(c)(3) public charities.

(iii) No Tax on Net Revenue

501(c)(3) organizations and the organizations described under other section
501(c) categories in the Code share the advantage of exemption from paying
federal income tax on income related to their tax-exempt function and often on
investment income as well.

(iv) Other Advantages

Other advantages include:

y Federal tax-exempt status is necessary for certain state and local tax
benefits (e.g., exemptions from property tax, B&O tax and admissions
taxes, as further discussed in Chapters 51-57).

y 501(c)(3) organizations are exempt from federal unemployment tax
(“FUTA”).

y Exempt organizations may qualify for bulk mailing rates.

y 501(c)(3) organizations may be permitted to engage in bingo or other
gaming activities that otherwise would be prohibited.

WASHINGTON NONPROFIT HANDBOOK -63- 2018