January 12, 2006 | Read Time: 4 minutes
Q. My friends and I are in the process of staging our second annual golf tournament to honor another friend who died of cancer. We donate the event’s money to the American Cancer Society, and would like to eventually establish a scholarship in our deceased friend’s name. As our plans grow, we’d like to establish a Web site to publicize our activities, but want to make sure we’re going about this in the right way. Since our money is now being donated to a bigger charity, do we still need to register as a charity with the Internal Revenue Service? How do we do that? And can we get an “.org” Web address without being a registered charity?
A. The key issue isn’t how much money the event takes in or whether you have a Web site, but the relationship of your event to the American Cancer Society, says Paulette Maehara, president of the Association of Fundraising Professionals, in Alexandria, Va.
“You could create a separate charity, but given the number of charities already in existence and the work this would entail, I’m not sure this is your best option,” she says. “At the same time, running an independent event creates a whole separate set of challenges, including tax deductibility of contributions, expenses, and restricted gifts.”
Therefore, Ms. Maehara advises that you continue to work through your local chapter of the American Cancer Society. The organization offers help to outside fund-raising events like yours through its Team ACS program. Using this online tool can help you create a personal fund-raising page for your golf tournament, and even send customized e-mail messages to friends and family members, inviting them to support your event.
“Why get bogged down in creating another organization or other administrative details?” says Ms. Maehara. “Instead, look for ways to maximize your time spent on growing the event, reaching out to potential supporters and all the things that will help raise more money in your friend’s memory.”
Indeed, so long as you continue to donate your event’s proceeds to a recognized charity, such as the American Cancer Society, there is no need to create your own organization, says Ellen B. Covner, a lawyer in Wynnewood, Pa., who specializes in nonprofit fund-raising and management issues.
However, given that your ultimate goal is to establish a scholarship in honor of your friend, there may be some benefit in creating a separate nonprofit entity.
“In order to qualify as a charitable activity, a scholarship must be given to a person who meets the stated criteria, not to a named individual,” says Ms. Covner.
By creating a charity, she points out, you could then decide who wins the scholarship. On the other hand, if you decide not to form a charity and instead set up the scholarship at the American Cancer Society, or at another charity, you will probably have to give up some of that decision-making power.
“The charitable organization would accept your donation as a restricted gift to be used for a scholarship on whatever terms you set forth,” says Ms. Covner. “If the organization practices good donor stewardship, you may have a role in the selection of the scholarship recipient, but you would not be able to be the only one making the decision.”
Another reason you might consider registering as a nonprofit organization is if you want to establish your own “.org” Web site and seek additional sources of money to support your plans, says Ms. Covner. “If you are not recognized by your state and the IRS as a charity, then you are not a ‘.org.’”
The Foundation Center’s Web site offers several resources to help guide you through the process of establishing a nonprofit organization, should you choose that route.
First, read through the Foundation Center’s frequently asked questions section. Then, visit the IRS’s Web site, which provides detailed information about registering your organization as a charity. Be sure to read the comprehensive “Tax Exempt Status for Your Organization.”
You will also need to register with your state’s Bureau of Charitable Organizations, which is usually housed in the Department of State office.
Regulations and filing requirements vary, so contact your state’s attorney general’s office to get up to speed on the rules. Check out the National Association of State Charity Officials for a list of state charity offices.
