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Legal and practical aspects of raising funds in the United States and Europe.
Jean Paul Warmoes,King Baudouin Foundation United States (KBFUS)
September 12, 2012 Copyright Advancement Academy 1
Scope of this session
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I. The fundraising world(s) in the U.S. and in Europe.II. Tax-deductibility as an incentive for charitable giving.III. Three options for African universities.IV. Setting up a nonprofit entity in the U.S. and/or Europe.V. Working with a local ‘fiscal sponsor’.VI. Fiscal sponsorship through the King Baudouin Foundation.VII. Additional resources.
I. The fundraising world(s) in the U.S. and in Europe.
• Brief overview of the philanthropic tradition on both continents.• Giving in figures.
(See attachment 1, ‘Giving USA - 2012’)(See attachment 2, ‘International grantmaking update’)(See attachment 3, ‘Map of cross-border giving - Foundation Center’)
• It takes work!(See attachment 4, ‘How to succeed in fundraising by really trying’)
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II. Tax-deductibility as an incentive for charitable giving.
• Not the main, but an important driver.• Tax incentives (mainly) for gifts to ‘domestic’ nonprofits.• The U.S. fiscal system.
(See attachment 5, ‘Tax-efficient giving: The U.S. fiscal system’)
• And in Europe, country-by-country regulations.(See attachment 6, ‘Comparative highlights of foundation laws’)
• Raising funds across European borders - an evolving field.(See attachment 7, ‘The road to a European single market for …’)(See attachment 8, ‘Transnational Giving Europe’)
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III. Three options for African universities.
1. Raising funds without a local legal structure (no tax benefits).2. Setting up a nonprofit entity in the U.S. and/or Europe.3. Signing a fiscal sponsorship agreement with a local nonprofit.
(See attachment 9, ‘Structures for raising funds in the United States’)
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IV. Setting up a nonprofit entity in the U.S. / Europe.
Setting up a 501(c)(3) public charity in the U.S.:• Step 1: Incorporation (at State-level).• Step 2: Obtaining recognition of federal tax exemption (IRS).• Step 3: State registrations and tax exemptions.
(See attachment 10, ‘Tax-exempt organization reference chart’)(See attachment 11, ‘Applying for 501(c)(3) tax-exempt status’)
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Operational considerations for U.S. 501(c)(3) public charities:• Discretion and control.• Classification as a public charity.• Ongoing filing requirements (IRS Form 990 + State filing).• Estimated annual operating costs: At least US$ 35,000 a year.
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Setting up a nonprofit entity in Europe:• Similar procedures, but country-by-country regulations.• Choosing a country:
donor presence, EU country, TGE member, ease of registration.
Why would you set up your own nonprofit entity?:• Need to hire full time staff and/or rent office space.• Wish to develop program activities in addition to fundraising.• Misguided thought that you are ‘in control’.
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V. Working with a local ‘fiscal sponsor’.
Advantages of fiscal sponsorship vs. setting up a nonprofit entity:• No need to incorporate and apply for tax exemption.• No need for a Board with formal Board meetings/minutes.• No need for audited financials and filing of annual tax returns.• No expenses for legal counsel, accountants, auditors etc.• Fiscal sponsor takes care of back office and ‘donor support’.
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How to choose a fiscal sponsor?:• Fit with your geographic and issue focus.• Track record and collaborations with other nonprofits.• Reputation and image.• Knowledge of local regulations.• Width of services.• Quality of interaction with staff.• Fee structure.
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VI. Fiscal sponsorship throughthe King Baudouin Foundation.
For Europe: The King Baudouin Foundation (KBF):
• A leading foundation in Europe, based in Brussels, Belgium.• Develops its own programs + services to donors / nonprofits.• Annual expenditures of about 70 million Euros.
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‘European friends funds of African universities’ at KBF:
• Enables African universities to raise funds in Belgium and Europe.• Easy to set up + University chooses the name for its fund.• Contributions are tax-deductible in most European countries (TGE).• KBF takes care of tax, legal, financial issues + back office.• One time set-up fee (1,000 Euros) + Mgt fee (max. 5% of funds raised / year).
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For the USA: The King Baudouin Foundation United States (KBFUS):
• An American 501(c)(3) public charity, based in New York, USA.• Facilitates philanthropic flows from the U.S. to Europe and Africa.• Provides services to U.S. donors + European / African nonprofits.• Annual expenditures of about US$ 12 million.• Study visit for executives of African universities (May 2013, NYC).
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‘American friends funds’ at KBFUS:
• Enables European / African nonprofits to raise funds in the U.S.• Easy to set up + Nonprofit chooses the name for its fund.• Contributions are fully tax-deductible for U.S. tax purposes.• KBFUS takes care of tax, legal, financial issues + back office.• One time set-up fee (US$ 1,000) + Mgt fee (max. 4% of funds raised / year).
• Currently 80+ partners (including Nelson Mandela Foundation, Institut Curie, Rijksmuseum, Universities of Brussels, Amsterdam, Utrecht etc).
(See attachment 12, ‘An American friends fund at KBFUS’)
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VII. Additional resources.
• Council on Foundations, http://www.cof.org• Foundation Center, http://www.foundationcenter.org• Foundation Center - Map of Cross-Border Giving,
http://crossborder.foundationcenter.org/welcome.php• Africa Grantmakers Affinity Group (AGAG), http://www.africagrantmakers.org• Partnership for Higher Education in Africa (PHEA),
http://www.foundation-partnership.org• Giving USA Foundation, The Annual Report on Philanthropy,
http://www.givingusareports.org• Chronicle of Higher Education, http://chronicle.com• Chronicle of Philanthropy, http://philanthropy.com
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• Internal Revenue Service (IRS), Exempt Organizations Division, http://www.irs.gov/charities/index.html
• IRS Stay Exempt, Tax Basics for Exempt Organizations, http://www.stayexempt.irs.gov
• European Foundation Centre (EFC), http://www.efc.be• Transnational Giving Europe (TGE), http://www.transnationalgiving.eu• European Fundraising Association (EFA), http://efa-net.eu• Council for Advancement and Support of Education, http://www.case.org• Resource Alliance, http://www.resource-alliance.org
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King Baudouin Foundation United States (KBFUS - New York, USA):• Jean Paul Warmoes, Executive Secretary, [email protected]• Ellena Fotinatos, Program Associate, [email protected]• 10 Rockefeller Plaza, 16th Floor, New York, NY 10020, USA• Phone +1 (212) 713 7660; Web www.kbfus.org.
King Baudouin Foundation (KBF - Brussels, Belgium):• Ludwig Forrest, Philanthropy Advisor, [email protected]• 21 rue Brederodestraat, 1000 Brussels, Belgium• Phone +32.2.511.18.40; Web www.kbs-frb.be.
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