Here’s what to know before giving money to a new nonprofit

September 19, 2022

The number of nonprofits in the United States now tops 1.7 million, and hundreds more are started each year. As the nonprofit sector grows alongside the increased needs in our community, you may be asked by friends or colleagues to support a brand new nonprofit organization. You want to help, but you’re not sure about the rules.


First, remember that you can give money to anyone and anything you want, charitable or otherwise. If you want to be sure that your money is put to good use, check things out. If the charity has started a website, take a look at it and see if it makes sense. Even new charities should be able to clearly explain what they are doing and who exactly it is that they are serving. Also take a look at who’s involved. Perhaps the friend or colleague asking you for help is on the charity’s board or is even a founding staff member. If you know and trust the people involved, that is a good sign. 


Your questions may boil down to whether you are hoping to get a charitable deduction for your contribution to the new charity. The IRS has very specific rules about which types of donations are deductible and at what levels. If the new charity has filed an application (Form 1023) with the IRS to qualify as a 501(c)(3) charitable organization, and you make a donation to the charity while the application is pending, you still may be able to deduct that donation on your income tax return, provided the charity does in fact receives its exemption ruling from the IRS. You are taking a risk, though. If the charity’s application fails, you cannot deduct your donation.

Please reach out to the Community Foundation with any and all questions about how best to support charities and causes in our community. It’s our job to provide insights not only related to the tax aspects of charitable giving, but also related to the effectiveness of charitable giving and the impact of the nonprofit organizations that serve our community.