The year is winding down…and that means donation time is nearing. Nonprofits will start filling mailboxes and airwaves with appeals for funds, as they do every December. And taxpayers will be looking to donate to these organizations not just out of the goodness of their hearts but also to take advantage of the annual tax deductions for charitable donations.
Giving should be especially robust as 2021 draws to a close. Reason: A rule that lets taxpayers deduct up to $300 in cash donations even if they claim the standard deduction (up to $600 if married filing jointly) is due to expire at year-end.
But how can givers be sure that a nonprofit deserves their donations? Bottom Line Personal asked Stacy Steele of Charity Navigator, the world’s largest independent nonprofit evaluator, what donors need to know…
INVESTIGATING A NONPROFIT
Before writing a check to a charity, take these three steps…
Confirm that the charity is a “501(c) (3)” nonprofit. This means it has been approved by the Internal Revenue Service to be recognized as a tax-exempt, charitable organization, so donations to it are tax-deductible. The best way to confirm this is to use the organization’s Employer Identification Number (EIN) to verify its status. Enter the number into the IRS’s Tax-Exempt Organization Search tool. (On IRS.gov, choose “Charities & Nonprofits” from the top menu, then “Search for Charities” from the menu on the left.) You also can search by the nonprofit’s name, but many nonprofits have similar names, which can cause confusion.
Caution: Don’t donate to any charity that doesn’t have an EIN. All 501(c)(3) nonprofits must have an EIN officially registered with the IRS.
Investigate what the organization actually delivers. At the heart of any nonprofit is its stated mission. Connected to that mission are its values, goals and a breakdown of its programs and services. These are key bits of information for any donor because they provide a guide to how your money will be used and the impact of your gift.
Short descriptions of nonprofits’ missions and key projects often can be found within their Form 990 tax returns, which should be available via the IRS’s Tax-Exempt Organization Search tool. The information also is available on some charity-evaluation websites, such as my organization, Charity Navigator (CharityNavigator.org)…and/or on the nonprofit’s own website under a heading such as “ mission,” “financials,” “history,” “ projects” and/or “successes.”
Determine how effectively the organization puts donors’ money to use. What percentage of each dollar received by the organization goes toward its programs… and what percentage goes to overhead, salaries and attempts to raise more money? How cost-effective are those fund-raising efforts? Some nonprofits are far more efficient than others. You can find certain financial details in the nonprofit’s Form 990. There also are nonprofit evaluators such as Charity Navigator that analyze and share data beyond financials that also consider the importance of good governance, and other core areas of nonprofit effectiveness, including the impact and results of your donations…the organization’s approach to strategy, leadership and adaptability… and its culture and relationship to the community it serves. To view available Forms 990 for rated nonprofits, search for and visit the organization’s profile on CharityNavigator. org. See the “Additional Information” section, and select “Data Sources (IRS Forms 990).”
TOP NONPROFITS TODAY
At press time, the following organizations appeared within Charity Navigator’s Top Ten Lists of “10 of the Best Charities Everyone’s Heard Of.” These large, well-known nonprofits have budgets exceeding $100 million and at least $65 million in net assets. The Top Ten Lists are electronically selected based on an algorithm built into Charity Navigator’s Star Rating system. Value judgments are not made about the missions that nonprofits pursue—it’s up to donors to decide which causes matter most to them.
Direct Relief focuses on disaster response, emergency preparedness and the prevention and treatment of disease. DirectRelief.org
Enterprise Community Partners works to increase the supply of affordable housing, advance racial equity and promote upward mobility. EnterpriseCommunity.com
MAP International is a Christian organization providing medicine and health supplies to people in need. MAP.org
Matthew 25: Ministries is an international humanitarian aid and disaster relief organization. M25M.org
The Rotary Foundation of Rotary International makes grants intended to promote peace, fight disease, provide clean water and sanitation, support mothers and children, improve education and strengthen local economies. On Rotary.org, select “Our Foundation” from the “About Rotary” menu.
Vitamin Angels provides vitamins and minerals to pregnant women, new mothers and young children in need. VitaminAngels.org
World Resources Institute seeks to protect the environment and its capacity to provide for current and future generations. WRI.org
Americares provides medicine, supplies, health care, emergency preparation and recovery assistance to people and communities in need. Americares.org
Feeding America operates a nationwide network of 200 food banks that provide food to more than 46 million people through 60,000 food pantries and meal programs. FeedingAmerica.org
DonorsChoose allows citizen philanthropists to fund specific project requests from teachers in US public schools. DonorsChoose.org