Whether or not a certain grantmaker awards grants to public
schools will depend on the funder’s giving interests and
limitations. Some foundations are reluctant to provide funding for
otherwise publicly-supported organizations for various reasons. When
searching Foundation Directory Online for prospective
funders, always check the Limitations field in the
grantmaker’s profile for information about any restrictions on
funding.
While public schools may apply for recognition of tax-exempt
status under section 501(c)(3) of the Internal Revenue Code (IRC),
this step is not required in order for such organizations to qualify
for private foundation grants. Generally, the IRS treats public
school districts as government instrumentalities. As such, they are
exempt from federal income tax and eligible to receive
tax-deductible contributions from individuals under Section 170(c)(1) of the IRC. Additionally, grants
to such organizations, provided that they are for public or
charitable purposes, are considered qualifying distributions for
grantmaking private foundations.
Since organizations without 501(c)(3) status will not have an IRS
determination letter, grantmakers that do award grants to government
agencies or instrumentalities may instead request written proof of
an organization’s status as a government entity. Examples of
supporting documentation may include a letter from an authorized
government official or a copy of the legislative act creating a
government body.
The IRS also can supply a “government affirmation letter” free of
charge, which will describe government entity exemption from Federal
income tax and cite applicable Internal Revenue Code sections
pertaining to deductible contributions and income exclusion. Most
organizations will accept the government affirmation letter as the
substantiation they need. Government entities can request a
government affirmation letter by contacting the IRS.
Selected resources below may also be helpful.
Web Resources
Publication 557: Tax-Exempt Status for Your
Organization | Internal Revenue Service
Discusses rules and
procedures for organizations seeking recognition of exemption from
federal income tax under section 501(a) of the Internal Revenue Code
(IRC). Also describes which types of organizations are eligible for
tax-exempt status.
Affirmation of Your Tax-Exempt Status | Internal
Revenue Service
Outlines procedures for government agencies
and instrumentalities to request a “government affirmation letter”
from the IRS that can be used in place of a 501(c)(3) determination
letter, which is often required as part of a proposal for a private
foundation grant.
Books & Articles
Check title availability at Foundation Center collections or through your local
library.
"Grants to government". Foundation News & Commentary
(November-December 1994) p. 29-30.
Hopkins, Bruce R. The Law of Tax-exempt Organizations.
Hoboken, NJ: John Wiley & Sons, 2007.
Hopkins, Bruce R., & Jody Blazek. Private Foundations: Tax
Law and Compliance. Hoboken, NJ: John Wiley & Sons, 2008.
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