Glossary
501(c) (3):
501(c) (3) is a section of the U.S. Internal Revenue Code that designates an organization as charitable and tax exempt. Organizations qualifying under this section include religious, educational, charitable, amateur athletic, scientific or literary groups, foundations, organizations testing for public safety or organizations involved in prevention of cruelty to children or animals.
Capacity building:
Capacity building is assistance provided to entities, often non-profit organizations or developing country governments, which have a need to develop a certain skill or competence, or for general upgrading of their performance ability.
Charitable lead trust:
A charitable lead trust is an arrangement in which property income or investment income is given to a charity while the grantor is living, but the principal passes to other designated parties upon the grantor's death.
Charitable remainder trust:
A charitable remainder trust is an arrangement in which property or money is donated to a charity, but the donor continues to use the property and/or receive income from it while living. The beneficiaries receive the income and the charity receives the principal after a specified period of time. The grantor avoids any capital gains tax on the donated assets, and also gets an income tax deduction for the fair market value of the remainder interest that the trust earned. In addition, the asset is removed from the estate, reducing subsequent estate taxes.
Community foundation:
A community foundation is a gathering of assets and ideas that serve a defined community. Conceived in 1914 as a vehicle for managing charitable bequests and remainder trusts dedicated to the betterment of a particular community, the community foundation concept has expanded and matured. Today, community foundations offer opportunities for donors to invest in the present and future needs of their communities and accomplish philanthropic objectives that are difficult to achieve acting alone. There are more than 650 such foundations in the United States. Originally, community foundations were established to serve specific geographic areas, but today community foundations also serve the needs of a variety of ethnic, cultural and religious communities as well. Community Foundations are designated "public charities" rather than "private foundations" by the Internal Revenue Service because they raise a significant portion of their resources from a broad cross-section of the public each year.
Diaspora philanthropy:
Diaspora philanthropy is the way immigrants maintain giving to their native country as well as support causes in their new communities.
Donor advised fund:
Donor advised fund (DAF) allows you to combine the most favorable tax benefits with the flexibility to support your favorite charities at any time. Contributions to a PARSA donor advised fund are eligible for current-year tax deductions, and are then available to recommend grants now, or in the future. And, your contributions have the opportunity to grow and help make a greater charitable impact through our investment pools.
Donor management system:
Donor management database systems are used by nonprofit organizations and community foundations to manage relationships with donors and prospective donors by keeping records of financial transactions and correspondence, archiving the relationship's history, tracking grants, and producing reports.
Endowment fund:
An endowment fund is money or property donated to an institution, with the stipulation that it be invested, and the principal remain intact. This allows for the donation to have a much greater impact than if it were spent all at once.
Engaged philanthropy:
Engaged philanthropy is a style of grant making rooted in a close relationship with the grantee organization, based on openness, trust and mutual accountability.
Giving circle:
Giving circle is a pooled fund, through which members make grants together.
Global Philanthropy Forum:
The Global Philanthropy Forum is an organization that serves to inspire, inform, and expand the international philanthropic community by matching individual grant makers to vehicles for overseas giving, assisting foundations and governmental donor agencies in finding partners in global philanthropy, and by highlighting international issues of concern. The organization holds an annual “Conference on Borderless Giving.”
Grant:
Grants are funds given to tax-exempt nonprofit organizations or local governments by foundations, corporations, governments, small business and individuals. Most grants are made to fund a specific project and require some level of reporting. The process involves an applicant submitting a proposal to a potential funder, either on the applicant's own initiative or in response to a request for proposals from the funder.
Microfinance:
Microfinance is a term used to refer to the activity of provision of financial services to clients who are excluded from the traditional financial system on account of their lower economic status. These financial services will most commonly take the form of loans (microcredit) and savings, though some microfinance institutions will offer other services such as insurance and payment services.
Mission statement:
Mission statement is the evaluative measure by which a nonprofit organization measures its success. In the U.S. it is also the major criterion used by states and the IRS to determine if the organization qualifies as a nonprofit.
NGO:
A non-governmental organization (NGO) is a non-profit group or association that acts outside of institutionalized political structures and pursues matters of interest to its members by lobbying, persuasion, or direct action. The term is generally restricted to social, cultural, legal, and environmental advocacy groups having goals that are primarily non-commercial. NGOs usually gain at least a portion of their funding from private sources. Because the label "NGO" is considered too broad by some, as it might cover anything that is non-governmental, some NGOs now prefer the term private voluntary organization (PVO).
Non-Profit Organization:
A non-profit organization is a group organized for purposes other than generating profit and in which no part of the organization's income is distributed to its members, directors, or officers. Non-profit organizations must be designated as nonprofit when created and may only pursue purposes permitted by statutes for non-profit organizations. Non-profit organizations include churches, public schools, public charities, public clinics and hospitals, political organizations, legal aid societies, volunteer services organizations, labor unions, professional associations, research institutes, museums, and some governmental agencies.
Planned giving:
Planned giving is a type of philanthropy that refers to several specific gift types that can be funded with cash or property. These gift vehicles are based on United States tax law. The specific rules of planned giving are defined by the U.S. Congress and the Internal Revenue Service. Although Canada has adopted some aspects of planned giving, it is generally seen as a form of philanthropy and fundraising that is uniquely related to the United States.
Philanthropy:
Philanthropy is the voluntary act of donation money or goods or providing some other support to a charitable cause, usually over an extended period of time. In a more fundamental sense, philanthropy may encompass any altruistic activity which is intended to promote good or improve human quality of life. Someone who is well known for practicing philanthropy may sometimes be called a philanthropist. Although such individuals are often very wealthy, people may nevertheless perform philanthropic acts without possessing great wealth.
Private foundation:
Private foundations are generally Section 501 (c) (3) organizations that are created, funded, and operated by one person or a family. They usually are grant-making organizations and do not engage in fundraising. There are a few private foundations called operating private foundations which are are generally treated as public charities. Private foundations may be formed as either corporations or trusts.
Public charity:
A tax-exempt organization that is not a private foundation, either because it is "publicly supported" (that is, it normally derives at least one-third of its support from gifts and other qualified sources) or it functions as a "supporting organization" to other public charities. Some public charities engage in grant making activities, but most engage in direct service activities. Public charities are eligible for maximum tax-deductible contributions from the public and are not subject to the same rules and restrictions as private foundations. They are also referred to as "public foundations."
Social entrepreneur:
A social entrepreneur is someone who recognizes a social problem and uses traditional entrepreneurial principles to organize, create, and manage a venture to make social change. Whereas business entrepreneurs typically measure performance in profit and return, social entrepreneurs often start nonprofits and citizen groups.
Social enterprise:
Social enterprises are organizations which trade in goods or services and link that trade to a social mission. The need to deliver on both financial, social and environmental performance targets is often referred to as having a triple bottom line. It could be that the profit from the business is used to support related or unrelated social aims or that the business itself accomplishes the social aim through its operation, say through the employment of people from a disadvantaged community including individuals and existing business who have difficulty in securing investment from banks and mainstream lenders.
Social change philanthropy:
Social change philanthropy focuses on the root causes of social, economic and environmental injustices. It strives to include the people who are impacted by those injustices as decision-makers. It also aims to make the field of philanthropy more accessible and diverse.
Strategic philanthropy:
Strategic philanthropy entails achieving measurable superior performance in a specific area; choosing a unique positioning; engaging in unique activities; and forgoing some grant making opportunities in order to focus on others.
Supporting foundation:
Supporting foundation is separately incorporated charitable entity closely affiliated with one or more public charities, such as a community foundation. The supported charitable entity or entities are required to appoint a majority of the board of the supporting foundation. In return for a reduced level of control, the donor receives offsetting tax advantages and exemption from the independent foundation’s regulations and excise taxes.
Venture philanthropy:
Venture philanthropy refers to the nonprofit sector's application of certain practices used by venture capitalists when investing in new business ideas. These practices may include long term investments, a partner relationship, an accountability-for-results process, provision of expertise as well as financing, and/or an exit strategy.