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The team from Charity Navigator, the nation's largest independent charity evaluator and leading donor advocate, shares their thoughts on emerging nonprofit-sector issues and offers tips to better inform your intelligent giving decisions.

Tuesday, August 25, 2009

Charity Navigator’s Funding

Just like the charities we evaluate, Charity Navigator is a 501 (c)(3) tax-exempt charitable organization under the Internal Revenue code. We are currently in the second year of a 5-year interim ruling period, at the end of which (11/30/2012) we must demonstrate that we have fully transitioned from private foundation to public charity.

Why are we doing this? In simple terms, we want to expand our capacity to 1) evaluate more charities, 2) add new dimensions to our ratings system, and 3) hold ourselves to the same standards as public charities.

Perhaps the most important requirement we will have to meet is the IRS’s “public support test”; in terms of numbers, that means that we will have to derive a minimum of 1/3 of our revenue from a diverse funding base (individuals, foundations and corporations). Currently, approximately 15% of Charity Navigator’s funding comes from those sources, with the remainder generously given to us by our founders (click here to access background and financial information). Since our founding, over 6,200 donors have made contributions in support of our work and we are deeply grateful.

We have a lot of work to do and we’ll need a lot of help in the next few years to ensure that we successfully make the transition. Some of our users have noted that we are now allowing advertising on our website. Advertising is another way to diversify our funding stream, just as many charities sell merchandise or engage in other activities that might be considered of a commercial nature. The dollars derived from it aren’t huge, only about 1% of our budget, and we feel we must pursue every viable funding avenue as long as it does not violate our mission or jeopardize our tax-exempt status. To that end, Charity Navigator accepts no advertising or donations from any of the charities we evaluate.

We value your feedback. If you have questions, concerns or comments about our funding, please do not hesitate to contact us at development@charitynavigator.org. And if you'd like to support us, you can find out how here.


Josh said...

I was under the impression that the IRS did away with advance rulings: http://www.irs.gov/newsroom/article/0,,id=186513,00.html

Joanne Reisser said...

Thanks for your comment, Josh. It is true that the advance ruling period has been eliminated for new organizations, but it still applies to most private foundations (including Charity Navigator--even though we are to be considered a public charity during the advance ruling period) that would like to terminate their private foundation status. The regulations governing this reclassification and the effects of obtaining an advance ruling have not changed.