FundSvcs Community

I am at the Zoo with four kids so cannot look this up for you. But search the archives for “charitable class” and you will find the link to the IRS website. IRS Publication 526 is also relevant. John John Taylor 919.816.5903 johntaylorconsulting@gmail.com Big ideas; small keyboard > On Aug 19, 2019, at 10:19 AM, Katlyn Porter <kporter2@zanestate.edu> wrote: > > Good morning – > > We have a scholarship fund that is 10+ years old that has the exact language below (business name was excluded for confidentiality) that I am working to update. Can someone please provide me wording as to why the highlighted condition is not okay. I have started with the verbiage, but I am having trouble explaining best how this particular situation violates charitable class. > > I currently have as an explanation, > > The requirements below create a restriction that violates charitable class. This restriction is not sufficiently broad enough to be considered charitable class and does not benefit the community as a whole. > > > > Eligibility > 1. Must have been accepted at Zane State College; > 2. Must enroll as a full-time or part-time student during the quarter for which the scholarship award is > sought; > 3. Must have attained a high school (or college if attended) grade point average of at least a 2.75 (on a > 4.00 scale) or the GED equivalent. > 4. Total household income must be at or below 200% of poverty level. > > Conditions > 1. There shall be no restriction by gender. race, color. creed, age. or the national origin of any applicant. > 2. The recipient must be enrolled for the purpose of earning an associate degree or a formal certificate. > 3. The recipient must maintain a grade point average of at least a 2.75 each quarter or forfeit the > scholarship award > 4. Academic performance after the first quarter will be reviewed to ensure minimum grade point average > is being maintained. > 5. Applicants must be an “insert business name” customer or son or daughter of such customer with a primary > residence served by “insert business name”. They must be receiving service at the time of the scholarship award. > 6. Applicants shall pursue an academic program related to the electric industry. > > Thank you, > > Katlyn Porter > Assistant Director of Advancement Services > Zane State College Foundation > 740.588.1374 > >

The girls on in the carousel :-). The fund was incorrectly established from the beginning - perpetual or not. These rules have been in place for many years. You may need to involve counsel if the donor pushes back. John John Taylor 919.816.5903 johntaylorconsulting@gmail.com Big ideas; small keyboard > On Aug 19, 2019, at 12:26 PM, Katlyn Porter <kporter2@zanestate.edu> wrote: > > Thank you, John & Aaron. > > The problem is that when it was created, it was not meant to be perpetual. It was just difficult to award under this criteria because of the strict restrictions, so the fund sat un-awarded for many years. And, they did not have language in the agreement that said the restrictions could be modified if it was unable to be awarded. Now we are trying to clean things up and we are hoping to work with the donor to change the restrictions on the fund. > > Katlyn > > From: Advancement Services Discussion List <FUNDSVCS@LISTSERV.FUNDSVCS.ORG> On Behalf Of Hejnal, Alan > Sent: Monday, August 19, 2019 12:13 PM > To: FUNDSVCS@LISTSERV.FUNDSVCS.ORG > Subject: Re: Charitable Class... Again > > (So that John can continue to enjoy the kids and the zoo!) > > The IRS discusses “charitable class” in the most detail (as far as I can tell), in the context of disaster relief, here. Here’s what it says: > > What is meant by charitable class? > > A charitable class is a group of individuals that may properly receive assistance from a charitable organization. A charitable class must be either large enough that the potential beneficiaries cannot be individually identified, or sufficiently indefinite that the community as a whole, rather than a pre-selected group of people, benefits when a charity provides assistance. For example, a charitable class could consist of all individuals located in a city, county, or state. This charitable class is large and benefits to it benefit the entire geographic community. > > If the group of eligible beneficiaries is more limited, such as employees of a particular employer, the group of individuals eligible for disaster assistance (the class) must be indefinite. Otherwise, the charitable class would consist of a pre-selected group of people, which is prohibited. To benefit an indefinite charitable class, the relief program must be open-ended and include employees affected by the current disaster and those who may be affected by a future disaster. In this situation, the total number of potential members making up the charitable class cannot be counted or identified. Thus, while it may be possible to identify the employees who were victims of a present disaster (which is prohibited as pre-selection), it is not possible to identify employees who could be affected by future disasters. Accordingly, if a charity follows a policy of assisting employees who are victims of all disasters, present and future, it would be providing assistance to an indefinite charitable class. > > Caution: If the facts and circumstances indicate that a newly established disaster relief program to help employees is intended to benefit only current beneficiaries without any intention to provide for future disasters, a charitable class would not be present. > > The other side of the coin is that, as IRS Publication 526 says, you cannot deduct “a contribution to a specific individual.” So the charitable class analysis is a way to characterize a large and indefinite enough group of possible beneficiaries so that the donor is not, in effect, selecting specific individuals. This is consistent with the general rule that a charitable contribution should support the exempt charitable purpose of the qualified nonprofit organization, rather than benefiting some individual or individuals. > > As the IRS charitable class discussion indicates, the two primary ways to meet the charitable class requirement are that the class itself be large (for instance, an entire city) or that the class be indefinite with respect to time (not just the people who meet the criteria today, but also those as-yet-undetermined people who will meet the criteria in the future). > > In terms of your specific case, of course, only your counsel can offer definitive advice. > > More generally, with respect to the first perspective, you don’t say what the business is, but if it were, say, an electric company that serves an area like a city, that might be a class that is “large enough that the potential beneficiaries cannot be individually identified” (and not meaningfully different from the population of the city itself!). If the business (and, in particular, its customer base, in your example) were much smaller, that might not be the case. > > That having been said, as I read your example the scholarship continues over time (perhaps endowed?), so that future eligible recipients were not yet determined at the time that the scholarship was created. It’s hard for me to see how that is not an indefinite class; if future employees who might need disaster assistance sometime in the future meet the criteria for an indefinite class, it’s hard to see how future customers of a company who might be deserving of scholarship assistance at some time in the future is meaningfully different. > > From the perspective of whether the contribution has the primary purpose of supporting your institution’s charitable purpose, rather than primarily benefiting specific recipients, or primarily benefiting the donor, the other criteria seem to identify a population that is both well-qualified to benefit from the educational opportunities at your institution and economically situated so that a scholarship would facilitate their enrollment. Since the charitable class issue seems to be addressed by (possibly) the size of the class or, in any case, by the indefinite character of the class, it would not seem that the effect is to benefit certain pre-selected individuals. It also does not seem as if the primary effect would be to benefit the donors, since having well-educated customers doesn’t seem especially trenchant, certainly not compared to the benefit to the well-qualified students from families of relatively limited economic means, and the community as a whole by their education. > > My US$0.02 worth; the usual disclaimers apply. > > Good luck! > > Alan > > Alan S. Hejnal > Data Quality Manager > Smithsonian Institution - Office of Advancement > 600 Maryland Avenue SW, Suite 600E > P.O. Box 37012, MRC 527 > Washington, DC 20013-7012 > (: 202-633-8754 | *: HejnalA@si.edu > <image001.png> <image002.jpg> > > > From: Advancement Services Discussion List <FUNDSVCS@LISTSERV.FUNDSVCS.ORG> On Behalf Of John Taylor > Sent: Monday, August 19, 2019 11:20 AM > To: FUNDSVCS@LISTSERV.FUNDSVCS.ORG > Subject: Re: [FUNDSVCS] Charitable Class... Again > > I am at the Zoo with four kids so cannot look this up for you. But search the archives for “charitable class” and you will find the link to the IRS website. IRS Publication 526 is also relevant. > > John > > John Taylor > 919.816.5903 > johntaylorconsulting@gmail.com > > Big ideas; small keyboard > > On Aug 19, 2019, at 10:19 AM, Katlyn Porter <kporter2@zanestate.edu> wrote: > > Good morning – > > We have a scholarship fund that is 10+ years old that has the exact language below (business name was excluded for confidentiality) that I am working to update. Can someone please provide me wording as to why the highlighted condition is not okay. I have started with the verbiage, but I am having trouble explaining best how this particular situation violates charitable class. > > I currently have as an explanation, > > The requirements below create a restriction that violates charitable class. This restriction is not sufficiently broad enough to be considered charitable class and does not benefit the community as a whole. > > > > Eligibility > 1. Must have been accepted at Zane State College; > 2. Must enroll as a full-time or part-time student during the quarter for which the scholarship award is > sought; > 3. Must have attained a high school (or college if attended) grade point average of at least a 2.75 (on a > 4.00 scale) or the GED equivalent. > 4. Total household income must be at or below 200% of poverty level. > > Conditions > 1. There shall be no restriction by gender. race, color. creed, age. or the national origin of any applicant. > 2. The recipient must be enrolled for the purpose of earning an associate degree or a formal certificate. > 3. The recipient must maintain a grade point average of at least a 2.75 each quarter or forfeit the > scholarship award > 4. Academic performance after the first quarter will be reviewed to ensure minimum grade point average > is being maintained. > 5. Applicants must be an “insert business name” customer or son or daughter of such customer with a primary > residence served by “insert business name”. They must be receiving service at the time of the scholarship award. > 6. Applicants shall pursue an academic program related to the electric industry. > > Thank you, > > Katlyn Porter > Assistant Director of Advancement Services > Zane State College Foundation > 740.588.1374 > >

Good morning - We have a scholarship fund that is 10+ years old that has the exact language below (business name was excluded for confidentiality) that I am working to update. Can someone please provide me wording as to why the highlighted condition is not okay. I have started with the verbiage, but I am having trouble explaining best how this particular situation violates charitable class. I currently have as an explanation, The requirements below create a restriction that violates charitable class. This restriction is not sufficiently broad enough to be considered charitable class and does not benefit the community as a whole. Eligibility 1. Must have been accepted at Zane State College; 2. Must enroll as a full-time or part-time student during the quarter for which the scholarship award is sought; 3. Must have attained a high school (or college if attended) grade point average of at least a 2.75 (on a 4.00 scale) or the GED equivalent. 4. Total household income must be at or below 200% of poverty level. Conditions 1. There shall be no restriction by gender. race, color. creed, age. or the national origin of any applicant. 2. The recipient must be enrolled for the purpose of earning an associate degree or a formal certificate. 3. The recipient must maintain a grade point average of at least a 2.75 each quarter or forfeit the scholarship award 4. Academic performance after the first quarter will be reviewed to ensure minimum grade point average is being maintained. 5. Applicants must be an "insert business name" customer or son or daughter of such customer with a primary residence served by "insert business name". They must be receiving service at the time of the scholarship award. 6. Applicants shall pursue an academic program related to the electric industry. Thank you, Katlyn Porter Assistant Director of Advancement Services Zane State College Foundation<https://www.zanestate.edu/about/foundation/> 740.588.1374

(So that John can continue to enjoy the kids and the zoo!) The IRS discusses “charitable class” in the most detail (as far as I can tell), in the context of disaster relief, here<https://www.irs.gov/charities-non-profits/charitable-organizations/disaster-relief-meaning-of-charitable-class>. Here’s what it says: What is meant by charitable class? A charitable class is a group of individuals that may properly receive assistance from a charitable organization. A charitable class must be either large enough that the potential beneficiaries cannot be individually identified, or sufficiently indefinite that the community as a whole, rather than a pre-selected group of people, benefits when a charity provides assistance. For example, a charitable class could consist of all individuals located in a city, county, or state. This charitable class is large and benefits to it benefit the entire geographic community. If the group of eligible beneficiaries is more limited, such as employees of a particular employer, the group of individuals eligible for disaster assistance (the class) must be indefinite. Otherwise, the charitable class would consist of a pre-selected group of people, which is prohibited. To benefit an indefinite charitable class, the relief program must be open-ended and include employees affected by the current disaster and those who may be affected by a future disaster. In this situation, the total number of potential members making up the charitable class cannot be counted or identified. Thus, while it may be possible to identify the employees who were victims of a present disaster (which is prohibited as pre-selection), it is not possible to identify employees who could be affected by future disasters. Accordingly, if a charity follows a policy of assisting employees who are victims of all disasters, present and future, it would be providing assistance to an indefinite charitable class. Caution: If the facts and circumstances indicate that a newly established disaster relief program to help employees is intended to benefit only current beneficiaries without any intention to provide for future disasters, a charitable class would not be present. The other side of the coin is that, as IRS Publication 526 says, you cannot deduct “a contribution to a specific individual.” So the charitable class analysis is a way to characterize a large and indefinite enough group of possible beneficiaries so that the donor is not, in effect, selecting specific individuals. This is consistent with the general rule that a charitable contribution should support the exempt charitable purpose of the qualified nonprofit organization, rather than benefiting some individual or individuals. As the IRS charitable class discussion indicates, the two primary ways to meet the charitable class requirement are that the class itself be large (for instance, an entire city) or that the class be indefinite with respect to time (not just the people who meet the criteria today, but also those as-yet-undetermined people who will meet the criteria in the future). In terms of your specific case, of course, only your counsel can offer definitive advice. More generally, with respect to the first perspective, you don’t say what the business is, but if it were, say, an electric company that serves an area like a city, that might be a class that is “large enough that the potential beneficiaries cannot be individually identified” (and not meaningfully different from the population of the city itself!). If the business (and, in particular, its customer base, in your example) were much smaller, that might not be the case. That having been said, as I read your example the scholarship continues over time (perhaps endowed?), so that future eligible recipients were not yet determined at the time that the scholarship was created. It’s hard for me to see how that is not an indefinite class; if future employees who might need disaster assistance sometime in the future meet the criteria for an indefinite class, it’s hard to see how future customers of a company who might be deserving of scholarship assistance at some time in the future is meaningfully different. From the perspective of whether the contribution has the primary purpose of supporting your institution’s charitable purpose, rather than primarily benefiting specific recipients, or primarily benefiting the donor, the other criteria seem to identify a population that is both well-qualified to benefit from the educational opportunities at your institution and economically situated so that a scholarship would facilitate their enrollment. Since the charitable class issue seems to be addressed by (possibly) the size of the class or, in any case, by the indefinite character of the class, it would not seem that the effect is to benefit certain pre-selected individuals. It also does not seem as if the primary effect would be to benefit the donors, since having well-educated customers doesn’t seem especially trenchant, certainly not compared to the benefit to the well-qualified students from families of relatively limited economic means, and the community as a whole by their education. My US$0.02 worth; the usual disclaimers apply. Good luck! Alan Alan S. Hejnal Data Quality Manager Smithsonian Institution - Office of Advancement 600 Maryland Avenue SW, Suite 600E P.O. Box 37012, MRC 527 Washington, DC 20013-7012 •: 202-633-8754 | •: HejnalA@si.edu<mailto:HejnalA@si.edu> [SNAGHTML5cbfa34]<https://www.si.edu/> [AASP_FundSvcs_LOGO-01(040pct)(mark)] From: Advancement Services Discussion List <FUNDSVCS@LISTSERV.FUNDSVCS.ORG> On Behalf Of John Taylor Sent: Monday, August 19, 2019 11:20 AM To: FUNDSVCS@LISTSERV.FUNDSVCS.ORG Subject: Re: [FUNDSVCS] Charitable Class... Again I am at the Zoo with four kids so cannot look this up for you. But search the archives for “charitable class” and you will find the link to the IRS website. IRS Publication 526 is also relevant. John John Taylor 919.816.5903 johntaylorconsulting@gmail.com<mailto:johntaylorconsulting@gmail.com> Big ideas; small keyboard On Aug 19, 2019, at 10:19 AM, Katlyn Porter <kporter2@zanestate.edu<mailto:kporter2@zanestate.edu>> wrote: Good morning – We have a scholarship fund that is 10+ years old that has the exact language below (business name was excluded for confidentiality) that I am working to update. Can someone please provide me wording as to why the highlighted condition is not okay. I have started with the verbiage, but I am having trouble explaining best how this particular situation violates charitable class. I currently have as an explanation, The requirements below create a restriction that violates charitable class. This restriction is not sufficiently broad enough to be considered charitable class and does not benefit the community as a whole. Eligibility 1. Must have been accepted at Zane State College; 2. Must enroll as a full-time or part-time student during the quarter for which the scholarship award is sought; 3. Must have attained a high school (or college if attended) grade point average of at least a 2.75 (on a 4.00 scale) or the GED equivalent. 4. Total household income must be at or below 200% of poverty level. Conditions 1. There shall be no restriction by gender. race, color. creed, age. or the national origin of any applicant. 2. The recipient must be enrolled for the purpose of earning an associate degree or a formal certificate. 3. The recipient must maintain a grade point average of at least a 2.75 each quarter or forfeit the scholarship award 4. Academic performance after the first quarter will be reviewed to ensure minimum grade point average is being maintained. 5. Applicants must be an “insert business name” customer or son or daughter of such customer with a primary residence served by “insert business name”. They must be receiving service at the time of the scholarship award. 6. Applicants shall pursue an academic program related to the electric industry. Thank you, Katlyn Porter Assistant Director of Advancement Services Zane State College Foundation<https://nam02.safelinks.protection.outlook.com/?url=https%3A%2F%2Fwww.zanestate.edu%2Fabout%2Ffoundation%2F&data=02%7C01%7CHejnalA%40SI.EDU%7C36844f946b504d6afdaa08d724b8cb5e%7C989b5e2a14e44efe93b78cdd5fc5d11c%7C0%7C0%7C637018248434425712&sdata=YjSoMJsQQURCGN75wBginVKymGd6dV9ECU528AFOgx8%3D&reserved=0> 740.588.1374

Thank you, John & Aaron. The problem is that when it was created, it was not meant to be perpetual. It was just difficult to award under this criteria because of the strict restrictions, so the fund sat un-awarded for many years. And, they did not have language in the agreement that said the restrictions could be modified if it was unable to be awarded. Now we are trying to clean things up and we are hoping to work with the donor to change the restrictions on the fund. Katlyn From: Advancement Services Discussion List <FUNDSVCS@LISTSERV.FUNDSVCS.ORG> On Behalf Of Hejnal, Alan Sent: Monday, August 19, 2019 12:13 PM To: FUNDSVCS@LISTSERV.FUNDSVCS.ORG Subject: Re: Charitable Class... Again (So that John can continue to enjoy the kids and the zoo!) The IRS discusses “charitable class” in the most detail (as far as I can tell), in the context of disaster relief, here<https://www.irs.gov/charities-non-profits/charitable-organizations/disaster-relief-meaning-of-charitable-class>. Here’s what it says: What is meant by charitable class? A charitable class is a group of individuals that may properly receive assistance from a charitable organization. A charitable class must be either large enough that the potential beneficiaries cannot be individually identified, or sufficiently indefinite that the community as a whole, rather than a pre-selected group of people, benefits when a charity provides assistance. For example, a charitable class could consist of all individuals located in a city, county, or state. This charitable class is large and benefits to it benefit the entire geographic community. If the group of eligible beneficiaries is more limited, such as employees of a particular employer, the group of individuals eligible for disaster assistance (the class) must be indefinite. Otherwise, the charitable class would consist of a pre-selected group of people, which is prohibited. To benefit an indefinite charitable class, the relief program must be open-ended and include employees affected by the current disaster and those who may be affected by a future disaster. In this situation, the total number of potential members making up the charitable class cannot be counted or identified. Thus, while it may be possible to identify the employees who were victims of a present disaster (which is prohibited as pre-selection), it is not possible to identify employees who could be affected by future disasters. Accordingly, if a charity follows a policy of assisting employees who are victims of all disasters, present and future, it would be providing assistance to an indefinite charitable class. Caution: If the facts and circumstances indicate that a newly established disaster relief program to help employees is intended to benefit only current beneficiaries without any intention to provide for future disasters, a charitable class would not be present. The other side of the coin is that, as IRS Publication 526 says, you cannot deduct “a contribution to a specific individual.” So the charitable class analysis is a way to characterize a large and indefinite enough group of possible beneficiaries so that the donor is not, in effect, selecting specific individuals. This is consistent with the general rule that a charitable contribution should support the exempt charitable purpose of the qualified nonprofit organization, rather than benefiting some individual or individuals. As the IRS charitable class discussion indicates, the two primary ways to meet the charitable class requirement are that the class itself be large (for instance, an entire city) or that the class be indefinite with respect to time (not just the people who meet the criteria today, but also those as-yet-undetermined people who will meet the criteria in the future). In terms of your specific case, of course, only your counsel can offer definitive advice. More generally, with respect to the first perspective, you don’t say what the business is, but if it were, say, an electric company that serves an area like a city, that might be a class that is “large enough that the potential beneficiaries cannot be individually identified” (and not meaningfully different from the population of the city itself!). If the business (and, in particular, its customer base, in your example) were much smaller, that might not be the case. That having been said, as I read your example the scholarship continues over time (perhaps endowed?), so that future eligible recipients were not yet determined at the time that the scholarship was created. It’s hard for me to see how that is not an indefinite class; if future employees who might need disaster assistance sometime in the future meet the criteria for an indefinite class, it’s hard to see how future customers of a company who might be deserving of scholarship assistance at some time in the future is meaningfully different. From the perspective of whether the contribution has the primary purpose of supporting your institution’s charitable purpose, rather than primarily benefiting specific recipients, or primarily benefiting the donor, the other criteria seem to identify a population that is both well-qualified to benefit from the educational opportunities at your institution and economically situated so that a scholarship would facilitate their enrollment. Since the charitable class issue seems to be addressed by (possibly) the size of the class or, in any case, by the indefinite character of the class, it would not seem that the effect is to benefit certain pre-selected individuals. It also does not seem as if the primary effect would be to benefit the donors, since having well-educated customers doesn’t seem especially trenchant, certainly not compared to the benefit to the well-qualified students from families of relatively limited economic means, and the community as a whole by their education. My US$0.02 worth; the usual disclaimers apply. Good luck! Alan Alan S. Hejnal Data Quality Manager Smithsonian Institution - Office of Advancement 600 Maryland Avenue SW, Suite 600E P.O. Box 37012, MRC 527 Washington, DC 20013-7012 •: 202-633-8754 | •: HejnalA@si.edu<mailto:HejnalA@si.edu> [SNAGHTML5cbfa34]<https://www.si.edu/> [AASP_FundSvcs_LOGO-01(040pct)(mark)] From: Advancement Services Discussion List <FUNDSVCS@LISTSERV.FUNDSVCS.ORG<mailto:FUNDSVCS@LISTSERV.FUNDSVCS.ORG>> On Behalf Of John Taylor Sent: Monday, August 19, 2019 11:20 AM To: FUNDSVCS@LISTSERV.FUNDSVCS.ORG<mailto:FUNDSVCS@LISTSERV.FUNDSVCS.ORG> Subject: Re: [FUNDSVCS] Charitable Class... Again I am at the Zoo with four kids so cannot look this up for you. But search the archives for “charitable class” and you will find the link to the IRS website. IRS Publication 526 is also relevant. John John Taylor 919.816.5903 johntaylorconsulting@gmail.com<mailto:johntaylorconsulting@gmail.com> Big ideas; small keyboard On Aug 19, 2019, at 10:19 AM, Katlyn Porter <kporter2@zanestate.edu<mailto:kporter2@zanestate.edu>> wrote: Good morning – We have a scholarship fund that is 10+ years old that has the exact language below (business name was excluded for confidentiality) that I am working to update. Can someone please provide me wording as to why the highlighted condition is not okay. I have started with the verbiage, but I am having trouble explaining best how this particular situation violates charitable class. I currently have as an explanation, The requirements below create a restriction that violates charitable class. This restriction is not sufficiently broad enough to be considered charitable class and does not benefit the community as a whole. Eligibility 1. Must have been accepted at Zane State College; 2. Must enroll as a full-time or part-time student during the quarter for which the scholarship award is sought; 3. Must have attained a high school (or college if attended) grade point average of at least a 2.75 (on a 4.00 scale) or the GED equivalent. 4. Total household income must be at or below 200% of poverty level. Conditions 1. There shall be no restriction by gender. race, color. creed, age. or the national origin of any applicant. 2. The recipient must be enrolled for the purpose of earning an associate degree or a formal certificate. 3. The recipient must maintain a grade point average of at least a 2.75 each quarter or forfeit the scholarship award 4. Academic performance after the first quarter will be reviewed to ensure minimum grade point average is being maintained. 5. Applicants must be an “insert business name” customer or son or daughter of such customer with a primary residence served by “insert business name”. They must be receiving service at the time of the scholarship award. 6. Applicants shall pursue an academic program related to the electric industry. Thank you, Katlyn Porter Assistant Director of Advancement Services Zane State College Foundation<https://nam02.safelinks.protection.outlook.com/?url=https%3A%2F%2Fwww.zanestate.edu%2Fabout%2Ffoundation%2F&data=02%7C01%7CHejnalA%40SI.EDU%7C36844f946b504d6afdaa08d724b8cb5e%7C989b5e2a14e44efe93b78cdd5fc5d11c%7C0%7C0%7C637018248434425712&sdata=YjSoMJsQQURCGN75wBginVKymGd6dV9ECU528AFOgx8%3D&reserved=0> 740.588.1374

Thanks John, enjoy your day that the zoo! Katlyn From: Advancement Services Discussion List <FUNDSVCS@LISTSERV.FUNDSVCS.ORG> On Behalf Of John Taylor Sent: Monday, August 19, 2019 12:35 PM To: FUNDSVCS@LISTSERV.FUNDSVCS.ORG Subject: Re: Charitable Class... Again The girls on in the carousel :-). The fund was incorrectly established from the beginning - perpetual or not. These rules have been in place for many years. You may need to involve counsel if the donor pushes back. John John Taylor 919.816.5903 johntaylorconsulting@gmail.com<mailto:johntaylorconsulting@gmail.com> Big ideas; small keyboard On Aug 19, 2019, at 12:26 PM, Katlyn Porter <kporter2@zanestate.edu<mailto:kporter2@zanestate.edu>> wrote: Thank you, John & Aaron. The problem is that when it was created, it was not meant to be perpetual. It was just difficult to award under this criteria because of the strict restrictions, so the fund sat un-awarded for many years. And, they did not have language in the agreement that said the restrictions could be modified if it was unable to be awarded. Now we are trying to clean things up and we are hoping to work with the donor to change the restrictions on the fund. Katlyn From: Advancement Services Discussion List <FUNDSVCS@LISTSERV.FUNDSVCS.ORG<mailto:FUNDSVCS@LISTSERV.FUNDSVCS.ORG>> On Behalf Of Hejnal, Alan Sent: Monday, August 19, 2019 12:13 PM To: FUNDSVCS@LISTSERV.FUNDSVCS.ORG<mailto:FUNDSVCS@LISTSERV.FUNDSVCS.ORG> Subject: Re: Charitable Class... Again (So that John can continue to enjoy the kids and the zoo!) The IRS discusses “charitable class” in the most detail (as far as I can tell), in the context of disaster relief, here<https://www.irs.gov/charities-non-profits/charitable-organizations/disaster-relief-meaning-of-charitable-class>. Here’s what it says: What is meant by charitable class? A charitable class is a group of individuals that may properly receive assistance from a charitable organization. A charitable class must be either large enough that the potential beneficiaries cannot be individually identified, or sufficiently indefinite that the community as a whole, rather than a pre-selected group of people, benefits when a charity provides assistance. For example, a charitable class could consist of all individuals located in a city, county, or state. This charitable class is large and benefits to it benefit the entire geographic community. If the group of eligible beneficiaries is more limited, such as employees of a particular employer, the group of individuals eligible for disaster assistance (the class) must be indefinite. Otherwise, the charitable class would consist of a pre-selected group of people, which is prohibited. To benefit an indefinite charitable class, the relief program must be open-ended and include employees affected by the current disaster and those who may be affected by a future disaster. In this situation, the total number of potential members making up the charitable class cannot be counted or identified. Thus, while it may be possible to identify the employees who were victims of a present disaster (which is prohibited as pre-selection), it is not possible to identify employees who could be affected by future disasters. Accordingly, if a charity follows a policy of assisting employees who are victims of all disasters, present and future, it would be providing assistance to an indefinite charitable class. Caution: If the facts and circumstances indicate that a newly established disaster relief program to help employees is intended to benefit only current beneficiaries without any intention to provide for future disasters, a charitable class would not be present. The other side of the coin is that, as IRS Publication 526 says, you cannot deduct “a contribution to a specific individual.” So the charitable class analysis is a way to characterize a large and indefinite enough group of possible beneficiaries so that the donor is not, in effect, selecting specific individuals. This is consistent with the general rule that a charitable contribution should support the exempt charitable purpose of the qualified nonprofit organization, rather than benefiting some individual or individuals. As the IRS charitable class discussion indicates, the two primary ways to meet the charitable class requirement are that the class itself be large (for instance, an entire city) or that the class be indefinite with respect to time (not just the people who meet the criteria today, but also those as-yet-undetermined people who will meet the criteria in the future). In terms of your specific case, of course, only your counsel can offer definitive advice. More generally, with respect to the first perspective, you don’t say what the business is, but if it were, say, an electric company that serves an area like a city, that might be a class that is “large enough that the potential beneficiaries cannot be individually identified” (and not meaningfully different from the population of the city itself!). If the business (and, in particular, its customer base, in your example) were much smaller, that might not be the case. That having been said, as I read your example the scholarship continues over time (perhaps endowed?), so that future eligible recipients were not yet determined at the time that the scholarship was created. It’s hard for me to see how that is not an indefinite class; if future employees who might need disaster assistance sometime in the future meet the criteria for an indefinite class, it’s hard to see how future customers of a company who might be deserving of scholarship assistance at some time in the future is meaningfully different. From the perspective of whether the contribution has the primary purpose of supporting your institution’s charitable purpose, rather than primarily benefiting specific recipients, or primarily benefiting the donor, the other criteria seem to identify a population that is both well-qualified to benefit from the educational opportunities at your institution and economically situated so that a scholarship would facilitate their enrollment. Since the charitable class issue seems to be addressed by (possibly) the size of the class or, in any case, by the indefinite character of the class, it would not seem that the effect is to benefit certain pre-selected individuals. It also does not seem as if the primary effect would be to benefit the donors, since having well-educated customers doesn’t seem especially trenchant, certainly not compared to the benefit to the well-qualified students from families of relatively limited economic means, and the community as a whole by their education. My US$0.02 worth; the usual disclaimers apply. Good luck! Alan Alan S. Hejnal Data Quality Manager Smithsonian Institution - Office of Advancement 600 Maryland Avenue SW, Suite 600E P.O. Box 37012, MRC 527 Washington, DC 20013-7012 •: 202-633-8754 | •: HejnalA@si.edu<mailto:HejnalA@si.edu> <image001.png><https://www.si.edu/> <image002.jpg> From: Advancement Services Discussion List <FUNDSVCS@LISTSERV.FUNDSVCS.ORG<mailto:FUNDSVCS@LISTSERV.FUNDSVCS.ORG>> On Behalf Of John Taylor Sent: Monday, August 19, 2019 11:20 AM To: FUNDSVCS@LISTSERV.FUNDSVCS.ORG<mailto:FUNDSVCS@LISTSERV.FUNDSVCS.ORG> Subject: Re: [FUNDSVCS] Charitable Class... Again I am at the Zoo with four kids so cannot look this up for you. But search the archives for “charitable class” and you will find the link to the IRS website. IRS Publication 526 is also relevant. John John Taylor 919.816.5903 johntaylorconsulting@gmail.com<mailto:johntaylorconsulting@gmail.com> Big ideas; small keyboard On Aug 19, 2019, at 10:19 AM, Katlyn Porter <kporter2@zanestate.edu<mailto:kporter2@zanestate.edu>> wrote: Good morning – We have a scholarship fund that is 10+ years old that has the exact language below (business name was excluded for confidentiality) that I am working to update. Can someone please provide me wording as to why the highlighted condition is not okay. I have started with the verbiage, but I am having trouble explaining best how this particular situation violates charitable class. I currently have as an explanation, The requirements below create a restriction that violates charitable class. This restriction is not sufficiently broad enough to be considered charitable class and does not benefit the community as a whole. Eligibility 1. Must have been accepted at Zane State College; 2. Must enroll as a full-time or part-time student during the quarter for which the scholarship award is sought; 3. Must have attained a high school (or college if attended) grade point average of at least a 2.75 (on a 4.00 scale) or the GED equivalent. 4. Total household income must be at or below 200% of poverty level. Conditions 1. There shall be no restriction by gender. race, color. creed, age. or the national origin of any applicant. 2. The recipient must be enrolled for the purpose of earning an associate degree or a formal certificate. 3. The recipient must maintain a grade point average of at least a 2.75 each quarter or forfeit the scholarship award 4. Academic performance after the first quarter will be reviewed to ensure minimum grade point average is being maintained. 5. Applicants must be an “insert business name” customer or son or daughter of such customer with a primary residence served by “insert business name”. They must be receiving service at the time of the scholarship award. 6. Applicants shall pursue an academic program related to the electric industry. Thank you, Katlyn Porter Assistant Director of Advancement Services Zane State College Foundation<https://nam02.safelinks.protection.outlook.com/?url=https%3A%2F%2Fwww.zanestate.edu%2Fabout%2Ffoundation%2F&data=02%7C01%7CHejnalA%40SI.EDU%7C36844f946b504d6afdaa08d724b8cb5e%7C989b5e2a14e44efe93b78cdd5fc5d11c%7C0%7C0%7C637018248434425712&sdata=YjSoMJsQQURCGN75wBginVKymGd6dV9ECU528AFOgx8%3D&reserved=0> 740.588.1374

It does sound like it was incorrectly established from the beginning (unless the class was sufficiently large, which doesn’t seem to be the case, if the scholarship has been difficult to award!). My US$0.02 worth; the usual disclaimers apply. Good luck! Alan Alan S. Hejnal Data Quality Manager Smithsonian Institution - Office of Advancement 600 Maryland Avenue SW, Suite 600E P.O. Box 37012, MRC 527 Washington, DC 20013-7012 •: 202-633-8754 | •: HejnalA@si.edu<mailto:HejnalA@si.edu> [SNAGHTML5cbfa34]<https://www.si.edu/> [AASP_FundSvcs_LOGO-01(040pct)(mark)] From: Advancement Services Discussion List <FUNDSVCS@LISTSERV.FUNDSVCS.ORG> On Behalf Of John Taylor Sent: Monday, August 19, 2019 12:35 PM To: FUNDSVCS@LISTSERV.FUNDSVCS.ORG Subject: Re: [FUNDSVCS] Charitable Class... Again The girls on in the carousel :-). The fund was incorrectly established from the beginning - perpetual or not. These rules have been in place for many years. You may need to involve counsel if the donor pushes back. John John Taylor 919.816.5903 johntaylorconsulting@gmail.com<mailto:johntaylorconsulting@gmail.com> Big ideas; small keyboard On Aug 19, 2019, at 12:26 PM, Katlyn Porter <kporter2@zanestate.edu<mailto:kporter2@zanestate.edu>> wrote: Thank you, John & Aaron. The problem is that when it was created, it was not meant to be perpetual. It was just difficult to award under this criteria because of the strict restrictions, so the fund sat un-awarded for many years. And, they did not have language in the agreement that said the restrictions could be modified if it was unable to be awarded. Now we are trying to clean things up and we are hoping to work with the donor to change the restrictions on the fund. Katlyn From: Advancement Services Discussion List <FUNDSVCS@LISTSERV.FUNDSVCS.ORG<mailto:FUNDSVCS@LISTSERV.FUNDSVCS.ORG>> On Behalf Of Hejnal, Alan Sent: Monday, August 19, 2019 12:13 PM To: FUNDSVCS@LISTSERV.FUNDSVCS.ORG<mailto:FUNDSVCS@LISTSERV.FUNDSVCS.ORG> Subject: Re: Charitable Class... Again (So that John can continue to enjoy the kids and the zoo!) The IRS discusses “charitable class” in the most detail (as far as I can tell), in the context of disaster relief, here<https://nam02.safelinks.protection.outlook.com/?url=https%3A%2F%2Fwww.irs.gov%2Fcharities-non-profits%2Fcharitable-organizations%2Fdisaster-relief-meaning-of-charitable-class&data=02%7C01%7CHejnalA%40SI.EDU%7Ccf56c59cb176440b711708d724c33d3b%7C989b5e2a14e44efe93b78cdd5fc5d11c%7C0%7C0%7C637018293306125668&sdata=95om6TV%2BXhfeRvd9eMY06n6mT5FZy4h%2BxCTT6rjI2VM%3D&reserved=0>. Here’s what it says: What is meant by charitable class? A charitable class is a group of individuals that may properly receive assistance from a charitable organization. A charitable class must be either large enough that the potential beneficiaries cannot be individually identified, or sufficiently indefinite that the community as a whole, rather than a pre-selected group of people, benefits when a charity provides assistance. For example, a charitable class could consist of all individuals located in a city, county, or state. This charitable class is large and benefits to it benefit the entire geographic community. If the group of eligible beneficiaries is more limited, such as employees of a particular employer, the group of individuals eligible for disaster assistance (the class) must be indefinite. Otherwise, the charitable class would consist of a pre-selected group of people, which is prohibited. To benefit an indefinite charitable class, the relief program must be open-ended and include employees affected by the current disaster and those who may be affected by a future disaster. In this situation, the total number of potential members making up the charitable class cannot be counted or identified. Thus, while it may be possible to identify the employees who were victims of a present disaster (which is prohibited as pre-selection), it is not possible to identify employees who could be affected by future disasters. Accordingly, if a charity follows a policy of assisting employees who are victims of all disasters, present and future, it would be providing assistance to an indefinite charitable class. Caution: If the facts and circumstances indicate that a newly established disaster relief program to help employees is intended to benefit only current beneficiaries without any intention to provide for future disasters, a charitable class would not be present. The other side of the coin is that, as IRS Publication 526 says, you cannot deduct “a contribution to a specific individual.” So the charitable class analysis is a way to characterize a large and indefinite enough group of possible beneficiaries so that the donor is not, in effect, selecting specific individuals. This is consistent with the general rule that a charitable contribution should support the exempt charitable purpose of the qualified nonprofit organization, rather than benefiting some individual or individuals. As the IRS charitable class discussion indicates, the two primary ways to meet the charitable class requirement are that the class itself be large (for instance, an entire city) or that the class be indefinite with respect to time (not just the people who meet the criteria today, but also those as-yet-undetermined people who will meet the criteria in the future). In terms of your specific case, of course, only your counsel can offer definitive advice. More generally, with respect to the first perspective, you don’t say what the business is, but if it were, say, an electric company that serves an area like a city, that might be a class that is “large enough that the potential beneficiaries cannot be individually identified” (and not meaningfully different from the population of the city itself!). If the business (and, in particular, its customer base, in your example) were much smaller, that might not be the case. That having been said, as I read your example the scholarship continues over time (perhaps endowed?), so that future eligible recipients were not yet determined at the time that the scholarship was created. It’s hard for me to see how that is not an indefinite class; if future employees who might need disaster assistance sometime in the future meet the criteria for an indefinite class, it’s hard to see how future customers of a company who might be deserving of scholarship assistance at some time in the future is meaningfully different. From the perspective of whether the contribution has the primary purpose of supporting your institution’s charitable purpose, rather than primarily benefiting specific recipients, or primarily benefiting the donor, the other criteria seem to identify a population that is both well-qualified to benefit from the educational opportunities at your institution and economically situated so that a scholarship would facilitate their enrollment. Since the charitable class issue seems to be addressed by (possibly) the size of the class or, in any case, by the indefinite character of the class, it would not seem that the effect is to benefit certain pre-selected individuals. It also does not seem as if the primary effect would be to benefit the donors, since having well-educated customers doesn’t seem especially trenchant, certainly not compared to the benefit to the well-qualified students from families of relatively limited economic means, and the community as a whole by their education. My US$0.02 worth; the usual disclaimers apply. Good luck! Alan Alan S. Hejnal Data Quality Manager Smithsonian Institution - Office of Advancement 600 Maryland Avenue SW, Suite 600E P.O. Box 37012, MRC 527 Washington, DC 20013-7012 •: 202-633-8754 | •: HejnalA@si.edu<mailto:HejnalA@si.edu> <image001.png><https://nam02.safelinks.protection.outlook.com/?url=https%3A%2F%2Fwww.si.edu%2F&data=02%7C01%7CHejnalA%40SI.EDU%7Ccf56c59cb176440b711708d724c33d3b%7C989b5e2a14e44efe93b78cdd5fc5d11c%7C0%7C0%7C637018293306135658&sdata=1Eoc3lAoYcTjJrD%2FT6WqPKKf6CHjW7JLVxlyifhMn7c%3D&reserved=0> <image002.jpg> From: Advancement Services Discussion List <FUNDSVCS@LISTSERV.FUNDSVCS.ORG<mailto:FUNDSVCS@LISTSERV.FUNDSVCS.ORG>> On Behalf Of John Taylor Sent: Monday, August 19, 2019 11:20 AM To: FUNDSVCS@LISTSERV.FUNDSVCS.ORG<mailto:FUNDSVCS@LISTSERV.FUNDSVCS.ORG> Subject: Re: [FUNDSVCS] Charitable Class... Again I am at the Zoo with four kids so cannot look this up for you. But search the archives for “charitable class” and you will find the link to the IRS website. IRS Publication 526 is also relevant. John John Taylor 919.816.5903 johntaylorconsulting@gmail.com<mailto:johntaylorconsulting@gmail.com> Big ideas; small keyboard On Aug 19, 2019, at 10:19 AM, Katlyn Porter <kporter2@zanestate.edu<mailto:kporter2@zanestate.edu>> wrote: Good morning – We have a scholarship fund that is 10+ years old that has the exact language below (business name was excluded for confidentiality) that I am working to update. Can someone please provide me wording as to why the highlighted condition is not okay. I have started with the verbiage, but I am having trouble explaining best how this particular situation violates charitable class. I currently have as an explanation, The requirements below create a restriction that violates charitable class. This restriction is not sufficiently broad enough to be considered charitable class and does not benefit the community as a whole. Eligibility 1. Must have been accepted at Zane State College; 2. Must enroll as a full-time or part-time student during the quarter for which the scholarship award is sought; 3. Must have attained a high school (or college if attended) grade point average of at least a 2.75 (on a 4.00 scale) or the GED equivalent. 4. Total household income must be at or below 200% of poverty level. Conditions 1. There shall be no restriction by gender. race, color. creed, age. or the national origin of any applicant. 2. The recipient must be enrolled for the purpose of earning an associate degree or a formal certificate. 3. The recipient must maintain a grade point average of at least a 2.75 each quarter or forfeit the scholarship award 4. Academic performance after the first quarter will be reviewed to ensure minimum grade point average is being maintained. 5. Applicants must be an “insert business name” customer or son or daughter of such customer with a primary residence served by “insert business name”. They must be receiving service at the time of the scholarship award. 6. Applicants shall pursue an academic program related to the electric industry. Thank you, Katlyn Porter Assistant Director of Advancement Services Zane State College Foundation<https://nam02.safelinks.protection.outlook.com/?url=https%3A%2F%2Fwww.zanestate.edu%2Fabout%2Ffoundation%2F&data=02%7C01%7CHejnalA%40SI.EDU%7Ccf56c59cb176440b711708d724c33d3b%7C989b5e2a14e44efe93b78cdd5fc5d11c%7C0%7C0%7C637018293306135658&sdata=P%2BylBFxNkWkbKBKBQfVvmy1R2IrD9irYYUsQH3HflWs%3D&reserved=0> 740.588.1374

Thanks, Alan!! Katlyn From: Advancement Services Discussion List <FUNDSVCS@LISTSERV.FUNDSVCS.ORG> On Behalf Of Hejnal, Alan Sent: Monday, August 19, 2019 12:40 PM To: FUNDSVCS@LISTSERV.FUNDSVCS.ORG Subject: Re: Charitable Class... Again It does sound like it was incorrectly established from the beginning (unless the class was sufficiently large, which doesn’t seem to be the case, if the scholarship has been difficult to award!). My US$0.02 worth; the usual disclaimers apply. Good luck! Alan Alan S. Hejnal Data Quality Manager Smithsonian Institution - Office of Advancement 600 Maryland Avenue SW, Suite 600E P.O. Box 37012, MRC 527 Washington, DC 20013-7012 •: 202-633-8754 | •: HejnalA@si.edu<mailto:HejnalA@si.edu> [SNAGHTML5cbfa34]<https://www.si.edu/> [AASP_FundSvcs_LOGO-01(040pct)(mark)] From: Advancement Services Discussion List <FUNDSVCS@LISTSERV.FUNDSVCS.ORG<mailto:FUNDSVCS@LISTSERV.FUNDSVCS.ORG>> On Behalf Of John Taylor Sent: Monday, August 19, 2019 12:35 PM To: FUNDSVCS@LISTSERV.FUNDSVCS.ORG<mailto:FUNDSVCS@LISTSERV.FUNDSVCS.ORG> Subject: Re: [FUNDSVCS] Charitable Class... Again The girls on in the carousel :-). The fund was incorrectly established from the beginning - perpetual or not. These rules have been in place for many years. You may need to involve counsel if the donor pushes back. John John Taylor 919.816.5903 johntaylorconsulting@gmail.com<mailto:johntaylorconsulting@gmail.com> Big ideas; small keyboard On Aug 19, 2019, at 12:26 PM, Katlyn Porter <kporter2@zanestate.edu<mailto:kporter2@zanestate.edu>> wrote: Thank you, John & Aaron. The problem is that when it was created, it was not meant to be perpetual. It was just difficult to award under this criteria because of the strict restrictions, so the fund sat un-awarded for many years. And, they did not have language in the agreement that said the restrictions could be modified if it was unable to be awarded. Now we are trying to clean things up and we are hoping to work with the donor to change the restrictions on the fund. Katlyn From: Advancement Services Discussion List <FUNDSVCS@LISTSERV.FUNDSVCS.ORG<mailto:FUNDSVCS@LISTSERV.FUNDSVCS.ORG>> On Behalf Of Hejnal, Alan Sent: Monday, August 19, 2019 12:13 PM To: FUNDSVCS@LISTSERV.FUNDSVCS.ORG<mailto:FUNDSVCS@LISTSERV.FUNDSVCS.ORG> Subject: Re: Charitable Class... Again (So that John can continue to enjoy the kids and the zoo!) The IRS discusses “charitable class” in the most detail (as far as I can tell), in the context of disaster relief, here<https://nam02.safelinks.protection.outlook.com/?url=https%3A%2F%2Fwww.irs.gov%2Fcharities-non-profits%2Fcharitable-organizations%2Fdisaster-relief-meaning-of-charitable-class&data=02%7C01%7CHejnalA%40SI.EDU%7Ccf56c59cb176440b711708d724c33d3b%7C989b5e2a14e44efe93b78cdd5fc5d11c%7C0%7C0%7C637018293306125668&sdata=95om6TV%2BXhfeRvd9eMY06n6mT5FZy4h%2BxCTT6rjI2VM%3D&reserved=0>. Here’s what it says: What is meant by charitable class? A charitable class is a group of individuals that may properly receive assistance from a charitable organization. A charitable class must be either large enough that the potential beneficiaries cannot be individually identified, or sufficiently indefinite that the community as a whole, rather than a pre-selected group of people, benefits when a charity provides assistance. For example, a charitable class could consist of all individuals located in a city, county, or state. This charitable class is large and benefits to it benefit the entire geographic community. If the group of eligible beneficiaries is more limited, such as employees of a particular employer, the group of individuals eligible for disaster assistance (the class) must be indefinite. Otherwise, the charitable class would consist of a pre-selected group of people, which is prohibited. To benefit an indefinite charitable class, the relief program must be open-ended and include employees affected by the current disaster and those who may be affected by a future disaster. In this situation, the total number of potential members making up the charitable class cannot be counted or identified. Thus, while it may be possible to identify the employees who were victims of a present disaster (which is prohibited as pre-selection), it is not possible to identify employees who could be affected by future disasters. Accordingly, if a charity follows a policy of assisting employees who are victims of all disasters, present and future, it would be providing assistance to an indefinite charitable class. Caution: If the facts and circumstances indicate that a newly established disaster relief program to help employees is intended to benefit only current beneficiaries without any intention to provide for future disasters, a charitable class would not be present. The other side of the coin is that, as IRS Publication 526 says, you cannot deduct “a contribution to a specific individual.” So the charitable class analysis is a way to characterize a large and indefinite enough group of possible beneficiaries so that the donor is not, in effect, selecting specific individuals. This is consistent with the general rule that a charitable contribution should support the exempt charitable purpose of the qualified nonprofit organization, rather than benefiting some individual or individuals. As the IRS charitable class discussion indicates, the two primary ways to meet the charitable class requirement are that the class itself be large (for instance, an entire city) or that the class be indefinite with respect to time (not just the people who meet the criteria today, but also those as-yet-undetermined people who will meet the criteria in the future). In terms of your specific case, of course, only your counsel can offer definitive advice. More generally, with respect to the first perspective, you don’t say what the business is, but if it were, say, an electric company that serves an area like a city, that might be a class that is “large enough that the potential beneficiaries cannot be individually identified” (and not meaningfully different from the population of the city itself!). If the business (and, in particular, its customer base, in your example) were much smaller, that might not be the case. That having been said, as I read your example the scholarship continues over time (perhaps endowed?), so that future eligible recipients were not yet determined at the time that the scholarship was created. It’s hard for me to see how that is not an indefinite class; if future employees who might need disaster assistance sometime in the future meet the criteria for an indefinite class, it’s hard to see how future customers of a company who might be deserving of scholarship assistance at some time in the future is meaningfully different. From the perspective of whether the contribution has the primary purpose of supporting your institution’s charitable purpose, rather than primarily benefiting specific recipients, or primarily benefiting the donor, the other criteria seem to identify a population that is both well-qualified to benefit from the educational opportunities at your institution and economically situated so that a scholarship would facilitate their enrollment. Since the charitable class issue seems to be addressed by (possibly) the size of the class or, in any case, by the indefinite character of the class, it would not seem that the effect is to benefit certain pre-selected individuals. It also does not seem as if the primary effect would be to benefit the donors, since having well-educated customers doesn’t seem especially trenchant, certainly not compared to the benefit to the well-qualified students from families of relatively limited economic means, and the community as a whole by their education. My US$0.02 worth; the usual disclaimers apply. Good luck! Alan Alan S. Hejnal Data Quality Manager Smithsonian Institution - Office of Advancement 600 Maryland Avenue SW, Suite 600E P.O. Box 37012, MRC 527 Washington, DC 20013-7012 •: 202-633-8754 | •: HejnalA@si.edu<mailto:HejnalA@si.edu> <image001.png><https://nam02.safelinks.protection.outlook.com/?url=https%3A%2F%2Fwww.si.edu%2F&data=02%7C01%7CHejnalA%40SI.EDU%7Ccf56c59cb176440b711708d724c33d3b%7C989b5e2a14e44efe93b78cdd5fc5d11c%7C0%7C0%7C637018293306135658&sdata=1Eoc3lAoYcTjJrD%2FT6WqPKKf6CHjW7JLVxlyifhMn7c%3D&reserved=0> <image002.jpg> From: Advancement Services Discussion List <FUNDSVCS@LISTSERV.FUNDSVCS.ORG<mailto:FUNDSVCS@LISTSERV.FUNDSVCS.ORG>> On Behalf Of John Taylor Sent: Monday, August 19, 2019 11:20 AM To: FUNDSVCS@LISTSERV.FUNDSVCS.ORG<mailto:FUNDSVCS@LISTSERV.FUNDSVCS.ORG> Subject: Re: [FUNDSVCS] Charitable Class... Again I am at the Zoo with four kids so cannot look this up for you. But search the archives for “charitable class” and you will find the link to the IRS website. IRS Publication 526 is also relevant. John John Taylor 919.816.5903 johntaylorconsulting@gmail.com<mailto:johntaylorconsulting@gmail.com> Big ideas; small keyboard On Aug 19, 2019, at 10:19 AM, Katlyn Porter <kporter2@zanestate.edu<mailto:kporter2@zanestate.edu>> wrote: Good morning – We have a scholarship fund that is 10+ years old that has the exact language below (business name was excluded for confidentiality) that I am working to update. Can someone please provide me wording as to why the highlighted condition is not okay. I have started with the verbiage, but I am having trouble explaining best how this particular situation violates charitable class. I currently have as an explanation, The requirements below create a restriction that violates charitable class. This restriction is not sufficiently broad enough to be considered charitable class and does not benefit the community as a whole. Eligibility 1. Must have been accepted at Zane State College; 2. Must enroll as a full-time or part-time student during the quarter for which the scholarship award is sought; 3. Must have attained a high school (or college if attended) grade point average of at least a 2.75 (on a 4.00 scale) or the GED equivalent. 4. Total household income must be at or below 200% of poverty level. Conditions 1. There shall be no restriction by gender. race, color. creed, age. or the national origin of any applicant. 2. The recipient must be enrolled for the purpose of earning an associate degree or a formal certificate. 3. The recipient must maintain a grade point average of at least a 2.75 each quarter or forfeit the scholarship award 4. Academic performance after the first quarter will be reviewed to ensure minimum grade point average is being maintained. 5. Applicants must be an “insert business name” customer or son or daughter of such customer with a primary residence served by “insert business name”. They must be receiving service at the time of the scholarship award. 6. Applicants shall pursue an academic program related to the electric industry. Thank you, Katlyn Porter Assistant Director of Advancement Services Zane State College Foundation<https://nam02.safelinks.protection.outlook.com/?url=https%3A%2F%2Fwww.zanestate.edu%2Fabout%2Ffoundation%2F&data=02%7C01%7CHejnalA%40SI.EDU%7Ccf56c59cb176440b711708d724c33d3b%7C989b5e2a14e44efe93b78cdd5fc5d11c%7C0%7C0%7C637018293306135658&sdata=P%2BylBFxNkWkbKBKBQfVvmy1R2IrD9irYYUsQH3HflWs%3D&reserved=0> 740.588.1374