How Do Grant Writer’s Need to Consider Charitable LLC’s??

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Last year ended with big news in philanthropy: $45,000,000,000. That’s the Facebook stock that Pricilla Chan and Mark Zuckerberg will transfer to the Chan Zuckerberg Initiative (CZI) for philanthropic giving. The CZI will operate as a Limited Liability Company (LLC) instead of the more traditional private foundation.

 

CZI is not the only philanthropic LLC initiative. As a grants professional, I wonder if a grant seeking organization needs to tweak its strategy with regards to LLC giving.

 

For an investor, LLCs have advantages:

 

  • Donations can go to individuals, non-charities and organizations abroad without IRS approval
  • No transparency as its tax filings do not have to be made public
  • No restrictions against lobbying and electioneering

 

and disadvantages:

 

  • No tax advantages. Gifts to LLC are taxable until given out as donations
  • No reverse clause can destroy the tax deduction. LLCs can’t make grant agreements reverting funds if terms are breached

 

Ultimately, investors in a LLC vs. a private foundation will gain maximum flexibility while sacrificing some valuable tax benefits. With these attributes in mind, should a grant seeking strategy change for nonprofit organizations (NPO)? How will a NPO’s common mission be seen through the barrage of asking that a charitable LLC receives? A NPO’s strategy should focus on relationship building with deep accountability.

 

Trust will be vital. If a LLC gives a charitable donation, it has no assurance that a breach of agreement will mean a return of funds. It will be a gift rather than a grant. Unlike a LLC, a NPO is transparent. A good base to relationship building is ensuring that your NPO has an impeccable track record on grant requirements and reporting. To attract the attention of a philanthropic LLC, a NPO will also need to build its public presence with publicity and marketing.

 

Any grant seeking organization does well to build relationships with funders identified as a good match. A LLC relationship should be approached more like seeking a corporate gift rather than a foundation grant. Although LLC tax forms won’t be accessible, a lot of its organizational information and news might be.

 

  • If LLC has a website, visit it regularly. Watch for online application openings.
  • Follow the LLC in the news media. Sign-up for Google alerts with the LLC name.
  • Seek the LLC on social media and follow. (Facebook is an obvious follow for CZI!)
  • If LLC has a blog or newsletter, subscribe
  • Identify if anyone in your NPO has a contact with anyone in the LLC

 

A charitable LLC has greater control with its influence, but only benefits from a tax deduction when it makes a donation. The best approach to a LLC relationship is for a NPO to build its accountability and public presence. With the endless forms of communication available, there’s a good chance a NPO can catch the attention of a charitable LLC with similar interests.

 

What experience have you had with charitable LLCs so far? What questions do you still have? Share them with us in the comments section below!

 

 

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