- 501(c)(3) public charity vs private foundation
- Both are exempt under 501(c)(3), but a public charity draws broad support from the public and government and passes a public support test, while a private foundation is typically funded by one source. Private foundations face stricter rules: a minimum distribution requirement, an excise tax on net investment income, self-dealing prohibitions, and lower deductibility ceilings for their donors.
- 501(c)(4) and lobbying limits
- A 501(c)(4) social welfare organization may lobby without limit and engage in some political activity, but contributions to it are not tax-deductible as charitable gifts. A 501(c)(3) may lobby only to an insubstantial degree and may not intervene in campaigns at all. Some organizations run a (c)(3) and an affiliated (c)(4) side by side with strict cost allocation between them.
- The h-election (501(h))
- An optional election that replaces the vague 'insubstantial part' lobbying standard with a clear expenditure-based sliding scale tied to exempt-purpose spending, with a separate lower cap on grassroots lobbying. Most charities that lobby at all are better off electing it, because it converts a judgment call into an arithmetic one.
- Substantiation and the $250 written acknowledgment rule
- A donor cannot deduct a single contribution of $250 or more without a contemporaneous written acknowledgment from the charity stating the amount of cash or a description of property received and whether any goods or services were provided in return. The letter must be in hand before the donor files. Failing to send it does not penalize the charity but can cost the donor the deduction entirely.
- Quid pro quo disclosure
- When a donor pays more than $75 and receives goods or services in return — a gala seat, a tote bag, a round of golf — the charity must give a written statement telling the donor that only the amount above the fair market value of the benefit is deductible, and providing a good-faith estimate of that value.
- Fair market value of benefits
- The estimated value of what a donor receives back from a gift, which reduces the deductible portion. Charities set it by reference to what the item or experience would cost on the open market, with narrow exceptions for token items and low-cost articles.
- Form 990, 990-EZ and 990-N
- The annual information return. Small organizations under the gross-receipts threshold may file the 990-N electronic postcard, mid-size organizations file the 990-EZ, and larger organizations file the full 990 with its schedules. Missing three consecutive years triggers automatic revocation of exemption. Every filed 990 is a public document and is where donors, funders and reporters look first.
- Schedule B donor disclosure
- The 990 schedule listing substantial contributors. Names and addresses on Schedule B are redacted from the version made public by charities and by the IRS, so donor identities are not disclosed to the general public through this route, though the schedule is still filed with the IRS.
- Unrelated business income tax (UBIT)
- Tax on income from a trade or business regularly carried on that is not substantially related to the exempt purpose — a gift shop selling unrelated merchandise, some advertising sales, certain sponsorship arrangements that cross from acknowledgment into advertising. Related-purpose revenue, passive investment income and genuine sponsorship acknowledgments generally fall outside it.
- Excess benefit transactions and intermediate sanctions
- When an organization gives a disqualified person — an insider such as an officer, director or major donor — more than fair value, the IRS may impose excise taxes on that person and on managers who knowingly approved it, without having to revoke exemption. Boards manage the risk by documenting comparability data and independent approval of compensation.
- Private inurement
- The absolute prohibition on an organization's net earnings benefiting an insider. Unlike excess benefit rules, which are penalty-based, inurement is a threshold condition of exemption itself: an organization operated for private benefit is not exempt at all.
- Conflict of interest policy
- A board-adopted policy requiring annual disclosure of financial and personal interests and recusal from decisions where a conflict exists. The Form 990 asks directly whether the organization has one and how it is monitored, which makes it one of the most visible governance signals to a funder.
- Charitable solicitation registration
- Most states require a charity to register before asking their residents for money, with annual renewals, filing fees and, in some states, professional fundraiser registration. Online giving pages and email appeals can trigger obligations in states where the organization has no office at all. Texas does not impose a general charitable solicitation registration, but has specific registration regimes for certain categories including law enforcement and public safety solicitation.
- Texas Attorney General charitable oversight
- The Texas Attorney General's Charitable Trusts Section is the state's enforcement authority over charitable assets and charitable trusts, receives notice of certain nonprofit legal proceedings, and pursues deceptive charitable solicitation. It is the state-level counterpart to IRS oversight and the office a Texas donor complaint most often reaches.
- Donor-advised fund (DAF)
- An account held at a sponsoring public charity — a community foundation or a commercial sponsor — into which a donor contributes, takes the deduction immediately, and later recommends grants to charities. Legally the sponsor controls the assets; the donor's role is advisory. There is currently no legally mandated payout deadline for an individual DAF account, which is the center of an ongoing policy argument.
- Private foundation 5% distribution requirement and excise tax
- A private non-operating foundation must distribute roughly 5% of the fair market value of its net investment assets each year in qualifying distributions, or face an excise tax on the shortfall. Separately, its net investment income is subject to an excise tax. These two rules set the rhythm of most private foundation grant calendars.
- Fiscal sponsorship
- An arrangement where an existing 501(c)(3) accepts tax-deductible gifts on behalf of a project that has no exemption of its own, in exchange for an administrative fee and legal responsibility for the funds. In the common comprehensive model the project is legally part of the sponsor; in a pre-approved grant relationship the project remains separate and the sponsor regrants.
- Group exemption
- A single exemption ruling covering a central organization and its subordinate chapters, letting affiliates operate as exempt without each filing its own application. The central organization must maintain the roster and exercise general supervision, and subordinates still have their own annual filing obligations.
- Restricted vs unrestricted net assets
- Donor-imposed restrictions create net assets with donor restrictions, which may only be spent on the stated purpose or after a stated date; everything else is without donor restrictions. A large restricted balance can sit next to a cash shortage, which is why a surplus on paper is not the same as money available to make payroll.
- Board-designated reserves
- Unrestricted funds the board has set aside by resolution for a purpose such as an operating cushion or a building fund. Because the restriction is internal, the board can release it — which makes it real planning but not a legal restriction.
- Operating reserve months
- Unrestricted, liquid net assets expressed as months of average operating expense. It is the single most common measure of nonprofit financial resilience, and it is the number a funder asks for when deciding whether an organization can absorb a delayed contract payment.
- Functional expense allocation
- The requirement to report expenses by both nature and function — program services, management and general, and fundraising — allocating shared costs such as rent, technology and executive time on a documented, reasonable basis. The allocation method drives every ratio computed from the statements.
- Program, management and fundraising ratio
- The proportion of total expense in each functional category, published on the 990 and used by rating services. It measures where money was categorized, not whether the work succeeded, and is easily distorted by allocation choices.
- The overhead myth
- The well-documented critique that judging charities by low administrative and fundraising percentages starves them of the infrastructure — accounting, technology, evaluation, competitive salaries — that makes programs work. The counter-framing pushes donors toward true program cost, capacity and outcomes rather than a ratio.
- Cost per dollar raised
- Fundraising expense divided by the money it produced, computed per channel. Direct mail acquisition can cost more than a dollar to raise a dollar and still be sound if it builds a renewable file; a major gift program should cost a small fraction of that. Blended organization-wide figures hide both facts.
- Donor retention rate
- The share of last year's donors who gave again this year, tracked separately for first-time and repeat donors. First-year retention is typically far lower than repeat-donor retention, which is why converting a first gift to a second is the highest-leverage move in most annual funds.
- Lapsed donor
- A donor whose most recent gift falls outside the organization's active window, commonly twelve to twenty-four months. Reactivation generally costs less than acquiring a stranger, because the relationship and the data already exist.
- LYBUNT and SYBUNT
- Last Year But Unfortunately Not This year, and Some Year But Unfortunately Not This year. Two standard CRM reports that surface donors slipping away in time to do something about it, and the backbone of most year-end recapture appeals.
- Average gift
- Total dollars divided by number of gifts, ideally reported by channel, appeal and segment. A rising average with a falling donor count is a warning: revenue is holding while the base erodes.
- Major gift threshold
- The dollar level at which a gift moves from mass-market treatment into individual cultivation and personal solicitation. It is set by each organization relative to its own gift table, not by any external standard, and it defines a development officer's portfolio.
- Moves management
- A structured pipeline for individual donors — identification, qualification, cultivation, solicitation, stewardship — where each planned interaction is a 'move' toward a specific ask, tracked in the CRM with an owner and a date.
- Capital campaign and the quiet phase
- A time-limited, goal-specific campaign for facilities, endowment or program expansion. In the quiet phase, lead gifts are secured privately — commonly a large share of the goal — before any public announcement, so the campaign launches with visible momentum rather than a plea.
- Pledge and pledge receivable
- A written, unconditional promise to give in the future. Accounting standards require recognizing the revenue when the promise is made, discounted for multi-year pledges, with an allowance for uncollectible amounts — so a campaign can post a large revenue year while the cash arrives over several.
- Planned giving and bequests
- Gifts arranged during life that mature later: a will bequest, a retirement account or life insurance beneficiary designation, a charitable gift annuity, a charitable remainder or lead trust. Bequests dominate the category by volume, and the cheapest planned-giving program is simply asking loyal long-term donors to name the organization in their will.
- Matching gift
- An employer's commitment to match an employee's charitable contribution, often dollar for dollar up to an annual cap, sometimes extended to retirees and spouses. It doubles a gift at no cost to the donor, and requires only that someone tells the donor the program exists.
- Employer match capture rate
- The share of match-eligible donations that actually get matched. It is low across the sector — most eligible gifts are never submitted — because donors do not know their employer offers a match, which makes match-eligibility prompts at the point of donation one of the cheapest revenue gains available.
- Giving day
- A concentrated, usually 24-hour community fundraising event with matching pools, prizes and a public leaderboard, run by a community foundation or a dedicated intermediary. It excels at acquisition, visibility and rallying volunteers; its weakness is that a large share of the dollars would have been given anyway.
- Peer-to-peer fundraising
- Supporters raise money from their own networks on personal or team pages, typically anchored to a walk, ride or challenge. The organization gains access to donors it does not own — the relationship belongs to the participant, so second-gift conversion is the hard part.
- Monthly sustainer and recurring revenue
- Automatic recurring gifts charged monthly. Sustainers retain dramatically better than one-time donors, produce predictable cash flow, and lift lifetime value; the operational risks are payment-card expiry and involuntary churn, managed with card-updater services and dunning sequences.
- Grant cycle
- A funder's fixed rhythm of deadlines, review meetings, board decisions, award notices and reporting dates. Because the calendar belongs to the funder, grant-dependent budgets have to be built around cycles that may fall only once or twice a year.
- Letter of inquiry (LOI)
- A short pre-proposal — commonly one to three pages — describing the organization, the need, the project and the amount sought, submitted so a funder can invite or decline a full proposal. It is a screening device, and a clean, specific LOI saves both sides weeks.
- Logic model and theory of change
- A logic model lays out inputs, activities, outputs, outcomes and impact in a chain; a theory of change explains why each link is expected to hold and what has to be true for it to work. Funders increasingly ask for both, and program design is easier to defend when the causal story is written down.
- Outputs, outcomes and evaluation
- Outputs count what was done — meals served, students enrolled. Outcomes measure what changed for the people served. Impact attempts to attribute that change to the intervention. Evaluation is the method — from internal data collection through third-party or comparison-group studies — that tests the claim, and the honest reporting of null results is what separates evaluation from marketing.
- Indirect cost rate
- The percentage a funder allows for shared overhead on top of direct project cost. Under federal uniform guidance, pass-through entities must accept a recipient's federally negotiated rate or offer the de minimis rate; many private funders cap indirect far below true cost, and the gap has to be subsidized from unrestricted revenue.
- Government contract reimbursement and cash-flow lag
- Most government human-services contracts pay in arrears against documented expenses. The organization pays staff and rent first, invoices, and waits — often 30 to 90 days or longer — so a growing contract portfolio increases working-capital need even as it looks like growth.
- In-kind contribution
- Donated goods, services or use of facilities. Contributed nonfinancial assets must be recognized at fair value and, under current standards, presented as a separate line with disaggregation by category and disclosure of how they were valued and used. Donated professional services are recognized only if they require specialized skills that would otherwise have been purchased.
- Volunteer hour valuation
- The practice of assigning a dollar value to volunteer time for communications and grant narratives, using a published national or state hourly estimate. It is legitimate for storytelling and stewardship, but general volunteer time is not recognized as revenue in audited financial statements.
- Endowment and UPMIFA spending policy
- A permanent fund whose earnings support operations. Under the Uniform Prudent Management of Institutional Funds Act, adopted in Texas, the board spends what is prudent under enumerated factors rather than being locked to historic dollar value — most institutions set a policy rate applied to a multi-year rolling average of market value to smooth volatility.