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Section of the Internal Revenue Code that designates organizations as charitable and tax-exempt. Organizations qualifying under this section include religious, educational, charitable, amateur athletic, scientific, and literary groups; and organizations involved in the prevention of cruelty to children or animals. Vanguard Charitable is tax-exempt under Section 501(c)(3) and is also classified as a public charity under Section 509(a)(1) and 170(b)(1)(A)(vi).
509(a)(1), (2), (3), and (4)
Sections of the Internal Revenue Code that define public charities (as opposed to private foundations). A 501(c)(3) organization must have a 509(a)(1), (2), (3), or (4) designation to be classified as a public charity. Vanguard Charitable is a publicly supported organization under 509(a)(1). (See public support test).
Form 990/Form 990-PF
IRS forms filed annually by public charities and private foundations, respectively. (The letters PF stand for "private foundation.") The IRS uses these forms to assess compliance with the Internal Revenue Code. Both forms list organization assets, receipts, expenditures, and compensation of officers, among other items. Both include a list of grants made during the year, and they are made available to the public.
Certain religious organizations do not have to file Forms 990. Organizations whose assets fall below certain thresholds may file a simple electronic 990-N.
IRS Form to be completed by charities that sell, exchange, or dispose of donated property within three years of receipt.
The IRS form for noncash charitable contributions, filed by the taxpayer for any tax year in which you claimed a total deduction of more than $500 for all contributed property, including publicly traded securities.
An account advisor is typically the donor who opens the account. Account advisors have primary responsibility for certain account activities. They name the account, recommend an initial investment allocation, and establish a succession plan for the account.
Each account can have up to two account advisors, who receive equal access and privileges to the account. While some account activities must be initiated and approved by all account advisors, many may be completed by one account advisor.
Upon the death or incapacity of an advisor, the remaining advisor can nominate a second advisor. Succession plans are enacted when all account advisors are unable or unwilling to manage the account.
Adjusted Gross Income
The level of income on which you pay federal income tax, before itemized deductions and personal exemptions. This amount is used as a starting point for computing limitations on certain deductions.
A sum of money or property available to the designated recipient upon the donor's death.
Charitable Remainder Trust
A trust that pays current income to one or more non-charitable income beneficiaries, and later pays the entire remainder to charity. You transfer assets irrevocably, receive a current (partial) charitable deduction for the fair market value of the remainder interest passing to charity, and the income beneficiaries earn taxable income from the trust assets. Upon termination of the non-charitable interests (usually at or upon the death of the donor), the remaining trust assets go to charity. Vanguard Charitable qualifies as a potential recipient charity. Special IRS rules apply to these trusts.
Charity or Charitable Organization
An organization that operates exclusively for public benefit by furthering causes such as religion, education, lessening burdens of the government, promotion of health, relief of poverty or distress, or other charitable purposes. Generally exempt from federal income tax under Section 501(c)(3) of the Internal Revenue Code, and eligible to receive tax-deductible charitable gifts.
A tax-exempt, nonprofit, publicly supported institution whose funds are established by many separate donors for the long-term benefit of residents of a defined area, such as a community or state. Community foundations provide many services to donors who wish to establish endowed funds without incurring the administrative and legal costs of starting independent private foundations.
A private, company-sponsored foundation that derives grant-making funds primarily from the contributions of a for-profit business. The company-sponsored foundation often maintains close ties with the donor company, but it is a separate, legally recognized organization, sometimes with its own endowment. A corporate foundation is subject to the same rules and regulations as other private foundations.
Corporate Giving Program
A grant-making program established and administered within a profit-making company. Gifts or grants from the corporation go directly to charitable organizations. Expenses are planned as part of the company's annual budgeting process, and the program is usually funded with pretax income. Corporate giving programs may work in concert with a philanthropic account.
Generally the original cost of an asset, including transaction fees paid at the purchase and any reinvested dividends or capital gain distributions. For tax purposes, the cost basis is subtracted from the sales proceeds to determine any capital gain or loss. Special IRS rules apply for gifts and bequests.
Council on Foundations
A membership organization that works to support foundations by promoting knowledge, growth, and action in philanthropy.
Dividends and capital gains distributions
If a donated asset has a dividend or capital gain record date during the brief period between when it is received by Vanguard Charitable and then sold, Vanguard Charitable will utilize any resulting distribution it receives to offset operating expenses. No substantiation will be issued, and the donor's account will not be credited. Donors are encouraged to contribute stock away from dividend record dates.
However, if the donated asset is a mutual fund, any such distribution will be credited to the donor's account. In any case, the distribution would not represent an additional donation according to IRS guidelines.
Donors contribute to a Vanguard Charitable account. Vanguard Charitable donors can be individuals, corporations, private foundations, partnerships, trusts, and other charitable organizations. Donors are often also account advisors (see below).
Eligible donors will receive a tax substantiation letter acknowledging assets contributed to Vanguard Charitable.
Additional donors who don’t have advisory rights may also contribute to the account. Their contributions may qualify for a tax deduction.
A fund held by a charitable organization that is not wholly spendable on a current basis. The principal is intended to be maintained intact and invested to create a source of income for an organization or foundation. As a donor, you may require that the principal remain intact forever, for a defined period of time, or until sufficient assets have accumulated to achieve a designated purpose. Endowment investing and spending may be regulated by state law.
Fair Market Value
The price at which property would change hands between a willing buyer and a willing seller. Special IRS rules apply to the valuation of charitable gifts. For more information on this topic, visit the IRS website at www.irs.gov and read the following publications: Publication 526 - Charitable Contributions and Publication 561 - Determining the Value of Donated Property.
A private foundation that derives its funds from members of a single family. At least one family member generally serves as an officer or board member of the foundation. As the donor, you or your relatives play a significant role in governing or managing the foundation throughout its life.
A financial award to an organization that is made to support its charitable activities and is not a payment for services.
A private investment option for financially sophisticated, wealthy investors that seeks positive performance irrespective of the returns of the stock and bond markets.
A donation of goods or services rather than cash or value to a charitable organization.
Interested parties are nominated by account advisors to receive account access, information, and advisory privileges at one of three levels in the chart below. This role is important for a financial advisor, accountant, or family member who the account advisors wish to provide some account access, involve in charitable planning, or help manage the account.
An investment vehicle made up of a combination of mutual funds, in which the assets of a philanthropic account are invested. Learn about Vanguard Charitable's investment options.
Contributions to Vanguard Charitable are irrevocable, meaning the gift and all related future earnings are no longer the individual's assets and cannot be recalled. The gift becomes the property of Vanguard Charitable, and the donor cannot impose any restrictions or conditions that prevent Vanguard Charitable from furthering its charitable mission. Contributions must be irrevocable to ensure the donor's full tax deduction at the time the gift is made.
The TIFF Multi-Asset Fund is one of a series of SEC-regulated mutual funds offered by TIFF. It represents a diversified portfolio providing exposure to a broad range of markets, strategies and managers. MAF is available as an investment option (MAP) for qualifying Vanguard Charitable accounts.
Marginal Tax Rate
The income tax rate at which the last dollar of your income is taxed. Under federal law, you often pay a lower tax rate on your first dollar of taxable income than you do on your last dollar. The marginal rate is the highest rate at which your income is taxed.
The amount received from the sale of assets or securities after deducting all costs incurred in the transaction.
Any separately-accounted-for fund owned and controlled by a sponsoring charity (such as Vanguard Charitable) where the donor or a designee of the donor is given the opportunity to advise the charity regarding investments, grant recipients, and the amount and timing of grants.
The Philanthropic Impact Fund
A fund established by Vanguard Charitable and overseen by its board of trustees. Grants from the fund primarily support organizations whose work in donor education or nonprofit capacity-building aligns with Vanguard Charitable’s mission to maximize philanthropy and increase its impact over time.
A fund that commingles an individual's contributions with assets from another donor and operates similarly to a charitable remainder trust. An individual transfers assets irrevocably and receives a current charitable deduction for the fair market value of the remainder interest passing to charity, and the income beneficiaries earn taxable income from the fund's assets. Upon termination of the non-charitable interests (usually at or upon the death of the donor), the remaining assets go to charity. Vanguard Charitable qualifies as a potential recipient charity. Special IRS rules apply to these funds.
Private Equity Fund
A private investment option for financially sophisticated, wealthy investors that seeks positive performance through concentrated and long-term investments in unregistered (and typically illiquid) equity securities. Prominent examples include venture capital and leveraged buyout funds. Private equity funds are not registered with the SEC.
A nongovernmental, nonprofit organization, usually funded by a single source (such as an individual, family, or corporation), with a program managed by its own trustees or directors. A private foundation is established to maintain or aid social, educational, religious, or other charitable activities, typically through grant-making. Private foundations are exempt from federal income tax under Section 501(c)(3) of the Internal Revenue Code. However, private foundations are subject to a 1% or 2% federal excise tax on their net investment income.
A nonprofit organization that is exempt from federal income tax under Section 501(c)(3) of the Internal Revenue Code and generally receives financial support from the public. Religious, most educational, and many medical institutions are public charities. Other organizations exempt under Section 501(c)(3) must pass a public support test to be considered public charities, or they must be formed to benefit an organization that is a public charity.
Public Support Test
A test designed to ensure that charitable organizations are attracting contributions from the public rather than a limited number of donors. The specific test that applies to a donor-advised fund is the Section 509(a)(1) and 170(b)(1)(A)(vi) test. Organizations must show each year that they receive at least one-third of their support from the public, including government agencies and foundations.
An organization that fails this test still may qualify as a public charity if (a) its public support equals at least 10% of all support and (b) it also has other characteristics---such as a broad-based board---that make it sufficiently "public." Charities report public support information to the IRS each year on Form 990.
Publicly Traded Securities
Securities for which market quotations are readily available on an established securities market as of the date of the contribution.
A recognized entity that exists to further religious or related objectives. Additional documentation may be required from these types of organizations before Vanguard Charitable can issue them grants.
Funds with stipulations on their use, such as the types of organizations that may receive their grants, or the procedures used to make grants from such funds.
Shares of stock held by company insiders that are subject to certain limitations upon their sale or transfer. Specific SEC regulations govern the trading of restricted stock.
Abbreviation for Securities and Exchange Commission, an agency created by Congress to regulate the securities markets and protect the investing public.
Select Investment Options
Investment options available to Select Accounts with reduced administrative and investment fees. See a complete list of investment options.
Assets such as private stock, foreign stock, or limited partnership interests. Such assets may well provide greater tax benefits than donating cash or publicly-traded stock because they are often highly appreciated, and one can avoid more capital gains tax by contributing them to charity. These gifts are generally more complex than gifts of publicly-traded securities, and extra time and careful handling are usually required. The IRS may require a qualified appraisal of the donated assets. Vanguard Charitable will liquidate donated assets as soon as possible; they will not be held in-kind.
Investment options available to Standard Accounts. See a complete list of investment options.
Successor-advisors may be nominated in an account’s succession plan to act as account advisor when all current account advisors either resign or are unable to act due to incapacity or death. Successor-advisors have no account privileges until that time.
A charitable entity that exists in order to support (for example, with fundraising activities) an established public 501(c)(3) charity. Additional documentation may be required from these organizations before Vanguard Charitable can issue them a grant.
Sustainable Disaster-Recovery Fund
A fund designed to provide valuable project and program funding to experienced organizations seeking to create sustainable solutions for areas impacted by major disaster. This fund can accept tax-free IRA distributions as permitted by the Pension Protection Act of 2006. It is not intended to provide immediate financial assistance to direct relief organizations, as contributions are invested to allow for potential growth before distribution. Instead, it is designed to help create informed and effective enhancements to the process of long-term recovery funding.
TIFF Advisory Services Inc. is a taxable non-stock corporation and SEC-registered investment advisor that administers all investment vehicles bearing the TIFF name.
A nonprofit organization that does not have to pay state or federal income taxes. Any organization (other than a church) seeking recognition of its status as tax-exempt must apply to the IRS and may have to fulfill additional state applications or registration requirements. Charities may also be exempt from sales and local property taxes.
The Investment Fund for Foundations is a West Conshohocken, Pa.-based organization that was founded in 1991 and comprises three regulated entities, including TIFF Investment Program, Inc. (TIP), an SEC-regulated family of mutual funds, TIFF Advisory Services, Inc. (TAS), the investment advisor that administers all investment vehicles bearing the TIFF name, and TIFF Education Foundation (TEF), which provides resources aimed at enhancing non-profit fiduciaries' knowledge of investing.
The TIFF Multi-Asset Pool is an investment pool offered by Vanguard Charitable to Select accounts. MAP's underlying fund is the TIFF Multi-Asset Fund.
A legal agreement that allows the donor to set aside money or property of one person for the benefit of one or more persons or organizations. The legal title of a trust remains with the trustee.
The person(s) or institution(s) appointed to administer the affairs of a trust or other organization.
A calculation based on the investment option's aggregate value, after company expenses, divided by the number of units outstanding. The unit value includes any unrealized gain or loss in the underlying mutual fund investments, and any dividend and capital gains distributions paid by the funds. The unit value is calculated for each Vanguard Charitable investment option at the end of each day the New York Stock Exchange is open.
Funds that are not specifically targeted to particular uses by the donor, or for which restrictions have expired or been removed.
Many of the definitions and terms in this glossary are courtesy of the Council on Foundations.