Legal and Tax Status
Narragansett Number One Foundation was established as a Maine nonprofit corporation
on September 7, 2001, the date the Secretary of State of the State of
Maine accepted the Articles of Incorporation filed by Pat and Erwin
The Application for Recognition of Tax-Exempt Status for the Foundation
was filed with the Internal Revenue Service on November 8, 2001. The
Foundation received a determination letter from the IRS dated December
18, 2001 declaring it an organization described in section 501(c)(3)
of the internal Revenue Code with status as a private foundation as
opposed to a public charity.
Private foundations and public charities are nonprofit entities (they
can be nonprofit corporations or trusts). The difference is that public
charities receive their support their contributions from
the public. A private foundation, however, generally receives its support
from one or more individuals or a family. Both private foundations and
public charities have favorable tax-exempt status but a private foundation
must follow certain requirements that are not imposed on public charities.
For example, at least 5% of the value of the Foundation assets must
be distributed each year. (For this Foundation, the distributions will
be made by June 30.) In addition, there is an annual excise tax on the
Foundations investment income.
The income tax deduction rules for contributions by donors differ by
type of charity. For public charities, a donor can take up to 50% of
adjusted gross income for a contribution of cash and a deduction of
up to 30% of adjusted gross income for a contribution of an appreciated
asset. For private foundations, however, a donor is limited to 30% of
adjusted gross income for a cash contribution and 20% of adjusted gross
income for a contribution of appreciated publicly-traded stock. The
rules are tricky and anyone interested in contributing to the Foundation
should consult with his or her tax advisor.