Basic Steps Checklist

Starting a Not-for-Profit Educational Foundation

A not-for profit educational foundation is a tax-exempt organization formed to assist public schools. It can provide much needed and desired support for the entire school system beyond local, state, and federal appropriations. The success of a not-for-profit educational foundation depends on the amount of planning that goes into it.

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Practices:

1. A not-for-profit educational foundation should be a legally incorporated entity qualifying for tax-exempt status so that donors can receive tax benefits from their gifts.
2. A checklist of basic steps for starting a not-for-profit educational foundation and receiving tax exempt status pursuant to Internal Revenue Code section 501(c)(3) (which permits contributions to not-for-profit educational foundations to be eligible for certain tax deductions) is set forth below:
   
   
   • Create and organize a planning committee to undertake a feasibility study and research.
   • Secure legal and financial advice from experienced professionals (it may be helpful to consult with state and local chapters of bar associations for referrals to low cost pro bono legal assistance).
   • Determine your not-for-profit educational foundation’s name, mission statement, and size of the initial board of directors including preliminary officers, committees, and meeting times and places.
   • Establish an operating budget including a determination of start-up cash for fees and administrative expenses.
   • Establish an address and telephone number for your not-for-profit educational foundation and design its logo, letterhead and image items.
   • Register the domain (URL) of the Foundation’s website with a registrar. Once the website is live and the URL active, request that the school district put a link on its website for maximum exposure to school district constituents.
   • Contact the Secretary of State to obtain incorporation materials and verify the availability of the not-for-profit educational foundation’s proposed name.
   • Draft and file articles of incorporation with the Secretary of State’s office. The articles of incorporation state the name of the not-for-profit educational foundation, the registered agent and office, statement of purpose, the number, names and address of initial directors, names and address of incorporators, the duration of the not-for-profit educational foundation, membership provisions and additional provisions.
   • Create bylaws in accordance with the laws of your state which set forth how your not-for-profit educational foundation will operate. They will typically include information on the not-for-profit educational foundation’s mission, membership, board of directors, committees, fiscal management as well as how to amend the bylaws if necessary. Bylaws are not filed with the Secretary of State but are internal documents.
   • Obtain a federal Employer Identification Number (EIN) by executing IRS form SS-4 which is available at the IRS website www.irs.gov.
   • File required federal form for tax-exempt status from the Internal Revenue Service. The following form is required by the IRS for tax-exempt status: Form 1023 (“Application for Recognition of Exemption under 501(c)(3) of the Internal Revenue Code”). This form requires the not-for-profit educational foundation to provide a description of its exempt purpose and actual programs as well as financial information. The form is available at the IRS website or you can request it by calling the IRS at (800) 829-3676. 
   • File Federal Form 990 (“Return of Organization Exempt from Income Tax”) annually with the IRS. This form is required of most organizations granted 501(c)(3) tax-exempt status. Most Section 501(c)(3) organizations must complete and file a form 990. The foundation should check with its tax advisor for exceptions. 
   • Obtain tax exempt status for the not-for-profit educational foundation from its State Department of Revenue and file charitable registration documents with its State Attorneys General Office.
   • Develop the not-for-profit educational foundation’s strategic plan and the process by which it will be monitored and assessed.
   • Obtain not-for-profit mailing permit from the U. S. Postal Service. 
   • Consider the need for insurance coverage to protect the board of directors and the assets of the not-for-profit educational foundation. This includes obtaining general liability and directors’ and officers’ liability insurance as well as other insurance to mitigate risks.