# §Philanthropy and Non-Profit Constraints Philanthropy is the funding mechanism and Non-Profits are the Organization in an Organization-Funding Diad. ([[Organizations and their funding mechanisms are coupled]]) * Profit in non profits goes back towards the mission * Could this involve investing it? * Non-profits must spend all of their income every year * This can lead to very cyclic activity * Cyclic hiring harms employee’s ability to think long term because there is no buffer to pay them in income draught periods * Are universities non-profits? They invest their excess income. * Non-profits need to constantly be fundraising * Is this because they need to spend down every year? * This means that they can’t do anything that looks bad in the short term * What’s the difference between a foundation and a non-profit? * A foundation is a *type* of non-profit. The other type is Public charities. * The money for foundations comes from an initial gift from an individual or business and spends out of interest. * Foundations can only spend in ways that adhere with 501(c)(3) of the Internal revenue code * Foundations can be operating or non operating * A non operating foundation give money to orgs * An operating foundation distributes funds to its own purposes * Public Charities * A charity must receive 1/3 of its contributions from the general public OR at least 10% from general public + subjective test of “support” * Public charities have higher donor tax deductibles * How much? * [[Only charities can receive tax-deductible donations]] * 501(c)(3)s all are exempt from paying income tax, but only charities exempts donors from income tax * [What rules do charities have to follow? | HowStuffWorks](https://money.howstuffworks.com/economics/volunteer/starting-a-charity/rules-charities-follow.htm) * [[Funders want to follow other funders]] * It’s easier for foundations to pay out grants than anything else ([A “Watch-Out” for Private Foundations Offering Prizes](https://ssir.org/articles/entry/a_watch_out_for_private_foundations_offering_prizes)) but [[People giving out grants try to derisk them as much as possible]] * [[Charities raise money on a yearly or sub-yearly basis]] * [[Most people give money to philanthropy to make themselves look and feel good]] * [[Philanthropies can easily become misaligned with their money factories]] * [[Philanthropies are forced to show consistent short term progress]] * [[Most philanthropists give to specific causes]] * [[Non-profits must meet several requirements to Maintain 503c Status]] * [[People have different and unknown caring money thresholds]] * A possible tweak: [[Pay-it-forward tithing could resolve the tension between the potential public-good and potential profit in research.]] * [[Philanthropy has pathetic traunching]] * [[Funders find it dissatisfying to feel like they are just doing regranting]] * Philanthropists don’t like saying hard nos so they string people along * Philanthropists want to develop a relationship See also: [[§Misalignment between funders and nonprofits in research]] [Web URL for this note](http://notes.benjaminreinhardt.com/§Philanthropy+and+Non-Profit+Constraints) [Comment on this note](http://via.hypothes.is/http://notes.benjaminreinhardt.com/§Philanthropy+and+Non-Profit+Constraints)