Glossary of Terms

501(c)(3)

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. United 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 define it as a public charity. United Charitable is a publicly supported organization under 509(a)(1) (See public support test).


Form 990

IRS form filed annually by public charities. The IRS uses these forms to assess compliance with the Internal Revenue Code. The organization reports its assets, receipts, expenditures, and compensation of officers on this form. The charity includes a list of grants made during the year, and they are available to the public.


Form 990-PF

IRS form filed annually by private foundations. (The letters PF stand for “private foundation.”) The private foundation reports its assets, receipts, expenditures, and compensation of officers on this form. The charity includes a list of grants made during the year, and they are available to the public.


Form 8282

IRS Form to be completed by charities that sell, exchange, or dispose of donated property within two years of receipt.


Form 8283

The IRS form for non-cash 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.


Account Holder

An individual or business entity with advisory privileges over a donor-advised fund at United Charitable.


Adjusted Gross Income

The level of income on which you pay federal income tax, before any deductions and personal exemptions. This amount is used as a starting point for computing limitations on certain deductions.


Bequest

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. United Charitable qualifies as a potential recipient charity. Special IRS rules apply to these trusts.


Charity or Charitable Organization

An organization that operates exclusively for the benefit of the community by supporting causes such as religion, education, assistance to 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.


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.


Cost Basis

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.


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 United Charitable and then sold, United 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.


Donor

An individual, private foundation, or business entity that has made an irrevocable contribution to United Charitable.


Donor Advisor

An individual who is authorized to recommend grants from a donor-advised fund. United Charitable account advisors may also recommend changes in an account’s investment pool allocation and succession plan.


Donor-Advised Fund (DAF)

Any separately-accounted-for fund maintained by a sponsoring charity where (a) 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; and (b) the sponsoring charity retains exclusive legal control over all decisions regarding investments, grant recipients, and the amount and timing of grants. Also known as a DAF.


Endowment

The principal amount of a gift or bequest accepted by an organization or foundation. 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.


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.


Grant

A monetary award to an organization that is made to support its charitable activities.


In-Kind Contribution

A donation of goods or services rather than cash to a charitable organization. Also known as a non-cash donation.


Irrevocable Contribution

Contributions to United Charitable are irrevocable, meaning that the gift and all related future earnings are no longer your assets. Your gift becomes the property of United Charitable, and you cannot impose any restrictions or conditions that prevent United Charitable from furthering its charitable mission. This is necessary to ensure your full tax deduction at the time your gift is made.


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.


More Than Incidental Benefit

United Charitable cannot approve grant recommendations that would provide the donor, someone related to the donor, or other third party with “more than incidental benefits,” such as receipt of goods or services or entrance to a fundraising event.


Net Proceeds

The amount received from the sale of assets or securities after deducting all costs incurred in the transaction.


Non-cash Donation

A donation of goods or services rather than cash to a charitable organization. Also known as an in-kind donation.


Private Foundation

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, primarily 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.


Public Charity

A nonprofit organization that is exempt from federal income tax under Section 501(c)(3) of the Internal Revenue Code and that receives its 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.” (This is a more subjective test.) Charities report public support information to the IRS each year on Form 990.


Quid Pro Quo Contributions

A payment a donor makes to a charity partly as a contribution and partly for goods or services. For example, if a donor gives a charity $100 and receives a concert ticket valued at $40, the donor has made a quid pro quo contribution. In this example, the charitable contribution part of the payment is $60.


Publicly Traded Securities

Securities for which market quotations are readily available on an established securities market as of the date of the contribution.


Recommend a Grant

Donors cannot make a grant, but they can recommend a grant. United Charitable will perform due diligence, ensure that the grant adheres to our policies, and then make the grant based on the donor’s recommendations.


Religious Organization

A recognized entity that exists to further religious or related objectives. Additional documentation may be required from these organizations before United Charitable can issue them a grant.


Restricted Funds

Funds having stipulations on their use, such as the types of organizations that may receive grants from them, or the procedures used to make grants from such funds.


Restricted Stock

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.


SEC

Abbreviation for Securities and Exchange Commission, an agency created by Congress to regulate the securities markets, and to protect the investing public.


Special Assets

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. United Charitable will liquidate donated assets as soon as possible; they will not be held in-kind.


Successor-Advisor

A person named to continue a donor-advised fund’s activity after the death or inability to act due to incapacity or disability of the last surviving account advisor. This could be a relative, friend, or representative of the account advisor. A successor-advisor must provide United Charitable with written proof of the advisor’s death (in the form of a death certificate or a copy of a durable power of attorney with respect to the disabled advisor from the account) before assuming the role of account advisor. Upon doing so, this individual can then name new successor-advisors.


Supporting Organization

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 United Charitable can issue them a grant.


Tax-Exempt Organization

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 generally to the state Attorney General’s office. Charities may also be exempt from sales and local property taxes.


Trust

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.


Trustee

The person(s) or institution(s) appointed to administer the affairs of a company or other organization.


Unit Value

A calculation based on the pool’s aggregate value, after Program 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 pool at the end of each day the New York Stock Exchange is open.


Unrestricted Funds

Funds that are not specifically targeted to particular uses by the donor, or for which restrictions have expired or been removed.