The vast majority of associations that operate related foundations are neither effectively sidestepping these pitfalls nor maximizing their opportunities to generate revenue and cut costs. This article is designed to provide association executives with a practical, legal road map to this area of tremendous opportunity and potentially significant risk for associations. This is a very fact-specific determination. This is an area deserving of careful scrutiny and planning as a related foundation is conceived and as the governing documents and tax-exemption application are prepared. There are three ways to qualify as a public charity.
Most associations satisfy the requirements of the latter test.
A related foundation may engage in many activities related to the parent association's industry or profession, including publishing, seminars and conferences, research, grant-making, scholarships, fellowships, and awards, among other activities. These activities are ones either previously undertaken by the association or initiated by the related foundation, or both. If individuals who are not association members attend educational seminars or conferences sponsored by the related foundation, the association may create an opportunity to solicit new members. As with any relationship an association maintains with an affiliated entity, strict financial , management and operational separation must be maintained between an association and its related foundation at all times. Instead, the IRS and the courts will consider several different factors and reach a conclusion based on their significance taken together.