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Legal & 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 Wales.

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 Foundation’s 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.

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