Disaster Relief Efforts Start Now

A Q&A to Help Plan for Faster Action

Representatives of foundations and nonprofits of all shapes and sizes often feel compelled to take action in the aftermath of disaster.  The form of this relief can range from grants to local organizations to cash supports to financially needy individuals.  The manner in which an organization can provide support and the speed with which it can respond depend almost exclusively on the tax status of the organization.  Read on for common questions and answers regarding this important topic.

Q: For which types of disasters and emergencies can 501(c)(3) organizations provide relief?

A:  501(c)(3) organizations can provide relief in the wake of a broad range of disasters and emergencies.  Natural disasters like earthquakes, tsunamis, floods, tornadoes, and the like certainly qualify.  Emergencies in war-torn areas also can qualify, as can financial hardships caused by illness and job loss.  Many 501(c)(3) organizations provided emergency relief in recent years for a variety of Covid-19-related hardships.  

Q:  For which types of disasters and emergencies can
my 501(c)(3) organization provide relief?

A:  The answer here is more nuanced and depends on your organization’s specific tax status.  Public charities have fairly broad flexibility to respond to most disasters and emergencies.  Private foundations are subject to more restrictions.  In many situations, private foundations can provide relief only in the wake of “qualified disasters.”

Q:  Who qualifies for aid as part of these programs?

A:  The group of individuals eligible for benefits must constitute a “charitable class” and must be “needy or distressed”. 

The “charitable class” requirement generally means the eligible group is sufficiently large or indefinite such that an entire community rather than a small group of predetermined individuals benefits.  A relief fund for all residents of a city would meet that requirement; a relief fund for members of a particular family would not.  It can be permissible in certain situations to limit eligibility to somewhat smaller groups, like employees of a particular employer, residents of a single neighborhood, or victims of a specific disaster, but care must be taken to structure and implement those criteria in a way that continues to meet the “charitable class” requirements.  

The “needy or distressed” requirement means that the relief provided must be tailored to respond to actual need.  The type of disaster can dictate the permissible scope of relief provided.  For example, everyone displaced by a hurricane is eligible for food, water, and shelter relief in the immediate aftermath of the disaster, but only income-qualified individuals would be eligible for the same supports six months later.  It would not be enough to show that the recipient was a victim of the disaster.  Rather, the organization must make an objective determination of need at the time relief is provided. The scope of the need assessment and documentation requirements will vary depending on the situation. 

The organization also should put procedures and policies in place to be sure that the organization’s officers, directors, staff, and their families are not eligible for the program.

Q:  What if my 1023 Application didn’t specify disaster relief as part of my operations?

A:  That’s okay.  The IRS has made clear that, when structured properly, disaster relief is an inherently charitable activity.  An organization need not seek special approval for these programs except as otherwise noted here for private foundations.  It must, however, report the new activity on its Form 990.

Is disaster relief taxable to the recipients?

A:  It depends on the nature and amount of the relief, but it often is not.

Q:  When is the best time to sort this out and create a disaster relief program?  

A:  Right now!  Putting your plans in place now when you aren’t scrambling to respond to emergency needs is the best way to put your organization on the path to meaningful (and compliant) relief efforts.

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The team at C3 Legal is available to help structure your organization’s disaster relief program.  Reach out today for more information.