When you’ve established all of your appropriate policies, procedures, and vision for your sanctuary, you’ll have to decide how you plan on structuring your sanctuary in the eyes of the government. As you probably know, nearly all animal sanctuaries are 501(c)(3) non-profit entities in the United States. Sanctuaries meet one of the few stated categories to be designated as a 501(c)(3) organization exempt from federal income tax: prevention of cruelty to animals. This designation provides sanctuaries with much needed financial relief so they can focus their resources more fully on their residents and daily operations. It also incentivizes the public to support its endeavors through tax deductible giving.
However, deciding whether to run your sanctuary as a non-profit isn’t the only decision to make; you must also determine whether to structure your sanctuary as a private or public organization. This choice has broad implications for your rights and responsibilities. The easiest way to determine which direction to take with your organization depends upon how you may respond to the following questions:
Where Does Your Funding Come From?
Your funding source is the biggest factor in deciding whether your sanctuary should be a private or public organization. If your organization is lucky enough to have a long-term and independent income stream, such as from a trust fund that can generate income or funding from a generous, committed private individual or group, it may be better for your organization to be structured as a private non-profit (also known as a private operating foundation). If your sanctuary plan does not include the need for public fundraising efforts, It should be relatively clear that you intend to structure your organization as a private operating foundation.
In order to be designated as a private operating foundation, you must meet a number of criteria set by the Internal Revenue Service. As a result of the more insular funding sources, the IRS has strict recordkeeping and reporting rules per year to demonstrate that the private foundation is indeed operating for the public’s benefit and not just sheltering income for personal gain. Foundations are also typically required to pay some tax each year.
If you plan on generating most of your income based on support from the public (as most people expect when they hear the term “non-profit”), you will need to establish yourself as a public non-profit (also typically known as a public charity). Public organizations are required to source at least 33% of their annual revenue from small donors, other public non-profits, or the government, and they have to prove to the Internal Revenue Service why they should be considered a public charity. As a benefit from relying more strongly on public support, public organizations enjoy higher donor tax-deductible giving limits per year than typical private foundations, though they also face stringent IRS annual reporting requirements for individual donations and expenses.
Who Do You Want On Your Board?
If you wish to keep your organization controlled by a small number of individuals (or those related or in business partnerships), you’ll have to structure your non-profit as a private foundation. The benefit of this comes from the inherent control you gain from keeping an insular board.
If you are running your non-profit as a public charity, you will have to have a diversified board of directors. Specifically, this means that more than half of the board has to be unrelated (through family or business partnerships) and not compensated as employees. Although you are less likely to have as strong a say in your organization when structured publicly, there are some benefits in finding engaged diverse voices who can express their honest opinion outside of your inner-circle.
How Much Public Input Do You Want?
Private Operating Foundations, due to their private funding and more insular boards, are subject to much less public scrutiny and feedback. Due to the sometimes contentious nature of rescuing animals, some might find this to be a beneficial organizational structure.
Public charities, by virtue of relying upon the public to continue operating, are subject to much greater public scrutiny and feedback. Generally, this also puts them in a more favorable light than private institutions as the donating public has an opportunity to experience more sense of ownership and community with a public organization. Of course, an organization dependent on the public for fundraising faces much higher pitfalls if the public opinion sours!
Which One Is Right For You?
As long as you have the necessary resources and dedication to commit to your residents, you can successfully run a sanctuary through either model of organizational structure. Whichever structure your organization ends up falling under, be sure to keep stringent records for the IRS and file all necessary documents on time! They are far less charitable as an organization than most animal sanctuaries tend to be.