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Defining Philanthropy

Philanthropy — literally “love of mankind” — refers to active efforts to promote human welfare. Philanthropies provide resources to individuals and organizations, in the form of gifts, grants, technical support, capacity building, in-kind donations, and community development and strategic planning.

Types of Philanthropic Organizations

A wide range of organizations and individuals engage in philanthropy.

Section 501(c)(3) refers to the part of the tax code of the Internal Revenue Service (IRS) that designates charitable organizations. Section 501(c)(3) organizations are classified as either private foundations or public charities. The key differences between private foundations and public charities are their sources of funding and activities.

Private Foundations

Private foundations are the primary source of philanthropic giving in both rural and non-rural communities. Private foundations generally only have one source of funding, such as one family or a corporation. Private foundations primarily make grants to other nonprofit organizations or individuals. The philanthropic role of private foundations ranges widely in scope. On one end of the spectrum, foundations may function solely as donors or grantmakers with low levels of engagement with grantees. On the other end, foundations may provide extensive support, including technical assistance and capacity building.

  • Corporate Foundations. The Council on Foundations defines corporate philanthropy as:
    “the investments and activities a company voluntarily undertakes to responsibly manage and account for its impact on society.”
    Corporations may provide monetary donations or products, organize employee volunteering, or provide in-kind support to individuals or organizations, among other activities.
  • Independent Foundations. Independent foundations can operate at the national, regional, and local level. Some of the largest national independent foundations in the United States that support rural community health efforts include the Bill & Melinda Gates Foundation, the Ford Foundation, the Robert Wood Johnson Foundation, and the W.K. Kellogg Foundation.
  • Operating Foundations. Operating foundations spend the majority of their funds on directly providing charitable services. Instead of providing grants to external organizations, operating foundations typically administer their own programs.

Public Charities

Public charities actively fundraise and receive contributions from multiple sources, including the government, foundations, and the general public. Also known as public foundations, public charities typically include churches and hospitals. These organizations receive funding from multiple sources and primarily provide direct services.

  • Community Foundations. Community foundations are public charities that focus on providing funding and services to individuals and organizations in a defined geographic area. The number of community foundations that cover rural regions is growing, and these foundations can be effective in mobilizing resources and building regional capacity to address challenges in rural communities.

    Many individual donors use community foundations to establish a donor-advised fund account to provide grants to other charitable organizations over time. There are large disparities in the geographic distribution of donor-advised funds: Major metro areas have eight times the number of donor-advised funds of rural areas.
  • Healthcare Conversion Foundations. From 1999 to 2016, the number of for-profit community hospitals increased from 15.1% to 21.4%. Part of this rise can be attributed to hundreds of hospitals that converted from nonprofit to for-profit status. Federal law dictates that organizations that relinquish their tax-exempt status must dedicate their assets to charitable purposes. Several hospitals have transferred these assets to health conversion foundations that provide charitable care or grantmaking to support community health.
  • Hospitals. Nonprofit hospitals are statutory public charities. In addition to providing medical care, all nonprofit hospitals with a tax-exempt status are required to provide community benefit: programs or activities that improve the health of the community that the hospital serves, in response to identified community needs. Research indicates that more than 85% of community benefit expenditures on a national level are dedicated to direct patient care. Remaining funds are typically spent on health education programs, community outreach activities, or research. (Catholic Health Association of the United States offers a list of qualifying programs and activities.) Community benefit programs that focus on community-building activities, which “strengthen the community's capacity to promote the health and well-being of its residents,” can be important sources of philanthropic funding for rural community programs.

Resources to Learn More

Giving 2.0: The MOOC: Charity vs. Philanthropy
Provides a brief overview of the key differences between charity and philanthropy.
Author(s): Arrillaga-Andreessen, L.
Organization(s): Stanford University

Giving 2.0: The MOOC: What is Philanthropy?
Provides a brief overview of the key tenets of philanthropy.
Author(s): Arrillaga-Andreessen, L.
Organization(s): Stanford University