Starting a Small Charity to Give Grants

sapphire

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Giving money to individuals through private foundations is pretty cumbersome, and requires getting pre-approval from the IRS to run a scholarship program; then you have to stick to the same method of selecting recipients as the one the IRS approved you for, and it generally has to be an open application process.
If you give money to individuals through a public charity it's a lot easier, but to qualify as a public charity you have to meet certain financial requirements.
Another way of doing this is to just use a 501(c)4 social welfare organization. The downside is that donations to c4's aren't tax deductible, but the upside is that they are tax exempt (so you wouldn't pay any capital gains on donated assets). Giving money to individuals through a c(4) is easy.
A last way of giving money to individuals is to give people no-strings-attached prizes in recognition of past accomplishments through a private foundation (a la MacArthur Genius Grant or Nobel Prize). The upside is you can use a private foundation and have maximal discretion over who gets the money with minimal reporting requirements. The downside is that you can't actually require people to do something specific with the money.

sapphire

Oh wow. This was super informative. Thanks so much.

Brendon_Wong

You may be interested in my post on this topic! https://forum.effectivealtruism.org/posts/mMu2BpRQ8oqtvEZjm/ea-could-benefit-from-a-general-purpose-nonprofit-entity. I mention your two use cases of enabling individual granting and tax-free investing as some of the benefits of setting up such an entity.

I haven't encountered a team/project specifically working on this (Rethink Charity's fiscal sponsorship mentioned in the article comments is probably the closest thing to this); let me know if you'd like to discuss further or collaborate!

lynettebye

The individual receiving the grant has to pay taxes on it, so the net benefit may be somewhat less than you're anticipating.

sapphire

I am aware but the benefit is still quite large.

Brendon_Wong

If the funds are disbursed directly from the charity on project expenses (a charitable purpose), rather than to the person for their general use (not a charitable purpose), it is possible to avoid taxes. For example, EA charities hiring personal assistants for academics.

Clifford

Rather than setting up a charity, a Donor Advised Fund (DAF) is a good option for this purpose. This post may be helpful: https://forum.effectivealtruism.org/posts/qYuehBsAe6Ri6PZvL/a-comparison-of-donor-advised-fund-providers

Michael St Jules 🔸

I think they can only disburse to other charities, not individuals.

Josh Jacobson

They may be willing to direct it to a charity that will give it to an individual, eg https://www.theissresearch.org/.

sapphire

This would have been way better than holding everything in my individual account. But it doesn't let you make 'grants' to individuals. We need something like a smaller version of EA Funds.

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