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Formation of an Educational Betterment Foundation

Educational betterment foundations (EBFs) are private, non-profit corporations that are tax- exempt under section 501(c)(3) of the Internal Revenue Code. Public school districts create EBFs to serve as independent fund-raising entities to solicit individual and corporate gifts as well as grants from private and corporate foundations exclusively for the benefit of the school districts that create them.

Colleges and universities have been employing EBFs as their primary fund-raising organization for centuries. In many cases, cash and security assets held by individual college and university EBFs reach into the billions of dollars. In some cases, the interest alone generated by these EBF assets support over one-half of the college or university’s annual budget.

Public school districts across the nation are just beginning to recognize the enormous power of EBFs in generating unrestricted operation funds. Like a giant oak tree that begins from a single acorn, EBFs grow slowly in the beginning. Once they gain a foothold in the community, vast amounts of chartable dollars can be raised year after year.

Since these dollars are raised by a private corporation, they are not subject to control or accountability by state education departments.

Robert J. Miller & Associates, Inc. (RJMA) has assisted in the creation of numerous EBFs. Its services in this regard include providing guidance in the appointment and formation of the EBF’s board of directors, the drafting of bylaws that meet federal IRS requirements, and the preparation and filing of the application necessary to obtain a certificate of incorporation.

RJMA then embarks upon the long and arduous process of securing a federal tax-exemption under the provisions of Section 501(c)(3) of the Internal Revenue Code. Extreme care must be taken in this process to avoid months of delay caused by inadvertent errors and omissions in the preparation of this 30-page application.

Once approved, the IRS issues a Letter of Determination stating that the EBF is a 501(c)(3) organization, thereby enabling its donors to deduct their gifts and contributions from their federal and state income tax. It also enables foundations to award grants to the EBF that would otherwise be prohibited from awarding to tax supported entities such as public school districts.

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