The authors express their appreciation to the many others at Goodwin Procter who were part of the One Fund team, and in particular for the invaluable assistance of Stuart Cable, Mary-Kathleen O’Connell, and Alyssa Fitzgerald.
In the wake of the Boston Marathon bombings on April 15, 2013, Boston Mayor Menino and Massachusetts Governor Patrick proposed creating a charity to benefit the survivors and families of those killed in the attack. On April 16, Mayor Menino reached out to local businesses Hill Holliday and John Hancock to assist with the creation of the One Fund Boston. Later that day, before the fund was even incorporated and before Ken Feinberg was brought on as administrator, the One Fund received its first $1 million commitment from John Hancock.
As the One Fund’s attorneys, we at Goodwin Procter had to seek quick incorporation of the fund and apply on an expedited basis for 501(c)(3) tax-exempt status with the IRS. However, applications for 501(c)(3) status often take up to eighteen months to process, and in addition, obtaining the necessary approval was challenging, due to IRS limitations on the types of distributions that charitable organizations can make to individuals in the context of disaster relief.
Generally, to qualify for tax-exempt status, an organization must show that it will assist a large enough or sufficiently indefinite charitable class so that it is providing a public rather than a private benefit. In addition, in IRS Publication 3833, the IRS takes the position that an organization cannot distribute funds to individuals merely because they are victims of a disaster, but generally must determine that a recipient lacks adequate financial resources of his or her own. The IRS therefore had questions about the One Fund’s plans to make distributions without financial needs testing.
The One Fund team worked closely with the IRS to overcome these issues and to show that the One Fund instead met the criteria for a 501(c)(3) tax-exempt charitable organization as an organization that lessens the burdens of government, focusing on the organization’s relationship with the City of Boston and the City’s role in approving distributions. “Lessening the burdens of government” is an alternative method of qualifying as a 501(c)(3) organization. As far as we know, this method has not been used before in the disaster relief context. This approach to the formation of a relief organization allowed the One Fund Boston to accomplish its immediate and ongoing goals for distributions.
On May 14, just one month after the bombings, the IRS granted the One Fund Boston 501(c)(3) tax-exempt status. The One Fund’s attorneys were able to use procedures for expedited approval and effective dialogue with the IRS to obtain this unusually quick and favorable result.
The One Fund has been a huge success and an important contribution to Boston’s recovery. All of the $60 million in funds donated to the One Fund Boston through June 26, 2013 were distributed to those who were most affected by the bombings, in accordance with a protocol developed by Mr. Feinberg. In addition, the One Fund Boston will continue to provide support for those affected and has announced that it will make a second distribution.
Public response to the swift action taken by the One Fund Boston has been favorable, and Mayor Menino noted that in his 20 years as mayor of Boston, he had never seen the business community come together so quickly on behalf of the citizens of Boston.
While the One Fund Boston model will not work in all circumstances, it may be an alternative to more traditional charitable models when there is significant government involvement. In such cases, it provides an opportunity for the public and private sectors to work together to deliver expedited, direct benefits to those in need as a result of disasters.
Susan L. Abbott is a partner at Goodwin Procter LLP and Chair of the firm’s Tax-Exempt Organizations Group. She led the pro bono team that incorporated, obtained 501(c)(3) status for, and advised the One Fund Boston.
Lisa A.H. McChesney is an associate in the firm’s Trusts and Estate Planning Group and assisted with the One Fund Boston application for 501(c)(3) status.