Posted by: Discover Scholars | May 12, 2008

DiscoverScholars.org update

Hi Everyone,

Starting today, we are going to blog twice a week with updates about DiscoverScholars.org and commentary about educational giving more generally. Our plan is to post on Mondays and Thursdays, but if there’s a need to blog more frequently, then we’ll definitely do so.

One of our biggest sources of difficulty recently has been dealing with the restrictions that the IRS places on charitable organizations. The original motivation for starting DiscoverScholars.org was to give donors more choice over where their charitable dollars go. Each year, thousands of people give to colleges and scholarship funds with no way of knowing how their money’s spent. We wanted donors to have the ability to pick which students were funded, just like donors can pick worthy teachers at DonorsChoose or entrepreneurs at Kiva.

The problem with this solution, we’ve since found out, is that the IRS does not allow donors to receive tax exemptions when they make charitable contributions to known individuals. From the IRS’s perspective, there’s a potential for abuse: parents could post their son or daughter on the website and then direct their donation to their child — effectively receiving a tax exemption from paying for their child’s college. According to the IRS, such “donor-advised funds” don’t constitute charity. In fact, not only can donors not receive a tax exemption, but students even would have to pay a gift tax on the donations!

So, to make a long story short, we’ve had to restructure our business plan a bit to account for these restrictions, and to ensure that DiscoverScholars.org will be awarded 501(c)(3) status. The new plan is to allow donors to choose the type of students that they would like to fund, rather than selecting specific students. We feel that this compromise captures most of the benefit to donors — namely that their contributions will be distributed to students they would like to see supported. What do you think?

This weekend we finished updating the website to account for the new structure of DiscoverScholars.org. Does the website do a good job of describing the benefits of DiscoverScholars.org and how it will work? Do you think it will excite more students and donors to get involved? What can we make better? Let me know what you think: Feel free to reply to this post, or send us an e-mail at: mail [at] DiscoverScholars.org.

We also have our Facebook group up and running. This group is important, because the more student interest we can show for DiscoverScholars.org, the more willing potential donors will be to support it financially. So if you’re a student and have yet to join the Facebook group, please do so by clicking here. It’ll be a big help if you tell your friends about DiscoverScholars.org, get them signed up for e-mail updates, and have them join on Facebook, too.

Finally, some people have been asking what other ways they can help. Two things: first, if you know friends who are good with web development and/or design, it’d be great if you could put us in touch. Second, the sooner we can raise start-up capital, the sooner we can pay to fully develop the website and start accepting applications. If you know anyone who might be willing to make a donation to DiscoverScholars.org, talk to them about the venture, share the executive summary or business plan with them, and ask them to make a contribution via our donate page.

Thanks for your help!

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Responses

  1. […] we mentioned in one of our first posts, our biggest challenge has been to ensure that donors’ ability to select student attributes […]

  2. […] officially a 501(c)(3) non-profit organization. We’ve written on here in the past about the difficulty of this process, but the wait was worth it: you can view our official exemption letter here. With this obstacle now […]


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