We are often asked whether 501(c)(3) organizations can be established to raise funds for a particular person or persons. The answer is no.
This was reconfirmed by the IRS last week with the release of a letter ruling reviewing an organization established to support three special needs children. The IRS ruled that it could not recognize this organization as exempt under 501(c)(3) because it would serve private interests rather than public purposes.
Although often charitable in nature and probably well-intentioned, the IRS will not recognize as exempt an organization established for the benefit of designated individuals.
If the above organization sounds like one you want to establish, try to think bigger. Instead of supporting one family with special needs children, support special needs children in a broader community. Of course, you can always raise funds for a particular family, but just remember that contributions toward that goal will not be tax deductible and may be subject to gift tax limits.