Why do some foundations give only to 501c3s and others give to non-501c3s?

Question:
Why can some foundations (like Crossroads) give to any organization, but others with similar missions (like Resist) don't give unless the organization is a 501c3?

Answer:
Basically, Crossroads isn't any different, they're just sticking their neck out further than most.

Crossroads is a foundation, which means it's a 501c3 that spends its money on other organizations rather than "doing the work" itself. In this case, they make a distinction between private foundations (which get money from a small group of sources) and public foundations (which get money from several sources). They are still only required to give out 5% of their total assets in a year, including whatever they spend on administration. (That is my personal pet peeve about foundation requirements. So much damn wealth stored up for no reason.)

So, here's the key: Foundations almost only ever give to 501c3 organizations, but that isn't strictly required. They can give to non-501c3 organizations, so long as the grant is still for a "charitable purpose." Which means that non-501c3s can get grants if their lack of 501c3 status is a coincidence. The risk of proving the organization's charitability falls on Crossroads. Crossroads can stick their neck out and give a grant to an organization that might not be approved for 501c3 status, but if the IRS disagrees, Crossroads has to stop giving to that organization. However, nothing I can find says that they'd have to pay the money back. So that's good. More likely than a foundation giving to a radical organization doing "charitable" work is that a foundation would give money to a for-profit organization to do "charitable" work. I'm guessing the ability to exploit it for personal or corporate gain is the far more likely purpose and use of this loophole.

Crossroads does require organizations have a bank account in the organization's name, which usually means having an EIN, which means filing an SS-4 (I think) with the IRS, which still means being legally recognized and regulated.



Sources:
http://www.washingtongrantmakers.org/s_wash/images/client/TopTenTrouble.pdf
http://www.grantspace.org/Tools/Knowledge-Base/Funding-Resources/Foundations/What-is-a-foundation
http://www.guidestar.org/FinDocuments/2012/363/092/2012-363092907-09004c8e-9.pdf