A 501(c)(3) organization is one that qualifies for tax-exempt status according to the U.S. Internal Revenue Service code for schools, religious institutions and the like.  As such, charitable donations to a 501(c)(3) are tax deductible to the donor.

The annual fund is a recurring, yearly fundraising effort that runs for the entire fiscal year, usually from July 1 through June 30 in schools. Money raised by annual giving goes into the operating budget, or can be designated for a specific purpose identified by the donor. The school will ask every member of every constituency to support the annual fund every year.

From time to time, schools need to conduct capital campaigns to obtain funding to achieve major strategic objectives, which can include facilities, program, endowment or a combination thereof.  During a capital campaign, donors are asked for a one-time stretch gift to support a clearly identified major need.  Usually, donors are offered the opportunity to make a written pledge that can be paid over three to five years, if they choose.  During a capital campaign, donors should be asked to continue to support the annual fund in addition to their capital gift or pledge.