Community Foundation vs. Private Foundation
Establishing a fund with The Community Foundation has some distinct advantages over a private foundation.
When individuals and families learn the costs, ongoing administrative burdens, quarterly tax payments, mandatory pay-out rates and reduced tax benefits of private foundations they are often prompted to search for an alternative. Establishing a named fund at The Community Foundation often meets the needs of donors more efficiently and effectively.
about these issues, we are discussing a very serious subject – money. Money determines how you live, how you support your family, how you will retire, how you are taxed and how you share with others. It also says a lot about how hard you have worked and how committed you are to making good decisions.
Establishing a fund with The Community Foundation has some distinct advantages over a private foundation. When we talk
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We take the responsibility of your investment with us as an honor, and we continually work to ensure that donors are happy with fund service and how grants are distributed.
Things to Consider
Fund with Community Foundation
Create Private or Corporate Foundation
Organization
Established (1997)
Must establish
Tax Exempt
501(c)(3) Status
Must establish with IRS
Funds Required
$10,000 minimum
Experts recommend $10 million minimum
Selection of Grantees
Donor, family or his/her advisory committee recommends grantees
Donor specifies grantees
Tax Deductibility of gifts
a) Up to 50% of donor’s Adjusted Gross Income (30% with appreciated assets) b) Excess may be carried over for five years
Limited to 30% of donor’s AGI (20% with appreciated assets)
Federal approvals, restrictions and special taxes
a) Approved by IRS b) No payout requirement c ) No federal excise tax
a) Must receive IRS approval b) IRS requires 5% of assets to be paid out annually c) Fund is charged 2% federal excise tax on income unless strict requirements are met d) Greater incidence of IRS field audit
Legal documents for creation of, foundation designation of funds and grant awards
In place
Must create
Office
In place
May need to obtain
Staffing
In place
May need to obtain
Accounting
In place
Must obtain
Tax Return (state and federal)
Community Foundation prepares
Must prepare
Public Report
Report to public made annually
Must prepare reports for the general public
Knowledge of Potential Grantees
Community Foundation provides
Must develop
Grant Evaluation Process to Ensure Donor’s Intent Satisfied
In place
Must develop
Public Recognition for Donor
Fund may be named or anonymous
Must provide or rely on grantee organization
Director/Officer Liability Insurance
In place
Must obtain
Investment of Assets
Finance Committee oversees investment policies
Must establish policies and select investments
Organization Overhead
1%
Substantial costs; plus 2% federal excise tax on income