Private foundations are a great community asset and are an ideal solution for some philanthropic individuals. For others, establishing a fund with the Community Foundation with fewer administrative hassles and lower operational costs is a more attractive alternative.
Whether you want to leave a bequest in your will or be an active donor during your lifetime, there are many advantages to using the Community Foundation as a vehicle for your charitable giving. We can help you:
- achieve your charitable goals efficiently and effectively;
- save on administrative and legal costs;
- avoid restrictions and potential penalties imposed on private foundations by the Internal Revenue Service;
- and achieve valuable tax savings.
| Feature |
Donor Advised Fund at the Community Foundation (CFJH) |
Private Foundation |
| Organizational Structure |
Donors establish individually named funds within the corporate structure CFJH |
Donors establish a separate nonprofit corporation and apply for federal tax exemption |
| Control |
Donor provides advice to Foundation on grants. |
Donor retains maximum control of board, investments and grantmaking |
| Tax Deductibility |
Public charity -
Property: 30% AGI
Cash: 50% AGI
|
Private foundation -
Property: 20% AGI
Cash: 30% AGI
|
| Excise Taxes |
Exempt from excise taxes |
Excise taxes: 1-2% of investment income |
| Investment Flexibility |
Foundation offers donors limited number of investment strategies (Investors Circle Funds allow greater flexibility) |
Must divest excess business holdings (closely-held stock) within five years or pay excise tax |
| Continuity |
Donor may name successor advisor(s) to the fund |
Can continue to future generations |
| Administration |
Simple: can establish in one day, no separate tax returns required, donor guides grantmaking activities, CFJH manages granting process and monitors effectiveness of grants disbursed for the donor |
Burdensome administration: accounting, record keeping, state and federal tax return, operation of grant program and monitoring of funds disbursed to grantees |
| Anonymity |
Donors may remain anonymous |
Donors are named publicly on the private foundation's tax return |
| Staff |
Access to CFJH's staff and board (for investment, grantmaking expertise) |
Can hire staff |
| Start-up Costs |
None |
Legal and accounting fees |
| Can other people contribute & receive a tax deduction? |
Yes |
Yes, with limitations |
| Payout Requirement |
none |
IRS requires an annual grant payout of 5% of assets |
| Other |
N/A |
Special regulations govern and limit the investments and grantmaking of a private foundation, and all actions are monitored for self-dealing. |
