Community Foundation vs. Private Foundation

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.