Advantages To Creating A Fund Within The Community Foundation
| Community Foundation | Private Foundation | |
| Organization | Established | Must establish |
|---|---|---|
| Status | 501(c)(3) tax status and 170(b)(1)(A)(vi) public charity |
Must establish |
| Funds Required | $500 to create | More substantial funding required |
| Time to Establish | One hour or less | Time-consuming process |
| Organization Overhead | No fee on assets under $10,000 0.50% on assets over $10,000 0.25% on assets over $1,000,000 Reduced fees for non-profits & churches |
Administrative expenses plus excise tax |
| Payout Requirements | None | 5% annual payout of assets |
| Excise Tax | None | 1%-2% of net investment income including capital gains |
| Legal/Accounting Services | Provided | May need to obtain |
| Office/Staffing | Provided | May need to obtain |
| Tax Returns/Audit/ Public Disclosure |
Provided | Need to provide |
| Director’s Liability | Covered | May need to obtain |
| Monitoring of Investments | Provided | Need to provide |
| Monitoring of Regulatory Changes | Provided | Need to provide |
| Donor’s Role in Selection of Grantees | Donor’s role determined by type of fund created. Background checks on charitable status of grantees provided. | Donor specifies grants and has more control, yet donor must research and document charitable status of grantees. |
| Grants for Civic Emergencies, New Organizations, Self-Help Groups | Background checks to determine charitable intent of activity | Must meet series of statutory and regulatory requirements |
| Awards to Individuals | Allowed through Scholarship Program already in place. Not allowed through Advisory Funds. | Must seek approval from IRS for such grants, obtain pre-grant and post-grant reports from recipients, and submit requests to IRS. |
| Redirection of original gift whose purpose has become obsolete or incapable of fulfillment | Provided through Variance Power | In cases of trusts and charitable bequests, direction may be needed from the courts through judicial cy pres action |
| Public Recognition | Grants awarded in donor’s name or anonymity provided upon request. | Must provide or rely on grantee organization. Anonymity not permissible. |
| Governing Board | Automatic provision for board renewal | May experience difficulty in bridging the generations |
| Income Tax Deductibility by Individual | The deduction for charitable contributions of cash or property cannot exceed 50% of adjusted gross income (AGI). Property is valued for contribution deduction purposes at fair market value (FMV). However, FMV cannot exceed donor’s cost except in case of “long-term capital gain property” as described below.Property, the sale of which would result in a long-term capital gain, can be valued at FMV even if that value exceeds cost. However, in that case, deduction is limited to 30% of AGI. The 50% of AGI limit can be elected if donor chooses to value long-term capital gain property at lesser of cost or FMV.
Donor avoids capital gain tax on appreciation Special rules apply to contribution of tangible personal property Unused deductions may be carried over for 5 years |
Deduction for charitable contribution of cash or property to private foundations – other than foundation described in Code section 170(b)(1)(E) – is limited to 30% of AGI. Property is valued at lesser of FMV or cost except in the case of “publicly traded stock” which may be valued at FMV provided the sale of that stock would result in a long-term capital gain to donor. The deduction for contribution of “publicly traded stock” is limited to 20% of AGI.Donor avoids capital gain tax on appreciation
Special rules apply to contribution of tangible personal property Unused deductions may be carried over for 5 years |
