Community Foundation or Private Foundation
Advantages Of Creating A Component Fund Within The Community Foundation
Organization
Status
Funds Required
Time To Establish
Payout Requirements
Excise Tax
Legal / Accounting Services
Office / Staffing
Tax Returns / Audit / Publick Disclosure
Director's Liability
Monitoring of Investments
Monitoring of Regulatory Changes
Donor's Role in Selection of Grantees
Grants for Civic Emergencies, New Organizations, Self-Help Groups
Awards to Individuals
Redirection of Original gift whose purpose has become obsolete or incapable of fulfillment
Public Recognition
Governing Board
Income Tax Deductibility by Individual
Community Foundation
Established
501(c)(3) tax status and 170(b)(1)(A)(vi) public charity
$500 to create
One hour or less
None
None
Provided
Provided
Provided
Covered
Provided
Provided
Donor’s role determined by type of fund created. Background checks on charitable status of grantees provided.
Background checks to determine charitable intent of activity
Allowed through Scholarship Program already in place. Not allowed through
Advisory Funds
Provided through Variance Power
Grants awarded in donor’s name or anonymity provided upon request
Automatic provision for board renewal
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
Private Foundation
Must establish
Must establish
More substantial funding required
Time-consuming Process
5% annual payout of assets
1%-2% of net investment income including capital gains
May need to obtain
May need to obtain
Need to provide
May need to obtain
Need to provide
Need to provide
Donor specifies grants and has more control, yet donor must research and document charitable status of grantees.
Must meet series of statutory and regulatory requirements
Must seek approval from IRS for such grants, obtain pre-grant and post-grant reports from recipients, and submit requests to IRS.
In cases of trusts and charitable bequests, direction may be needed from the courts through judicial cy pres action
Must meet series of statutory and regulatory requirements
Must provide or rely on grantee organization. Anonymity not permissible
May experience difficulty in bridging the generations
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