Advantages of a Community Foundation vs. A Private Foundation
| PRIVATE FOUNDATION | COMMUNITY FOUNDATION | |
Ease of Creation |
Involves creation of a new organization, application for tax-exempt status, and expenditure of time and money. | Execution of simple Fund Agreement is all that is required. |
Tax Benefits |
Cash gift deduction is limited to 30% of adjusted gross income. Only the cost basis of certain types of appreciated property is deductible, and deduction is limited to 20% of adjusted gross income. | Taxpayer can deduct up to 50% of adjusted gross income for cash gifts. Full market value of gifts of appreciated property is deductible up to 30% of adjusted gross income. (Consult your tax advisor concerning alternative minimum tax implications.) |
Accounting & Tax Prep |
Detailed reporting required. | No separate tax return to file, and assets are audited as part of the Foundation’s annual audit. |
Excise Taxes |
A 1-2% federal excise tax must be paid on net investment income. | No excise tax to pay. |
Investments |
Certain types of investments prohibited, and the Foundation may not own more than 20% equity interest in a business. | No federal investment requirements, and no equity concentration restrictions other than those established through prudent guidelines. (Information on the Foundation’s investment policies, managers, consultants, fees and performance is available upon request.) |
Distributions |
Approximately 5% of net asset value must be paid out for charitable purposes annually. | Currently, there is no minimum pay-out requirement. |
Anonymity |
Names and addresses of contributors must be made available to the public. | Donors’ names are revealed only to the IRS. |
Perpetuity |
Over time, oversight will change and your wishes may be forgotten. | Carrying out the donor’s charitable intent is an important hallmark of community foundations. |
Staffing |
Any staffing must occur within federally mandated self-dealing rules. | Professional staff can screen giving opportunities and stay abreast of community needs with maximum convenience and low cost. |
Please always consult your professional advisor as the above information is not intended as legal or tax advice. Contact us for more information.
