Advantages of a Community Foundation vs. A Private 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 60% 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 and Tax Preparation 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.
Back to top