Private vs. Community / Discover the benefits of your Community Foundation

  Private Foundations Community Foundation Donor Advised Fund
Liability
Insurance
Director’s and Officer’s Liability Insurances, employee bonding, and office insurance must be separately purchased Automatically covered by Community Foundation’s Liability and Office Insurance Policy.
Investment,
Audit,
Accounting & Tax Returns
Board or Trustees must contract for financial and administrative services; annual 990-PF tax return required  Community Foundation handles all financial and administrative management, files annual tax return and provides annual independent audit as part of its normal business plan.
Grant Management Must verify the charitable status of all recipient organizations and follow “expenditure responsibility” rules established by the IRS Community Foundation verifies charitable status of all recipient organizations, plus donors have access to CF’s strategic grantmaking services
Tax Treatment of Cash Gifts Deductible up to 30% of AGI
(Adjusted Gross Income)
Deductible up to 50% of AGI
Tax Treatment of appreciated publicly-traded securities Full market value deductible to 20% of AGI Full market value deductible up to 30% of AGI or cost basis up to 50% of AGI
Tax Treatment of closely held stock or real estate Deduction limited to cost basis, up to 20% of AGI Full market value deductible up to 30% of AGI or cost basis up to 50% or AGI
Privacy Required to file tax returns on grants, investment fees, staff salaries, etc.  These are public records and are compiled into grantseeker’s directories Individual donors or grants cam be kept private.  If the donor wishes, CF can serve as a buffer between the donor and grantseeker
Excise tax on investment income and net realized capital gains Generally 2% of investment income: however, may be reduced to 1% under special circumstances None
Self dealing rules Strict prohibition under IRS Section 4941 None specified
Grant Payout Requirement Required to distribute 5% of private foundation assets annually to avoid penalty taxes whether or not the foundation investments earn that much income None – can accumulate toward a sizable project or grant with no required payout
Need to Hire Staff Trustee are responsible for administration – if trustees cannot provide staffing, professionals will be needed No – the staff of the Community Foundation handles all administrative details
Set-up Procedure and Costs Must incorporate or operate as a trust and apply to IRS for tax-exempt status: legal and accounting fees to establish and maintain Simple agreement: not start-up fees or costs: automatically covered by the Community Foundation’s tax exempt status
Investment Options May not hold closely-held stock: may hold limited shares in a manner that does not violate the excess business holdings or jeopardy investment restrictions under IRS Sections 4943 and 4944 Uses the investment pools established by the Community Foundation and overseen by its volunteer Investment Committee