Resources

Private Foundation Options

If you or your client are thinking about establishing a private foundation, but are looking for a simpler, more cost-efficient alternative, the Siouxland Community Foundation can help you analyze the pros and cons of creating a private foundation or a Donor Advised Fund through the Community Foundation as an alternative.

Donor Advised Fund
Donor Advised Funds are convenient, flexible tools for individuals, families, businesses, or groups that want to be personally involved in suggesting grant awards made possible by their gifts. Companies looking for an easier, more effective way to give back to the community can establish a Donor Advised Fund and a team of employees can meet regularly to review local needs and recommend grants. Donor Advised Funds are typically less costly and easier to administer than other forms of philanthropic giving such as family or corporate foundations. The donor or other named advisors can recommend grants to 501(c)(3) nonprofit organizations from the fund’s investment income and/or the corpus of the fund. Grants are made in the fund’s name, and the donor receives quarterly fund activity statements. The donor (if established by individuals) also has the right to name successor advisors to the fund who can recommend grants in the fund’s name after the death of the original donors.

Private Foundation
A private foundation allows extensive donor control over distributions, board selection and investment management. However, private foundations are highly controlled by the IRS with many special restrictions and regulations, including administrative and reporting burdens, excise taxes and a required minimum payout.

As described in the following chart, establishing a Donor Advised Funds through the Siouxland Community Foundation (SCF) can serve as a cost-effective alternative to a starting up a private foundation or administering an existing one.

ComparisonsDonor Advised FundPrivate Foundation
Creating the FoundationEstablished at SCF by a simple agreementNonprofit corporation or trust organized as a private foundation
Tax Exempt StatusShares the public charity tax exempt status of SCF, as a “component” of SCFMust apply for private foundation tax exempt status from the IRS
Start-up CostsNo cost to donorSimilar to a corporate start-up requiring substantial legal, accounting, and operational start-up costs
Recommended Size$10,000 or more Substantial assets required
Charitable Deductions for Cash GiftsTax deduction of up to 50% of adjusted gross income (AGI) Tax deduction of up to 30% of adjusted gross income (AGI)
Charitable Deductions for Appreciated PropertyTax deduction available for full fair market value of marketable securities and other property Tax deduction may be taken for fair market value of marketable securities up to 20% of AGI. Tax deduction for other property is limited to the lower of cost or fair market value
Donor ControlDonor makes advisory grant recommendations; final decision rests with SCF’s board of directors Donor retains complete control over investments and grant making, subject to IRS requirements
Self-Dealing RulesPrivate foundation self-dealing rules do not applyStrict regulations prohibit most transactions between a private foundation and its donors (including related persons or organizations)
Payout RequirementsDo not applyMust pay out for charitable purposes at least 5% of its asset value annually, regardless of its income
Administrative Concerns (personnel, facility, gift, and grant managing)Services provided by SCFMust establish and/or obtain these services
Annual CostsMinimalAdministration can be costly
Annual TaxesNoneSubject to an excise tax of up to 2% of net investment gain, including net capital gains and income
Annual Tax Filings and Returns (990 Report)Not required (reported as part of SCF's annual reporting)Must be filed by the private foundation with required reporting schedules
InvestmentsFund assets are professionally invested through SCF's investment programMust research, secure, and carefully monitor its own investment vehicles
Fiduciary ResponsibilitySCF fulfills the associated fiduciary responsibilitiesThe private foundation board has fiduciary responsibility
Liability and Risk InsuranceProvided by SCFMust be purchased by the private foundation

 

Transferring a Private Foundation

You or your client may have an existing private foundation.  In this case, we invite you to explore the benefits of transferring it to an advised fund that can be established at the Siouxland Community Foundation. Through a simple transfer process, you or your client may be able to avoid some of the hassles (and costs) of private foundation management.

Establishing a Donor Advised Fund allows you or your client to remain involved in grant making, if that is desired.  At the same time, an Advised Fund will ensure that their intent, name and pattern of charitable giving is maintained—in perpetuity if so wished.

There is so much more we’d like for you to know. For more information and ideas on ways to integrate your financial planning with charitable giving, ask your financial advisor or contact the generic сialis Siouxland Community Foundation.

Learn more about…
Community Foundations Locator
Iowa Council of Foundations
Planned Giving
Iowa Nonprofit Resource Center
Community Vitality Center
Endow Iowa