Community vs. Private Foundation
A Community Foundation is indeed a less taxing way to give. Our structure allows us to extend to donors many of the advantages of a private foundation, minus the disadvantages.
A Community Foundation offers simplicity. Many funds actually originate as private foundations, which were later turned over to a community foundation because doing so enhanced their ease of operation. When you entrust your gift to the Greater Grand Island Community Foundation, the process is simplified by the expertise of a full-time staff dedicated to donor services, fund administration, and grant-making. The Foundation will help you draft a straightforward gift agreement to establish your fund and carry out your charitable wishes.
A Community Foundation offers efficiency. Donors who choose to set up a private foundation must assume the responsibilities of structuring the foundation, formulating policies, overseeing the investment of the assets, filing all necessary tax and other forms, and monitoring the activities of grantees. The Greater Grand Island Community Foundation handles all of these functions for our donors while offering greater tax advantages than those available through a private foundation.
A Community Foundation offers flexibility. A fund with the Greater Grand Island Community Foundation is flexible and is created in accordance with the wishes and needs of the donor. Its charitable purpose can be defined in a manner that allows distributions to a broad range of charitable institutions.
Many donors choose to name their funds. Some use their own name, or they use the name of the person or group they wish to memorialize or assist. Still, others wishing to remain anonymous select a generic fund title. Grant recipients are told the name of the fund from which their grant was made and the name of the donor advisor unless the donor has requested anonymity.
Often, donors structure funds to engage their children in philanthropy. Children may serve as co-advisors or successors to the initial donors.
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Community Foundation |
Private Foundation |
| Higher Deductibility. You may deduct up to 60% of adjusted gross income for cash gifts and up to 30% of adjusted gross income for non-cash gifts. Gifts of appreciated securities or other property can be deducted at fair market value. | Your deduction is limited to 30% of adjusted gross income for cash gifts. The total deduction for non-cash gifts cannot exceed 20% (or less, in some cases) of adjusted gross income. The deduction for a gift of appreciated property (other than certain publicly-traded stock) is limited to the donor's cost basis. |
| Tax Breaks. Avoid costly excise taxes, annual payout requirements, and other tax regulations. | A private foundation pays a 2% excise tax on net investment income, which may be reduced to 1% of net investment income if the foundation makes sufficient grants to other charities. A private foundation must pay out approximately 5% of its net principal value each year, even if it does not earn 5%. It must avoid a long list of "self-dealing" transactions with donors, directors, officers, their families, and their business even if the transactions clearly benefit the foundation. It must pay an additional penalty tax for failure to comply with these and other requirements. In certain cases, these taxes can be levied on board members personally or can result in the confiscation of foundation assets. |
| Low Initial Costs and Low Overhead. Most funds can be established in just one meeting, without legal fees. Funds range in size from $5,000 to millions of dollars. Individual gifts made to fund are as little as $5 and as large as several million dollars. Sharing overhead costs with other component funds means a greater percentage of your gift is available for grantmaking. | You need legal counsel in virtually all cases in order to structure the foundation and its policies in order to ensure compliance with tax regulations and other laws. In general, a larger gift is needed to establish and operate a private foundation than a fund with the Community Foundation. |
| Minimal Paperwork. IRS reports and audits are handled by the Foundation. We file an annual tax return (Form 990) for all Foundation funds as a whole and can maintain the anonymity of donors if requested. | You must file an annual report of investments, grants, trustee fees, staff salaries, and other payments. This information is readily available on the Internet and in published books. |
| Grant Making Expertise. We not only administer your fund, but our staff is available to help donors identify the projects and organizations where their gifts will do the most good. Our staff routinely investigates and monitors grants and nonprofit organizations, in addition to receiving and evaluating grant proposals. We can help donors design a grant-making initiative specifically tailored to their charitable interests and priorities. | You may need to hire staff to manage the process of receiving grant proposals, evaluating the proposals for presentation to the board of the foundation, scheduling site visits and monitoring the grants once they are made. A new foundation must also familiarize the nonprofit community with its grant-making priorities and guidelines. |
| Expert Investment Oversight. Our staff and Board provide expert, professional oversight of our investment managers. | You are responsible for investment management, including compliance with tax regulations pertaining to investments. |