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Foundation Comparison: Community or Private?

You want to make an impact, but you are not sure whether a community or private foundation is the right choice.

The following table provides comparisons between the two options and demonstrates
the advantages of giving through a community foundation.

Community
Foundations		 Private / Family Foundations
Establishing a Fund A Community Foundation fund can be established quickly and efficiently with a simple document. Administrative fees are 1% to 1.5% of the fund's annual market value. Establishing a new foundation requires extensive legal, accounting and operational expenses on an on-going basis.
Tax Treatment of Cash Gifts Tax deduction of up to 50% of Adjusted Gross Income (AGI). Tax deduction of up to 30% of Adjusted Gross Income (AGI).
Tax Treatment of Appreciated Publicly Traded Securities Tax deduction of 100% of fair market value up to 30% of AGI. Tax deduction limited to fair market value up to 20% of AGI.
Tax Treatment of Appreciated Closely Held Stock Tax deduction of 100% of fair market value up to 30% of AGI. Tax deduction limited to cost basis up to 20% of AGI.
Tax Treatment of Real Estate Gifts Tax deduction of 100% of fair market value up to 30% of AGI. Tax deduction limited to cost basis up to 20% of AGI.
Tax Exempt Status and Required Payout A Community Foundation is a 501(c)(3) public charity and is fully tax exempt. Private foundations are subject to excise taxes and annual 5% payout requirements.
Annual Tax Returns Individual funds are not required to file. A Community Foundation prepares and files all tax reports to the IRS and obtains an annual independent audit. Must file annual Federal 990-PF and supporting schedules, which indicate staff salaries, investment performance, fees, etc. Trustees must perform, contract or hire staff for these services.
Investments A diversified portfolio and economies of scale offer greater cost-efficiencies and minimize risks. A Community Foundation works with professional money managers. A Community Foundation's Investment Committee provides experienced oversight. Selection of investment strategies and professional fund advisors can become a very time consuming responsibility for a private foundation's Board of Trustees.
Expertise A Community Foundation provides expertise to donors on a wide range of gift management, finance and fund administration issues. Must hire staff or Board members carry out administrative tasks on their own.
Grant Administration Full-time professional staff are available to assist donors with grant administration, research and program evaluation to ensure maximum community impact. Requires extensive time to review proposals, investigate community needs, confirm status of grantees and evaluate previous distributions.
Accountability A Community Foundation obtains an independent audit each year. Publication of an annual report, public disclosure of grants and thoughtful selection of Board members ensures funds are used in the communities’ best interests. Laws and regulations governing private foundations differ greatly from those of public charities and may require expensive specialized legal and finance expertise.
Flexibility As a public charity, a Community Foundation's organizational structure is purposely designed to allow greater flexibility to respond to and meet emerging needs in the community. Expensive and lengthy legal proceedings may be required to change the purposes of a private foundation.
Privacy Individual donors or grants can be kept private. If the donor wishes, the community foundation can serve as a buffer between the donor and grantseekers. Required to file tax returns on donations, grants, investment fees, staff salaries, etc. These are public records and are compiled into grantseeker directories.

Resource: Council on Foundations Listserve

NOTE: Policies and laws governing charitable gifts are subject to change. Examine carefully the policies that apply when you create a fund or foundation. The Community Foundation is not in the business of rendering legal, accounting or financial advice. Always discuss your plans with your attorney, accountant or financial advisor.