Finding What's Best for You, Community or Private Foundations
Increasingly donors are asking whether it makes sense to create a private foundation for their charitable giving or whether a more effective and cost efficient alternative exists. While a private foundation can be an attractive vehicle in the right circumstances, most experts in foundation law and administration believe that since the 1969 Tax Reform Act and subsequent tax laws, private foundations are not financially viable unless assets exceed $10 million.
An endowed fund at the Elk County Community Foundation is an attractive alternative that offers donors significant tax benefits and substantial tax and administrative differences.
Effective and Cost Efficient Alternative
| The Elk County Community Foundation | Private Foundation |
| Endowed funds can be establised with an initial $5,000 contribution* | Endowment funds must be $5-$10 Million for the fund to be cost effective |
| Can be established in a day | Takes months to establish |
| Inexpensive to establish and administer | Expensive to establish, costing thousands |
| Equally appropriate for any size assets | Typically established with substantial assets |
| No requirements for annual payouts | Requires 5% charitable payout of its asset value annually |
* A minimum contribution of $5,000 is enough to establish a named or endowed fund. Funds can be launched with smaller gifts, however, with plans to build to the $5,000 minimum.
Tax Benefits
| The Elk County Community Foundation | Private Foundation |
| No Excise Tax | Subject to annual excise tax of up to 2% on net investment income |
| Full Market value deduction for gifts of appreciated property | Full market value deduction for gifts of appreciated publicly-traded stock |
| Deduct up to 30% AGI for appreciated property; 50% for cash | Deduct up to 20% AGI for appreciated property; 30% for cash gifts |
| No penalty taxes | Penalty taxes may be imposed for excess business holdings or self-dealing |
Tax Administration Differences
| The Elk County Community Foundation | Private Foundation |
| No start up costs | Legal and accounting fees as start up costs |
| Fund can be established in a day | Takes months to establish |
| Inexpensive to establish and administer | Expensive to establish, costing thousands |
| No restrictions on grant scholarships | Restrictions on grant scholarships |
| No requirements for annual payouts | Requires 5% charitable payout of its asset value annually |
| Low annual administration/management fees | Costly ongoing administration |
| Anonymity can be maintained, if desired | Requires public disclosure |
| Professional staff can provide consultation for grant-making | May need to obtain expert advice for effective grant-making |
Your hometown advantage is what sets the Elk County Community Foundation apart from commercially sponsored gift funds offered by financial investment companies. The Foundation offers face-to-face service, more investment flexibility, community involvement and recognition, and advice on grant-making. We have the local awareness and experience to help you accomplish your charitable giving goals and will work with you to make your giving to your community as easy as possible.
To transfer assets from a commercially sponsored gift fund, simply recommend that the balance of you fund be granted to the Elk County Community Foundation. Transferring assets from a private foundation to the Elk County Community Foundation is also very easy.
If you are interest in learning more about setting up an endowed fund or transferring assets to the Elk County Community Foundation Contact Us.