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 Community Foundation is an attractive alternative that offers donors significant tax benefits and substantial tax and administrative differences.

Effective and Cost Efficient Alternative

The Community Foundation Private Foundation
Endowed funds can be established 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 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 Community Foundation. Transferring assets from a private foundation to they Community Foundation is also very easy.

If you are interest in learning more about setting up an endowed fund or transferring assets to the Community Foundation Contact Us.