Private Foundations

Private Foundation or Community Foundation?

If your client is considering establishing a private foundation, check out the Community Foundation first. You’ll find that a Community Foundation offers most some benefits that private foundations can’t offer, including more favorable tax status and no minimum annual payout requirement. We can minimize your client’s paperwork and administrative hassles, allowing you to focus on the joy of giving and involving family members for generations to come. You can help your client accomplish this with either a donor-advised fund or supporting organization. Review our fact sheet comparing a private foundation to options at the Community Foundation:

Private Foundation Supporting Organization of CFGM Donor-Advised Fund of CFGM
Legal Identity Separate nonprofit corporation with donor’s choice of name Separate nonprofit corporation affiliated with CFGM; donor’s choice of name Fund of CFGM with donor’s choice of name
Tax Status Private Foundation Public Charity Public Charity
Minimum Size Generally, $1 million and up $2,000,000 $10,000
Taxation of Investment Income Up to 2% annually None None
Required Payout 5% annually None None
Deductibility of Cash Gifts Up to 30% of AGI Up to 50% of AGI Up to 50% of AGI
Deductibility of Long-Term Capital Gain Property Deductible at cost only, except for qualified appreciated securities, which are deductible at fair market value up to 20% AGI Deductible at fair market value up to 30% of AGI Deductible at fair market value up to 30% of AGI
Administration Donor responsible for all accounting and record keeping, including detailed IRS annual filing CFGM responsible for all accounting, record keeping and IRS filing CFGM responsible for all accounting and record keeping; no separate IRS filing required
Grant-making Expertise Donor must be knowledgeable or obtain professional advice CFGM staff available to research donor interests, develop applications, advise donor, monitor grants CFGM staff available to research donor interests, advise donor, monitor grants
Control Private foundation board has control of distributions and responsibility for asset management Supporting organization board has control of distributions and responsibility for asset management Donor advisor(s) recommend grants and investment pool for CFGM Board approval
Upfront Costs Substantial organizational fees and expenses, plus local, state and federal filing fees of $700 Local, state and federal filing fees of $700 None
Annual Costs Legal and accounting fees, insurance, possibly staff and office expenses Administrative fee of 1.25% of assets (or less depending on asset size) Administrative fee of 1.25% of assets (or less depending on asset size)