Alternative to a Private Foundation

Sometimes creating a private or family foundation makes sense, but the complexities and time needed to run a foundation might be more than expected. For private foundations, the Community Foundation can be a solid and respectable source of grantmaking knowledge-helping donors create and monitor programs tailored to meet their charitable interests. We can also be an economical source of administrative support to handle daily grantmaking and financial services. By tapping into our philanthropic services, individuals can identify important community needs and achieve the impact they envision. Establishing a fund at the Manatee Community Foundation has many advantages over a private foundation.


Discover the benefits of working through your Community Foundation


		Private Foundations	Community Foundation Donor Advised Fund


	Liability Insurance	Director's and Officer's Liability Insurances, employee bonding, and office insurance must be separately purchased	Automatically covered by Community Foundation's Liability and Office Insurance Policy.


	Investment, Audit, Accounting & Tax Returns	Board of Trustees must contract for financial and administrative services; annual 990-PF tax return required	Community Foundation handles all financial and administrative management, files annual tax return and provides annual independent audit as part of its normal business plan.


	Grant Management	Must verify the charitable status of all recipient organizations and follow "expenditure responsibility" rules established by the IRS	Community Foundation verifies charitable status of all recipient organizations, plus donors have access to MCF's strategic grantmaking services


	Tax Treatment of Cash Gifts	Deductible up to 30% of AGI (Adjusted Gross Income)	Deductible up to 50% of AGI


	Tax Treatment of appreciated publicly-traded securities	Full market value deductible to 20% of AGI	Full market value deductible up to 30% of AGI or cost basis up to 50% of AGI


	Tax Treatment of closely held stock or real estate	Deduction limited to cost basis, up to 20% of AGI	Full market value deductible up to 30% of AGI or cost basis up to 50% or AGI


	Privacy	Required to file tax returns on grants, investment fees, staff salaries, etc. These are public records and are compiled into grantseeker's directories	Individual donors or grants can be kept private. If the donor wishes, MCF can serve as a buffer between the donor and grantseeker


	Excise tax on investment income and net realized capital gains	Generally 2% of investment income: however, may be reduced to 1% under special circumstances	None


	Self dealing rules	Strict prohibition under IRS Section 4941	None specified


	Grant Payout Requirement	Required to distribute 5% of private foundation assets annually to avoid penalty taxes whether or not the foundation investments earn that much income	None - can accumulate toward a sizable project or grant with no required payout


	Need to Hire Staff	Trustee are responsible for administration - if trustees cannot provide staffing, professionals will be needed	No - the staff of the Community Foundation handles all administrative details


	Set-up Procedure and Costs	Must incorporate or operate as a trust and apply to IRS for tax-exempt status: legal and accounting fees to establish and maintain	Simple agreement: no start-up fees or costs: automatically covered by the Community Foundation's tax exempt status


	Investment Options	May not hold closely-held stock: may hold limited shares in a manner that does not violate the excess business holdings or jeopardy investment restrictions under IRS Sections 4943 and 4944	Uses the investment pools established by the Community Foundation and overseen by its volunteer Investment Committee