NWACF: Donors: Advantages

Comparison: Community vs. Private Foundation...

Private foundations are subject to many more governmental regulations than an endowment placed with a community foundation. For example, a private foundation is required to distribute annually a minimum equal to approximately 5% of the fair market value of its noncharitable assets to accomplish charitable purposes.

Private foundations are also subject to a 2% excise tax on the net earnings.

Finally, should a private foundation fail to distribute the required 5% payout, the following will occur:

a 15% excise tax will be imposed, or

if failure to distribute in the second year occurs, a 100% tax may be imposed.

Following is a comparison chart of additional benefits that community foundations such as NWACF can offer:

	Community Foundations	Private Foundations
Tax treatment of cash gifts	Receive deduction of up to 50% of adjusted gross income (AGI).	Receive deduction up to 30% of AGI.
Tax treatment of gifts of appreciated publicly-traded securities	Full market value deduction up to 30% of AGI.	Receive full market value deduction up to 20% of AGI.
Tax treatment of closely held stock or real estate	Receive full market value deduction up to 30% of AGI.	Deduction limited to donor's cost basis, up to 20% of AGI.
Excise taxes	No excise taxes imposed.	Excise tax of 1-2% of net investment income paid annually.
Required payout	No required payout. Can accumulate income toward a sizable project or grant. Has flexibility to hold low yield property.	Required to expend 5% of asset value annually, whether or not the Foundation's investments earn that amount.
Incorporation and tax exemption	Automatically covered by the Community Foundation. Minimal start-up expenses incurred.	Must apply for incorporation, tax exemption and incur various start-up expenses.
Privacy and recognition	Donors are generally recognized for grants disbursed from their fund. However, individual donors or grants can be kept private. Individual funds assets and grant activity are confidential.	Foundation required to file tax returns with details on all grants, investments, fees, trustee fees, staff salaries, etc. These are public records and are complied into grant-seeker directories.
Liability and insurance	Automatically covered by Community Foundation's liability and office insurance policies.	Any directors' and officers' liability insurance, employee bonding, and office insurance must be purchased separately.
Investment, accounting, audit and tax returns	The Foundation handles all investments and accounting, files annual tax return and provides annual independent audit.	Trustees must perform, contract, or hire staff for these services.
General administration	Community Foundation handles all financial and administrative management.	Trustees must perform, contract, or hire staff for these services.
Grant administration	If donor wishes, the Community Foundation can identify potential recipients, investigate applicants, make grant payments, and monitor performance.	Trustees must perform, contract, or hire staff for these services.
Costs	The Community Foundations fee for most funds is 1% of the fund balance annually. Assets above $500,000 receive reduced fees.	Private foundations of under $1 million had average costs of 4.8% of assets and those of $1-10 million had average costs of 3% of assets.

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