Benefits of Community Foundations versus Private Foundations for your client
Is your client trying to decide between a community foundation and a private foundation? Both options can assist a donor with charitable giving, but there are key differences that might make a donor advised fund at The Community Foundation of Harrisonburg & Rockingham County a more practical choice for your client.
- Start Up Costs
The Community Foundation of Harrisonburg & Rockingham County can set up a new fund in as little as one day and for a relatively modest fee, while the process of fully establishing a private foundation takes longer and is more costly.
- Tax Benefits
Cash gifts to a donor advised fund are deductible up to 60% of the donor’s adjusted gross income. Cash donations to private foundations are deductible up to 30% of the donor’s adjusted gross income. The tax benefit of appreciated stock donated to The Community Foundation of Harrisonburg & Rockingham County is up to 30% of adjusted gross income and a deduction at fair market value. For private foundations the tax benefit of the same gift of appreciated stock is up to 20% of adjusted gross income.
- Tax Consequences
Funds at The Community Foundation of Harrisonburg & Rockingham County are exempt from federal excise tax on income, while private foundations usually pay an excise tax on net investment income.
- Expertise and Effective Management
At The Community Foundation of Harrisonburg & Rockingham County management is provided in perpetuity. This includes investment services, tax returns, reports and audits, along with proposals from nonprofit organizations, making and monitoring grants and disbursing funds. Our staff is familiar with hundreds of nonprofit organizations and is experienced with accepting more complex gifts, while a private foundation must bring the knowledge themselves or hire someone.
A private foundation must make its tax return available to the public. While the tax return of The Community Foundation of Harrisonburg & Rockingham County is available, there is no disclosure on individual funds.
- Investment Management
Donor advised funds receive the benefit of oversight by our Investment Committee. In contrast, private foundations must manage their own investments.
- Annual Payout
A donor advised fund has no annual payout requirement, while a private foundation is required to grant 5% of the previous year’s investment assets.
A donor advised fund can, when needed, remain anonymous, while all private foundation grants are accessible by the public.