Community vs. Private Foundation

Private foundations are a great community asset and are an ideal solution for some philanthropic individuals. For others, bigger tax savings, less administrative hassles and lower operational costs associated with establishing an endowment (long-term) fund or a supporting organization through The Dayton Foundation provide a more attractive alternative.

Whether you want to leave a bequest in your will or be an active donor during your lifetime, there are many advantages to using The Dayton Foundation as a vehicle for your charitable giving. We can help you:

  • achieve your charitable goals efficiently and effectively;
  • save on administrative and legal costs;
  • avoid restrictions and potential penalties imposed on private foundations by the Internal Revenue Service; and
  • achieve valuable tax savings.

The following chart compares the advantages of establishing a private foundation vs. a donor-advised endowment fund or a supporting organization of The Dayton Foundation. A supporting organization of The Dayton Foundation, also known as a family foundation, is a separate legal entity and offers many of the advantages and controls of a private foundation, but with numerous additional benefits. By utilizing the resources and structure of The Dayton Foundation, a supporting organization can often be a more cost-effective, flexible and efficient alternative to a private foundation.

21 Reasons to Establish a Donor-Advised Endowment or a Supporting Organization of The Dayton Foundation vs. Establishing a Private Foundation

    •  
    • Donor-Advised Endowment
    • Supporting Organization (SO)

    • Private Foundation (PF)

    • 1. Legal Entity
    • Established by The Dayton Foundation
    • Must establish by the SO; 501(c)(3) must be obtained from IRS
    • Must establish by PF; 501(c)(3) must be obtained by IRS
    • 2. Tax Status
    • Public charity
    • Public charity
    • Private foundation
    • 3. Valuation of gifts, other than publicly traded stock
    • Fair market value
    • Fair market value
    • Cost basis
    • 4. Tax Deductibility of Donations
    • 50% of Adjusted Gross Income (AGI) for cash gifts; 30% of AGI for long-term capital gains
    • 50% of AGI for cash gifts; 30% of AGI for long-term capital gains
    • 30% of AGI for cash gifts; 20% of AGI for long-term capital gains
    • 5. Taxes paid
    • None
    • None
    • 2% excise tax on net investment income, possible penalty taxes
    • 6. Tax Returns, States & Federal
    • Separate fund report not needed.
    • Federal 990 filed by SO
    • Federal 990-PF filed by PF
    •  
    • Donor-Advised Endowment
    • Supporting Organization (SO)

    • Private Foundation (PF)

    • 7. Annual Payout Required
    • None
    • None
    • 5% of net investment income
    • 8. Governance
    • Not required, since donor-advised fund
    • Board of Directors, with some minor restrictions
    • Board of Directors
    • 9. Legal & Tax Counsel
    • Retained by The Dayton Foundation
    • Can use The Dayton Foundation’s or retain separately
    • Must retain counsel
    • 10. Accounting & Audit
    • All funds consolidated, no separate report
    • The Dayton Foundation handles if investments are merged with the Foundation; separate audit optional at the cost of SO if investments are not merged
    • Must establish accounting systems; separate audit may be needed
    • 11. Grants
    • Suggested by donor & those appointed by donor
    • Controlled by SO board. Resources of The Dayton Foundation available
    • Controlled by PF board
    • 12. Assets
    • Investments pooled
    • May hold unusual assets; e.g. real estate
    • Some restrictions depending on type of assets held
    • 13. Asset Investment
    • Policy & mechanisms set, results measured & monitored
    • Can operate separately or with The Dayton Foundation
    • Must implement & manage
    •  
    • Donor-Advised Endowment
    • Supporting Organization (SO)

    • Private Foundation (PF)

    • 14. Fund Corpus
    • Ability to invade corpus determined by Donor at inception of fund
    • Board controlled, can grant all income & corpus
    • Board controlled, can grant all income & corpus
    • 15. Knowledgeable Staff
    • In place
    • Can employ own or contract with The Dayton Foundation for staff support
    • Must employ & manage
    • 16. Administration
    • In place through The Dayton Foundation
    • Can establish or contract with The Dayton Foundation for staff support
    • Must establish & maintain
    • 17. Public Report
    • Part of The Dayton Foundation report
    • Separate or can be part of The Dayton Foundation report if assets are merged
    • Must advertise, print & distribute
    • 18. Operating Expenses
    • Paid to The Dayton Foundation; currently 7/10 of 1% annually on first million; 3/10 of 1% on assets over one million
    • Individually negotiated; may be paid by grant to The Dayton Foundation
    • Paid by asset income — some IRS limitations
    •  
    • Donor-Advised Endowment
    • Supporting Organization (SO)

    • Private Foundation (PF)

    • 19. D & O Insurance, Surety Bonds
    • In place
    • Cost charged to SO
    • Must carry separate coverage
    • 20. Gift Acceptance Policy & Procedure
    • Established by The Dayton Foundation
    • Established by The Dayton Foundation
    • Must establish
    • 21. Complex Gift Planning
    • In place through The Dayton Foundation
    • Access to The Dayton Foundation staff for assistance
    • Must obtain
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File date: 9.18.14

HERE TO HELP

Joe Baldasare

“Let me, Joe Baldasare, vice president, Development, tell you more about the financial benefits of establishing a fund through the Foundation over a private foundation or how you can transfer a private foundation to The Dayton Foundation.”

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