Ten Reasons to Establish a Fund
at the Kalamazoo Community Foundation
Here are 10 practical reasons that outline why establishing a charitable fund at the Kalamazoo Community Foundation might make more sense than creating a private foundation:
1. A fund is easy and inexpensive to establish. A private foundation requires a donor to create a new
organization, apply for tax-exempt status, pay filing fees and incur legal and accounting expenses.
2. A gift of cash to a Community Foundation charitable fund allows a deduction of up to 50 percent of a
donor's Adjusted Gross Income (AGI). A gift of cash to a private foundation allows a donor to deduct up
to 30 percent of AGI.
3. By creating a charitable fund at the Community Foundation, a donor may deduct gifts of closely held
long-term appreciated stock at its fair market value, up to 30 percent of AGI. If the same gift is given
to a private foundation, deductibility may be limited to its cost basis up to 20 percent of AGI.
4. No tax is imposed on the investment income of a charitable fund because it is a component of a public
charity. A private foundation pays up to 2 percent federal excise tax on its investment income and
net realized capital gain.
5. A Community Foundation donor may remain anonymous. A private foundation must make available
to the public the name and address of any substantial contributor.
6. There are no minimum distribution requirements for a charitable fund at the Community
Foundation. A private foundation must annually distribute at least 5 percent of its net investment
assets, regardless of whether the amount is actually earned.
7. There are fewer restrictions on a charitable fund. For private foundations, however, there are strict
regulations regarding self-dealing between the foundation and those who manage, control, or
contribute to it and persons or corporations closely related to them. For example, a private foundation,
along with its donor and other "disqualified persons" (including members of the board and staff), may
not hold more than 20 percent of a related corporation's voting stock.
8. There are fewer investment restrictions on the Community Foundation's funds. A private foundation
may not make certain types of investments. For example, the Community Foundation may hold
more than a 20 percent ownership in a particular corporation, but private foundations may not.
9. There are fewer IRS reporting requirements on Community Foundation grants and funds, and
requirements that do exist are handled by our staff at no extra charge to individual donors.
10. Charitable gifts to a Community Foundation fund are almost always considered "public support,"
thus helping the recipient charity retain its public charity status. A private foundation grant is
usually not considered "public support" in its entirety and, thus, may not be as helpful to the
recipient charity in retaining its public charity status.
We are here to help you and your clients discuss and consider these options. To contact us, email any member of our Donor Relations staff or call (269) 381-4416. |
