Private Foundations vs. Family Foundation Funds

Community FoundationPrivate Foundation
OrganizationEstablished 1935Not yet established
Tax exempt§ 501(c)(3) statusNot yet established
5% payout ruleNot subject toMay have to payout 5% of assets
Excise Tax on investment incomeDo not payMay be subject to tax
Tax Deductibility for DonorsMaximum under lawUncertain; provisional status if approved
Mechanism for Receiving GiftsEstablished mechanisms to handle gifts of real estate, securities & cashNeed mechanisms for receiving and managing of gifts
Language for Making Gifts & Creation of FundsIn placeMust create
Sophisticated Gift Instruments (Pooled Income, Lead, Annuity, and Unitrusts)In placeMust create
OfficeIn placeNeed to obtain
StaffingIn placeNeed to obtain
AccountingComputerized & independentCPA audit conducted each yearMust employ
Tax Return (Attorney General &IRS)Prepared by CPAMust prepare
Public ReportAnnual report to public (over 1,000 copies distributed)May be required
Acknowledge DonorsDonors recognized in publications and thanked individually for each giftNeed systems
Director and Officer LiabilityIn place $3 millionNeeded (costly and difficult to obtain)
Liability InsuranceIn place $2 millionNeeded
Employee BondingYesNeeded
Investment of AssetsProfessional Investment CommitteeNeed to obtain
Organization OverheadSpread over all our assetsStart-up costs and costs spread over smaller asset base
CredibilityWide public acceptanceNew organization

For a more thorough discussion about establishing a fund, contact us at (814) 454-0843.