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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
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- Donor-Advised Endowment
Supporting Organization (SO)
Private Foundation (PF)
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- 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
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- 2. Tax Status
- Public charity
- Public charity
- Private foundation
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- 3. Valuation of gifts, other than publicly traded stock
- Fair market value
- Fair market value
- Cost basis
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- 4. Tax Deductibility of Donations
- 60% 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
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- 5. Taxes paid
- None
- None
- 2% excise tax on net investment income, possible penalty taxes
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- 6. Tax Returns, States & Federal
- Separate fund report not needed.
- Federal 990 filed by SO
- Federal 990-PF filed by PF
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- Donor-Advised Endowment
Supporting Organization (SO)
Private Foundation (PF)
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- 7. Annual Payout Required
- None
- None
- 5% of net investment income
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- 8. Governance
- Not required, since donor-advised fund
- Board of Directors, with some minor restrictions
- Board of Directors
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- 9. Legal & Tax Counsel
- Retained by The Dayton Foundation
- Can use The Dayton Foundation’s or retain separately
- Must retain counsel
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- 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
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- 11. Grants
- Suggested by donor & those appointed by donor
- Controlled by SO board. Resources of The Dayton Foundation available
- Controlled by PF board
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- 12. Assets
- Investments pooled
- May hold unusual assets; e.g. real estate
- Some restrictions depending on type of assets held
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- 13. Asset Investment
- Policy & mechanisms set, results measured & monitored
- Can operate separately or with The Dayton Foundation
- Must implement & manage
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- Donor-Advised Endowment
Supporting Organization (SO)
Private Foundation (PF)
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- 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
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- 15. Knowledgeable Staff
- In place
- Can employ own or contract with The Dayton Foundation for staff support
- Must employ & manage
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- 16. Administration
- In place through The Dayton Foundation
- Can establish or contract with The Dayton Foundation for staff support
- Must establish & maintain
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- 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
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- 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
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- Donor-Advised Endowment
Supporting Organization (SO)
Private Foundation (PF)
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- 19. D & O Insurance, Surety Bonds
- In place
- Cost charged to SO
- Must carry separate coverage
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- 20. Gift Acceptance Policy & Procedure
- Established by The Dayton Foundation
- Established by The Dayton Foundation
- Must establish
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- 21. Complex Gift Planning
- In place through The Dayton Foundation
- Access to The Dayton Foundation staff for assistance
- Must obtain
Get started. Learn how to create a fund with The Dayton Foundation.
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“Let me 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.”
– Michelle Lovely, senior vice president, Development and Donor Services, (937) 225-9948
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