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
  • 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
• • 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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