Why a Fund?
A community foundation is a collection of component funds that make up one foundation. As a public charity, the Community Foundation benefits from maximum tax deductions and other advantages not available to private foundations. Our 501(c)(3) classification extends benefits to each donor of the Community Foundation as well. When a Foundation donor makes a gift to a fund, they receive an immediate tax deduction for the maximum allowable amount. Deductions benefit the donor and the community because thorough tax planning increases the amount of money that is available to address needs in our community.
When a donor has made the decision to give, some consider establishing a private foundation. With a little investigative work, they find similarities between private foundations and funds opened through the Community Foundation. Both entities:
- Provide philanthropic community impact.
- Garner recognition in the community.
- Support family members with ways to be involved in philanthropy.
With further research, advantages offered by the Community Foundation quickly outweigh those of a private foundation. By opening a fund with the Community Foundation:
- Donors are able to make charitable gifts to funds in the same year that best suits tax planning needs.
- Donors can recommend grants to be made from the fund to charitable organizations over many years.
- Contributions are tax deductible, with few limitations. Many restrictions govern private foundations.
- Only one annual tax return is filed for all Foundation funds. Private foundations incur the cost and burden of this headache each year.
- Donors are relieved from rules and regulations regarding required minimum distributions and IRS reporting.
In short, in lieu of starting a private foundation, a fund at the Community Foundation is far easier, more cost efficient, a part of a larger community of philanthropic relationships, and way more fun!