How Does a Private Foundation Compare to a Donor Advised Fund?
There are more than several good reasons to establish a fund at a Community Foundation versus setting up a private foundation. Here is a useful comparison chart to help answer some basic questions. We look forward to speaking with you in more detail about the options available at the Community Foundation.
||Donor Advised Fund
||For donors who wish to actively engage in their philanthropy through an administrative and programmatic partner. Shares public charity tax-exempt status of the Foundation; Not a separate corporate entity.
||For donors who want extensive control over grantmaking, investments, and board selection. Must apply for private foundation tax exempt status from IRS. Separate corporate entity status
||Donor makes grant recommendations to the Foundation for approval. After initial gift, assets are property of the Foundation.
||Donor retains complete control over investments, grantmaking and board selections, subject to IRS requirements.
|Philanthropic Advising, Grantmaking & Community Knowledge
||Services provided by the Foundation include access to grantmaking expertise, strategic charitable planning, family philanthropy facilitation, site visits, and planned giving vehicles.
||Must arrange and support own grantmaking, administrative, and monitoring structure.
||2% annually, with tiered fees for assets over $3MM. Minimum initial gift of $10,000.
||Must contract/hire and oversee legal, accounting, and program-related staff and expenses.
|Minimum Annual Payout Requirements
||Required pay out for charitable purposes minimum of 5% of asset value.
||Public charity deductibility.
Property: Fair market value up to 30% AGI;
Publicly-traded stock: fair market value to 30% AGI;
Cash: 50% of AGI
||Private foundation deductibility.
Property: cost basis up to 20% AGI;
Publicly-traded stock: fair market value to 20% AGI;
Cash: 30% of AGI
|Administration (personnel, facility, gift and grant management)
||Services provided by the Foundation. Online fund management available. No separate tax return required.
||Must hire personnel and establish board. Manage facility, accounting, record keeping, grant and gift processing, and file tax returns.
|Annual Taxes & Filings
||Not required (reported as part of the Foundation’s annual reporting); exempt from excise taxes.
||Must be filed by private foundation with required supporting schedules (Form 990PF); excise taxes are 1-2% of net investment income. State reports.
||Private foundation self-dealing rules do not apply.
||Regulations prohibit most transactions between a private foundation and its donors (including related persons or corporations).
||The Vermont Community Foundation fulfills associated fiduciary responsibilities.
||Private foundation board has full fiduciary responsibility, must develop own compliance policies.
|Liability & Risk Insurance (including D&O)
||Provided by the Vermont Community Foundation.
||Purchased by the private foundation.