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Donor Advised Fund
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Private Foundation
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IRS charitable status
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501(c)(3) & 509(a)(1)
(public charity)
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501(c)(3)
(private foundation)
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Governing body
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1. Advisory Committee
Advisor may be established or may be committee of family members and/or others.
Successive generations may participate in future giving.
2. The Community Foundation has final approval for all grants and administrative matters.
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Governing body may consist of donor and related persons.
Governing body approves all grants and administrative matters.
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Tax treatment of cash gifts
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Deductible up to 50 percent of adjusted gross income (AGI).
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Deductible up to 30 percent of AGI.
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Tax treatment of gifts of appreciated publicly-traded securities
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Full market value deductible up to 30 percent of AGI.
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Full market value deductible up to 20 percent of AGI.
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Tax treatment of closely held stock or real estate
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Full market value deductible up to 30 percent of AGI or cost basis up to 50 percent of AGI.
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Deduction limited to donor's cost basis, up to 20 percent of AGI.
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Deduction carry-over available
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Five additional years
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Five additional years
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Ease of establishment, incorporation and tax exemption
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One signed document
(Instrument of Transfer)
Automatically covered by The Community Foundation's tax exempt status
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Corporation or trust required
Must apply to IRS for tax-exempt status using Form 1023. (IRS may take six months or longer to process)
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Excise tax on investment income and net realized capital gains
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None
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Generally 2 percent; may be reduced to 1 percent under special circumstances.
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Self dealing rules
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Some relevant provisions under HR 4, passed 8/17/06.
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Strict prohibition under IRC Section 4941.
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Minimum payout requirements
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None (can accumulate toward a sizable project or grant with no required payout)
Has the flexibility to hold low yield property.
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Yes (minimum 5% of average asset value each year under IRC Section 4942)
A private foundation must meet the minimum distribution rules whether or not the foundation's investments earn that amount.
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Restriction on private investment
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Yes
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Yes (in addition, you cannot engage in acts that may violate strict self dealing rules that apply only to private foundations)
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Restriction on holding interests in business enterprises
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Yes, based on HR4, passed 8/17/06.
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Yes
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Application of expenditure responsibility procedures for grants to organizations and programs that are not public charities
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Yes, based on HR4, passed 8/17/06.
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Yes (under IRC Section 4945 - taxable expenditure retax for failure to make "expenditure responsibility" investigations)
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Possibility of advisory role for donor and family in grantmaking
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Yes
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Yes
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Separate annual IRS tax return required
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No
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Yes
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Privacy
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Yes. Individual donors' fund assets size, gifts and grantmaking are kept private and confidential. No public disclosure of individual grants or donations is required. Donors are generally recognized for grants disbursed, but grants may be made anonymously. If a donor wishes, the Community Foundation can serve as the buffer between donors and grant-seekers.
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No (IRS Form 990-PF which is open to public inspection)
Private foundations are required to file detailed tax returns on grants issued, investment fees, trustee fees, staff salaries, asset size, etc. and then publish a notice to the public that the tax return is available for public viewing. These are public records and are often compiled into grant-seeker directories.
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Investment, accounting, audit and tax returns
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The Community Foundation handles investments/accounting, files annual tax return, provides annual independent audit.
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Trustees must perform, contract or hire staff for these services.
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General administration
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The Community Foundation handles all financial and administrative management.
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Trustees must perform, contract or hire staff for these services.
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Grant administration
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If donor wishes, The Community Foundation can identify potential recipients, investigate applicants, make grant payments and monitor performance.
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Trustees must perform, contract or hire staff for these services.
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Liability and insurance
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Advisors to funds are covered by The Community Foundation's liability and office insurance policies. Fundraising events and other activities require insurance.
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Any Directors and Officers liability insurance, employee bonding, and office insurance must be separately purchased.
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