Foundation FAQ's (12)
A Community Foundation is supported by a broad and ever-widening group of unrelated individuals, families, corporations, and institutions. The only thing that connects all of our donors is a desire to improve local communities.
Because of their broad base of support, Community Foundations are classified by the IRS as publicly-supported charities. This gives Community Foundations tax advantages not enjoyed by private foundations.
Community Foundations are also allowed to treat all funds within their control (known as “component funds”) as part of a single corporation. This gives them administrative advantages over private foundations as well.
Private foundations, by contrast, are generally supported by a single individual, family, or business. Rarely does it make sense to establish a private foundation if the principal endowment is not large. Today, of course, the world’s largest foundations -Gates, Ford, Kellogg- are all still private foundations.
To prevent abuse and self-dealing, private foundations have been subjected by the IRS to numerous penalty taxes and legal requirements, since the 1970s.
Because Community Foundations are controlled by large, diverse, and unrelated boards of directors, and the possibility of abuse is slim, the IRS does not impose any tax penalties or burdensome legal requirements on Community Foundations.
A community foundation is a tax exempt, non-profit, publicly supported, philanthropic institution with the long term goal of building permanent, named funds for the broad-based charitable benefit of the residents in a given area.
The common mission of every community foundation is to enhance the quality of life in the local area. Community foundations carry out this very broad mission by building a permanent endowment fund and using the annual income to support a variety of local nonprofit organizations through grants and special projects.
Most community foundation assets are held in separate funds established by local individuals, families, businesses, or charitable institutions. Each fund may have a special purpose, but the foundation board of directors, representing the community, oversees them all. The IRS recognizes community foundations as public charities in part because they receive support from the general public and their boards broadly represent the areas served.
A Community Foundation receives contributions from a wide range of local individuals, families, and businesses. Most establish separate, named funds for specific purposes: to support local education or health, to fund a scholarship for local students, or to endow a local non-profit institution. A community foundation saves individual donors time and money by handling the administrative details of many funds jointly:
- Through the community foundation’s finance committee it makes investment decisions for all funds
- Through its staff it handles all tax filings, bookkeeping, and grants processing
Because of this and other built-in “safeguards” of the community foundation model, the IRS permits each fund established in a community foundation to qualify as a “component fund” of it. In effect, that means that each fund qualifies as a publicly-supported, non-profit 501(c)3 organization unto itself. It becomes, as it were, a “foundation within a foundation.” In turn, the advantage of public-charity status gives donors maximum tax benefits for all their donations.
Most non-profit organizations have a specific mission. By contrast, a Community Foundation’s mission is very broad: to improve the quality of life in a given area. This breadth of mission reflects our ability to make grants in any field of interest with a charitable benefit to local communities.
This flexibility allows us to serve a wider group of potential donors on the one hand and, on the other, a wider group of non-profit organizations whom we consider our partners in improving local communities.
Area non-profits benefit from having a local Community Foundation because the Community Foundation helps money stay in a community. Community Foundations benefit local non-profits in other ways, too: besides having local grant money available, some non-profits ask the Community Foundation to manage an endowment on their own behalf. We call such funds “agency endowment funds.”
As it grows, a Community Foundation gradually becomes the center for all charitable giving in a community. We help make connections between the people who want to give and the people who need their support.
While cash or checks are simplest, many donors find that securities, real estate, or even life insurance policies maximize tax benefits by avoiding capital gains taxes on highly appreciated property. Direct bequests via will or beneficiary designations for tax-deferred retirement plans have become frequently used planned giving tools. The Foundation staff can provide more details on attractive estate planning, insurance and property gift options.
No. According to IRS regulations, the Community Foundation may make grants only to qualifying nonprofit public charities. The Community Foundation staff checks all organizations for documentation of nonprofit status.
Scholarship awards are made payable to the institution the recipient is attending on his/her behalf.
The Foundation’s work involves managing, investing, and making effective charitable grants from the assets of 170+ different charitable funds to date; including unrestricted endowments, designated funds, donor advised funds, fiscal sponsorships, field of interest funds and scholarship funds. Each fund receives its share of the Foundation’s investment return as part of maximizing its grant-making potential.
We have been in existence since 1999. We are governed by a distinguished, all volunteer, Board of Directors. We are a 501 (c) (3) nonprofit organization. We are a very transparent organization and would be happy to provide you with current financial information. Our financial information is also publicly available under the About section of our website.
You can honor or commemorate a special person with a named permanent endowment fund, or with a memorial contribution in the honoree’s name for any amount to the Foundation for general operating support, or to add to an existing permanent endowment fund. The Foundation takes care of all appropriate gift acknowledgements.
When we receive a donation here at the Foundation, we will send a tax receipt to the donor and we will send you a letter saying who gave in your loved one’s memory. We will include the donor’s address so you may thank them in your own way as well.
Creating a permanent endowment fund ensures that the special people who have “left footprints on our hearts” are forever remembered in our community. It takes just $25,000 to establish a permanent endowment fund from which grants will be awarded forever in a loved one’s name, and the Foundation charges a very modest annual fee of approximately 1% annually to administer your endowment fund. You have up to five years to achieve the $25,000 minimum to endow your fund.
The Oscar B. Greenleaf Scholarship Fund is a great example. Mr. Greenleaf left a bequest of $1 million to establish a scholarship fund. The Foundation grants out approximately 4% annually in scholarships. That equates to approximately $40,000 in scholarships going out of the fund to local students each year. What a legacy Mr. Greenleaf left to his community. Forever and ever, this fund will continue to award scholarships, and the annual scholarships will grow as the $1 million bequest grows through its investment. As you can see, when you establish or support an endowment, your gift just keeps giving…and getting bigger!
Speakers: Marc Selden, J.D., LL.M., national recognized lecturer, Member: Cozen O’Connor, New York City, and Richard J. Shapiro, J.D., CELA.
This 2-credit charitable giving seminar, presented by the Community Foundation’s Professional Advisors Council, will teach you everything you need to know about asset protection planning and how you can help your clients preserve and protect their assets.
Registration & Networking: 4:30 – 5:30 PM
Buffet Dinner & Seminar: 5:30 – 7:30 PM
Credits: Attorneys – 2 CLE credits*; CPAs – 2 CPE credits*
RSVP by October 19
Limited seating. Reserve now.
*Credits are pending. This program is transitional and appropriate for experienced and newly admitted attorneys. The Women’s Bar Association of the State of New York has been certified by the New York State Continuing Education Board as an accredited provider of continuing legal education in the State of New York. Full and partial scholarships based on need are available. All requests are confidential.
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