Alternatives to Private Foundations

Donor Advised Funds

Planning on setting up a family foundation? Consider a donor advised fund with the Main Street Community Foundation instead.

A donor advised fund allows you to facilitate your family’s charitable activities without the administration, management and IRS burden commonly associated with setting up a private foundation. The fund costs less to maintain than a private foundation, allows bigger tax deductions and minimizes the paperwork for giving.

Plus you receive all the services and expertise that Main Street Community Foundation offers other fund holders.

Creating the Fund or Foundation Established at the Main Street Community Foundation (MSCF) Non-profit corporation or trust organized as a private foundation
Tax-exempt Status Shares the public charity tax-exempt status of MSCF Must apply for tax-exempt status from the IRS
Start-Up Cost No cost to donor Similar to corporate start-up requiring substantial legal, accounting and operational start-up costs
Recommended Size $10,000 or more Substantial assets required
Charitable Deductions-cash gifts and appreciated stock Tax deduction of up to 60% of adjusted income for cash gifts. Appreciated stock is deductible at its fair market value as of the date it is received by MSCF up to 30% of adjusted gross income. Tax deduction is limited to 30% of adjusted gross income
Charitable Deductions-appreciated real property Tax deduction available for full market value. Tax deduction available up to 30% of adjusted gross income. Tax deduction may be taken for fair market value of marketable securities. Tax deduction for other property is limited to the lower of cost or fair market value, and is limited to 20% of adjusted income.
Donor Control Donor makes grant recommendations--to protect tax deductibility, final oversight rests with MSCF Donor retains complete control over investments and grant-making, subject to IRS requirements
Public Disclosure No required public disclosure; anonymity available Annual tax returns and filings must be open for public inspection
Self-Dealing Rules Private foundation self-dealing rules do not apply Strict regulations prohibit most transactions between a private foundation and its donors (including related persons or corporations)
Pay-Out Requirements Do not apply Must pay out for charitable purposes at least 5% of its asset value regardless of its annual income
Administrative Concerns (personnel, facility, gift and grant management) Services provided by MSCF Must establish and/or obtain these services
Annual Fees 1.75% administrative fee Administration can be costly
Annual Taxes None Generally exempt from income tax but subject to excise tax of up to 2% of net investment gain including net capital gains
Annual Tax Filings and Returns Not required (included as part of MSCF's annual reporting) Annual tax return required. Generally exempt from income tax is but subject to excise tax of 1.39% of net investment gain including net capital gains
Investments Fund assets are professionally invested through MSCF as part of more than $50 million in funds Must be filed by the private foundation with required supporting schedules
Fiduciary Responsibility MSCF fulfills the associated fiduciary responsibilities The private foundation board has full fiduciary responsibility
Liability & Risk Insurance Provided by MSCF Must be purchased by the private foundation

Supporting Organizations

Do you have a family foundation and are tired of the administration and IRS requirements associated with it? Become a supporting organization to the Main Street Community Foundation. This allows you to have tax exempt status as a public charity, but with a separate identity, mission and participation on the board of directors.

The benefits of these structures are many. We take on the accounting and filing of all required reports, and annual tax returns and audits. We can assist you with your grantmaking mission or focus, structuring grant applications and the review process, evaluating grants made and publicizing activities.

Contact us to learn more about these unique benefits.