Donor-Advised Funds vs. Private Foundations
It is critically important for you to understand the differences between Donor-Advised Funds and Private Foundations and to choose the best structure for your charitable contributions.
ADVANTAGES OF DONOR-ADVISED FUNDS VS. PRIVATE FOUNDATIONS
| TEXAS FOREST COUNTRY COMMUNITY FOUNDATION (TFCCF) DONOR-ADVISED FUND | PRIVATE FOUNDATION | |
| Ease of Creation | TFCCF is already a 501(c)(3). Execution of simple Fund Agreement is all that is required. | Involves creation of new organization, application for tax exempt status and expenditure of time and money. |
| Tax Benefits | Tax Payer can deduct up to 60% of adjusted gross income for cash gifts. Full market value of gifts of appreciated property is deductible up to 30% of adjusted gross income. (Consult your tax advisor concerning alternative minimum tax implications.) | Cash gift deduction is limited to 30% of the adjusted gross income. Only the cost basis of certain types of appreciated property is deductible, and deduction is limited to 20% of adjusted gross income. |
| Minimum Contribution | $25,000 | $2 million traditionally recommended |
| Accounting and Tax Preparation | No separate tax return to file and assets are audited as part of the Foundation’s annual audit | Detailed reporting required |
| Excise Taxes | No Excise Tax to pay. | A 1-2% federal excise tax must be paid on net investment income. |
| Investments | No federal investment requirements and no equity concentration restrictions other than those established through prudent guidelines. | Certain types of investments prohibited and the Foundation may not own more than 20% equity interest in a business. |
| Distributions | Currently, there is no minimum pay-out requirement for a specific fund. | Approx 5% of net asset value must be paid out annually for charitable purposes. |
| Anonymity | Donor’s names are revealed only to the IRS | Names and addresses of contributors must be made available to the public. |
| Perpetuity | Carrying out the donor’s charitable intent is an important hallmark of TFCCF | Overtime, oversight will change and your wishes may be forgotten. |
Please always consult your professional advisor as the above information is not intended as legal or tax advice.
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