Benefits of a Donor Advised Fund v. a Private Foundation

Your clients have a choice. They can establish a private foundation, or they can establish a fund within the Community Foundation of the Ozarks.

If a donor establishes a private foundation he/she must do the following:

  • File a detailed annual federal tax return (form 990PF) and required schedules
  • Pay excise tax on net investment income including net capital gains. (The tax will vary from 1 to 2% of such income depending on whether the foundation meets certain payout requirements)
  • Publish in a local paper notice of the annual federal tax return’s availability
  • Make sure that grants paid out each year equal or exceed 5% of the foundation’s asset value and that the grant administration costs qualifying as payout do not exceed .65% of assets
  • Assume expenditure responsibility for certain grants paid to tax exempt organization that are not “publicly supported”
  • Make certain that the total of voting stock held by the foundation, donor and other “disqualified person” (including members of the Board) does not exceed 20% of any corporation’s voting stock (or 35% of the corporation’s voting stock, if it can be established that effective control of the corporation is in the hands of other, non-disqualified person)
  • Avoid a long list of transactions held to be “self-dealing”
  • Avoid investments which jeopardize the charitable purposes of the foundation
  • Pay additional taxes for failure to take corrective action. (In certain cases, these could be levied on the donor personally and on each member of the Board.)
  • File State of Missouri returns and a notice with the Attorney General of Missouri’s Office that meets specified requirements

If the donor establishes a fund within the Community Foundation of the Ozarks, CFO DOES IT ALL:

  • The fund becomes part of a publicly supported organization benefiting the community
  • The donor may get a larger tax deduction for current and future gifts
  • Since the fund doesn’t pay excise tax, there frequently is more available for charitable purposes
  • The fund can be set up in one day, rather than requiring months
  • The fund is managed by a full-time, staffed organization with expert advisors
  • You may remain anonymous if you wish
  • There is no minimum distribution requirement