- 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 grants paid out each year equal or exceed 5% of
the Foundation's asset value and that grant administration costs
qualifying as payout do not exceed .65% of assets.
- Assume expenditure responsibility for certain grants paid
to tax-exempt organizations that are not "publicly supported."
- Make certain that the total of voting stock held by the Foundation,
donor and other "disqualified persons" (including
members of the Board) does not exceed 20% of the 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 hand of other, nondisqualified persons.)
- Avoid a long list of transactions held to be "self-dealing".
- Avoid investments that jeopardize the charitable purposes
of the Foundation.
- Pay additional taxes for failure to take corrective action.
-The fund becomes part of a publicly supported organization.
- 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 charity.
- 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. The Southern Tier West Development Foundation
does not provide legal or financial advice. You are encouraged
to contact your legal and financial advisors when considering
establishing a fund or making a planned gift to the Foundation
| AT THE STWDF: |
IN A PRIVATE FOUNDATION: |
| Funds can be established in a day |
Funds take months to establish |
| Inexpensive to establish/administer |
Expensive to establish |
| Equally appropriate for any size assets |
Typically established with large assets |
| No annual report to file |
Must file own detailed tax return |
| No requirement for annual payouts |
Requires 5% payout of asset value |
| No excise taxes |
Annual excise tax of up to 2% on net investment income |
| Full market value deduction for gifts of appreciated property |
Deduction at cost basis only for appreciated value |
| Deduct up to 30% AGI for appreciated property; 50% for cash |
Deduct up to 20% AGI for appreciated property; 30% for cash |
| Low annual management fees |
Costly ongoing administration |
| Donor can involve family and heirs in charitable giving |
Donor can involve family and heirs in charitable giving |
| Anonymity can be maintained if desired |
Required public disclosure |
| No penalty taxes |
Penalty taxes may be imposed for excess business holdings
or self-dealing |
| Professional staff can provide consultation for grant making |
May need to obtain expert advice for effective grantmaking |
| Can be established during lifetime or through trust of estate |
Can be established during lifetime or through trust of estate |
| Fund name chosen by donor |
Foundation name chosen by donor |
