The Columbus Foundation vs. Private Foundations

Establishing a fund at The Columbus Foundation has many advantages
over a private foundation. As a charitable donor, you wish to create a
vehicle that allows you to maintain long-term involvement with your
charitable assets. The Columbus Foundation enables the philanthropy minded to secure maximum tax deductions, involve family members,
focus grantmaking, and obtain visibility for their giving.

A new private foundation must
establish its tax-exempt status,
which can take several months to
obtain.

There are strict regulations regarding self-dealing between a private foundation and those who manage, control, or contribute to it and persons or corporations closely related to them.

While some donors may find a private foundation suited to their needs, establishing a fund at The Columbus Foundation often proves more attractive.

The following provides a comparison between establishing a fund at The Columbus Foundation or creating a private foundation.

Establishment

The Columbus Foundation		Private Foundation
The Columbus Foundation has existed since 1943.		A new private foundation must be organized from the ground up.
A fund is inexpensive and easy to set up.		A private foundation can be both time consuming and costly to establish.
Only $10,000 is needed to begin a fund at The Columbus Foundation.		For economic operations, a private foundation needs to have substantial assets.
The Columbus Foundation Governing Committee members and officers have $5 million liability insurance coverage.		This necessary insurance is costly and difficult to obtain.
The Columbus Foundation has a $5 million policy for theft, accident and umbrella insurance coverage.		This needed insurance is costly to obtain.

Tax Filings and Liability

Component funds of The Columbus Foundation are included in the Foundation’s annual reports to the Internal Revenue Service (IRS) and the Ohio Attorney General.		A private foundation must prepare its own detailed federal tax return (Form 990PF) with required supporting schedules and must report to the state as well.
A community foundation is a taxexempt entity.		A private foundation is subject to an excise tax of up to two percent on net investment income including net capital gains.

Tax Advantages

A donor can enjoy maximum tax advantages:

Deduction for gifts of cash is limited to 50 percent of Adjusted Gross Income (AGI).
The full, fair market value of appreciated property, including publicly traded stock, closely held stock , and real estate, is deductible from income up to 30 percent of AGI.

Tax treatment is not as favorable:

Deduction for gifts of cash is limited to 30 percent of AGI.

For gifts of appreciated property, including both publicly traded and closely held stock, the deduction is limited to 20 percent of AGI. If closely held stock or real estate is given, the deduction is also limited to the cost basis.

The Columbus Foundation already has a favorable tax-exempt ruling from the IRS, so contributions are immediately deductible.

A new private foundation must establish its tax-exempt status, which can take several months to obtain.

Operations & Administration

Administrative costs are shared by all funds and, therefore, kept at a minimum for individual funds.		Administration can be costly.
The Columbus Foundation meets the IRS’s “public support test,”thereby qualifying as a public charity.		A private foundation does not qualify for public charity status.
Donor control is limited through various fund formats.		Complete donor control over the fund’s use is permitted.
As an established organization, The Columbus Foundation has the following developed and in place:		A new private foundation must establish and obtain the following:

A mechanism for receiving and managing gifts of real estate, securities, and cash.
A means of evaluating requests for grants from nonprofit agencies.
Knowledge of the needs of the community.
A system for verifying the tax-exempt status of grantees.
Qualified professional and support staff.
Office space.

Monitoring & Oversight

A community foundation must be able to demonstrate that its money is being used for charitable purposes, but does not need to report such information to the federal government.

A private foundation that awards scholarships, or that makes grants to other private foundations or to new charitable agencies that have not received public charity status, is subject to federal monitoring and reporting requirements.

Public Exposure

Funds established by donors may be anonymous, even though tax returns must be available for public inspection for three years. Contributors need only be revealed to the IRS.

A private foundation’s tax return, including the names of its contributors, must be open to public inspection for three years.

Self-dealing & Business Holdings

Many private foundation regulations do not apply to a community foundation.

There are strict regulations regarding self-dealing between a private foundation and those who manage, control, or contribute to it and persons or corporations closely related to them. A private foundation, along with its donor and other “disqualified persons” (including members of the board and staff), may not hold more than 20 percent of the corporation’s voting stock.

Payout Requirements

A community foundation does not have minimum payout requirements; therefore, The Columbus Foundation can be more flexible in accepting gifts such as undeveloped real estate or other assets that produce little or no current income.

A private foundation must pay out for charitable purposes at least five percent of its asset value, regardless of its income each year.

Investment

The Columbus Foundation currently deals with more than 27 investment agents.

A private foundation must research and secure its investment vehicles.

High-Risk Involvement

The Columbus Foundation fulfills fiduciary duties.

Some high-risk investments of a private foundation can be subject to a federal penalty tax.

Purpose

If the named charity or restricted purpose is no longer active or providing a needed service, or if the gift becomes impractical or impossible to fulfill, then the Governing Committee may select another recipient with a similar purpose.

Expensive court proceedings may be required to change the original restricted purpose if it becomes outdated.

The Columbus Foundation is a resource for the community. In addition to the above comparisons, The Columbus Foundation has developed the following to simplify the process of charitable giving:

Legal language for making gifts and creating funds.

The expertise to handle sophisticated gift instruments such as charitable gift annuities, charitable lead trusts, and charitable remainder trusts.

A system whereby donors to funds are recognized in publications (if appropriate), identified to grant recipients (unless anonymous), and thanked individually for each gift.

Please feel free to contact The Columbus Foundation’s Donor Services and Development Department at 614/251-4000 with any questions.