Why Give | Tax Decisions | Community Foundation vs. Private Foundation



A community foundation offers many advantages to someone seeking a way to create or redirect a philanthropic effort.

Often people discover that creating and maintaining a family or other private fund or foundation independently is expensive and time consuming. Creating a fund at a community foundation will reduce the time commitment needed and can lower the fund’s operational expenses.

A community foundation offers several benefits over other types of giving, including:

  • As a 501(c)(3) public charity, your gift receives the maximum tax deduction under current tax law.
  • Capital gains tax cannot be levied on gifts to a community foundation.
  • A gift to the community foundation relieves the benefactor of administrative burdens  and overhead expenses.

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Year-End Tax Decisions

As the end of 2019 approaches, many of your clients may be considering options for charitable giving. Research by the Center for Philanthropy shows that 24 percent of annual donations by individuals or families occur between Thanksgiving and New Year’s Eve. Whether inspired by the season or the uncertainty of future tax changes, many people are currently seeking the best means to execute their charitable desires.

The New Braunfels Community Foundation can help with those important decisions. From our variety of funds, your clients can select one or more to express their charitable interests while securing 2019 tax deductions.

Some NBCF funds to consider:

  • Donor-Advised Fund. Permits the highest level of donor involvement, allowing advisory authority over grant making throughout the life of the fund.
  • Designated Fund. Creates a fund specifically to benefit causes or nonprofits the benefactor identifies.
  • Unrestricted Gift. Fulfills a broader community focus by allowing the NBCF Board of Directors to assist with community needs as they arise.
  • Field of Interest Fund. Permits identification of specific areas of interest and the flexibility to meet community needs.

Advantages of creating a fund with the New Braunfels Community Foundation:

  • Flexibility. Gifts can take many forms. Long-term capital-gain assets, such as appreciated stock, are an attractive option, as they generally qualify for deduction at fair market value.
  • Efficiency. Consolidate charitable giving and gain access to administrative capabilities, simplifying giving and reducing time and expenses.
  • Impact. Community funds allow donors to honor someone, to create a legacy, and to keep their gifts viable in perpetuity. All funds may be added to indefinitely, building a charitable vehicle with ever-increasing impact.

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NBCF Funds vs. Private Foundation


NBACF Private Foundation
Tax Status Derives “public charity” 501(c)(3) status, and qualifies for 170(b)(1)(A)(vi) “public support” requirements from its relationship with NBCF. Must apply to IRS for private foundation tax-exempt status. (Currently 18 months or more) Does not qualify as a “publicly supported” organization.
Start-Up Costs None Several thousand dollars for legal and accounting expenses and filing fees.
Start-Up Time None Form independent corporation (or trust). Must file for IRS approval as a tax-exempt entity
Minimum to Start a Fund $10,000 Many Advisors suggest more than $10 million to justify the cost.
Annual Expenses Varies depending on size of fund. Fees are normally covered by investment returns. Annual tax returns and audit required. Grantmaking and administrative support must be staffed independently. Separate investment and Directors and Officers insurance costs.
Annual Taxes None Excise tax of up to 2 percent of net investment income, including net capital gains. Other excise taxes may apply if certain annual tests are not met.
Annual Distribution Requirements None At least 5% of Net Asset Value is required to be distributed
Maximum Annual Income Tax Deduction cash Up to 50 percent of adjusted gross income. Can rollover excess deduction for the next 5 succeeding years. Up to 30 percent of adjusted gross income. Can rollover excess deduction for the next 5 succeeding years.
Anonymity Donors and grants from funds may remain anonymous. All donors and grants are public information and easily found via the internet.

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