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PRIVATE FOUNDATION ALTERNATIVES

The York County Community Foundation vs. A Private Foundation

A comparison between establishing a fund at York County Community Foundation and establishing a private foundation

As a charitable donor, you wish to create a giving model that allows you to maintain long-term involvement with your charitable assets. York County Community Foundation enables the philanthropy-minded to secure maximum tax deductions, involve family members, focus grantmaking and obtain visibility for their giving. While some donors may find a private foundation suited to their needs, the alternative of establishing a fund in York County Community Foundation often proves more attractive.Establishing a fund at York County Community Foundation has many advantages over a private foundation.

York County Community Foundation	Private Foundation
Establishment
York County Community Foundation has existed since 1961.	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 $25,000 is needed to begin a fund at York County Community Foundation.	For economic operations, a private foundation needs to have substantial assets.
York County Community Foundation Governing Board members and officers have $2 million liability insurance coverage.	This necessary insurance is costly and difficult to obtain.
York County Community Foundation has a $2 million policy for theft, accident and umbrella insurance coverage.	This needed insurance is costly to obtain.
Tax Filings & Liability
Component funds of York County Community Foundation are included in the Foundation's annual reports to the Internal Revenue Service (IRS) and the Pennsylvania 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 tax-exempt entity.	A private foundation is subject to an excise tax of up to 2 percent on net investment income, including net capital gains.
Tax Advantages
A donor can enjoy maximum tax advantages:	Tax treatment is not as favorable:
Deduction for gifts of cash is limited to 50 percent of adjusted gross income (AGI).	Deduction for gifts of cash is limited to 30 percent of 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.	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.
York County Community 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.
Operations & Administration
Administrative costs are shared by all funds and therefore kept at a minimum for individual funds.	Administration can be costly.
York County Community 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, York County Community 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 chari-table agencies that have not received public charity status, is subject to federal monitoring and reporting requirements.
Public Disclosure
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, York County Community Foundation can be more flexible in accepting gifts from individuals, families and business entities.	A private foundation must pay out for charitable purposes at least 5 percent of its asset value, regardless of its income each year.
Investment
York County Community Foundation currently deals with more than a dozen money managers. Investments are monitored and reviewed by the Investment Committee and the Board of Directors in consultation with Fund Evaluation Group (FEG), our independent investment consultant.	A private foundation must research and secure its investment vehicles.
High-Risk Involvement
York County Community 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 Board may select another recipient with a similar purpose.	Expensive court proceedings may be required to change the original restricted purpose if it becomes outdated.
York County Community Foundation is a resource for the community. In addition to the above comparisons, York County Community Foundation has developed the following to simplify the process of charitable giving: Language and documents for making gifts and creating funds The understanding of community to help donors and their families make the most of their lifetime giving through donor advised fund arrangements The expertise to handle sophisticated gift instruments such as charitable gift annuities, charitable lead trust, 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