The Catholic Foundation (TCF) vs. Private Foundation

Many of your clients will assume they need a private foundation to achieve their philanthropic goals. Over the years, we have found that most donors who establish funds with The Catholic Foundation enjoy virtually the same benefits that would accrue to a private foundation, but without the onerous reporting and spending requirements. A comparison follows:

Issue Donor Advised Fund
at TCF
Supporting
Organization
Private
Foundation
Creating the Foundation Established at TCF by a simple agreement Nonprofit corporation or trust created with assistance from TCF Nonprofit corporation or trust organized as a private foundation
Tax Exempt Status Shares the public charity tax exempt status as a “component” of TCF Shares the public charity tax exempt status of TCF Must apply for private foundation tax exempt status from the IRS
Start-up Costs No cost to donor Minimal costs through collaboration with TCF Similar to a corporate start-up requiring substantial legal, accounting, and operational start-up costs
Recommended Size $25,000 or more
($10,000 minimum)
$5 million or more Generally $2-$5 million to justify start-up costs
Charitable Deductions for Cash Gifts Tax deduction of up to 50% of adjusted gross income Tax deduction of up to 50% of adjusted gross income Tax deduction of up to 30% of adjusted gross income
Charitable Deductions for Appreciated Property Tax deduction available for full fair market value of marketable securities and other property

Tax deduction available up to 30% of adjusted gross income
Tax deduction available for full fair market value of marketable securities and other property

Tax deduction available up to 30% of adjusted gross in income
Tax deduction may be taken for fair market value of marketable securities.  Generally, tax deduction for other property is limited to the lower of cost or fair market value

Tax deduction available up to 20% of adjusted gross income
Donor Control Donor  makes advisory grant recommendations – final decisions rest with TCF’s Trustees Donor holds significant organizational influence and may appoint minority of the board Private Foundation’s Trustees or Directors  retain complete control over investments and grantmaking, subject to IRS requirements
Self-Dealing Rules Private foundation self-dealing rules do not apply Private foundation self-dealing rules do not apply Strict regulations prohibit most transactions between private foundation and its donors (including related persons or organizations)
Payout Requirements Do not apply Do not apply Must pay out for charitable purposes at least 5% of its asset value annually, regardless of its income
Administration Services provided by TCF Affiliation with TCF provides access to existing services Must establish and/or obtain these services
Operational and Grantmaking Guidance TCF staff available to consult with client and research charities TCF staff available to consult with client and research charities Little to no assistance available
Annual Costs Minimal Shared by TCF and therefore kept at a minimum Can be costly but varies according to size and complexity of the foundation
Annual Taxes Generally no tax on investment income Generally no tax on investment income Subject to an excise tax of up to 2% of net investment gain, including net capital gains and income
Annual Tax Filing & Return (990 Report) Not required (reported as part of TCF’s annual reporting) Can be prepared and filed by TCF, or TCF can oversee preparation Must be filed by the private foundation with required reporting schedules
Investments Fund assets are professionally invested through TCF’s various options May avail itself of professional investment services offered by TCF Must research, secure, and carefully monitor its own investment vehicles
Fiduciary Responsibility TCF fulfills the associated fiduciary responsibility Administrative guidelines provided by TCF The private foundation board has fiduciary responsibility
Liability and Risk Insurance Provided by TCF up to $10 million Provided by TCF up to $10 million Must be purchased by the private foundation

Donor Advised Fund – Through an agreement with The Catholic Foundation (TCF), the fund will be set up and specially named. The fund will be managed and administered by TCF, but you will be able to choose fund advisors and advise the Foundation about preferences regarding grant recipients and gift amounts. Distributions will be made in the fund's name, and you will receive annual financial statements. Since the fund is considered part of The Catholic Foundation's holdings, it will receive all related tax exempt benefits.

Supporting Organization – Through a unique collaboration with The Catholic Foundation (TCF), you can form a supporting organization. Structured as a separate corporation or trust, a support organization has its own nonprofit board, bylaws, articles of incorporation and financial statements. If it is a trust, it also has its own trustees. However, by sharing management and administration with TCF, a support organization is particularly cost effective. Most importantly, it is for tax purposes a public charity, entitling its donors to the most generous tax deduction available.

Private Foundation – A private foundation allows extensive donor control over distributions and board selection. However, private foundations are highly controlled by the government with many special restrictions, including administrative and reporting burdens, excise taxes, and a required minimum payout. In recent years, significant limitations on charitable deductions available for gifts to private foundations have minimized the appeal of this tool.

The Catholic Foundation | 12222 Merit Drive, Suite 850, Dallas, TX 75251| 972.661.9792 phone | 972.661.0140 fax | info@catholicfoundation.com

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