The Dayton Foundation: About Us: Community vs. Private Foundation

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Community vs. Private Foundation

Private foundations are a great community asset and are an ideal solution for some philanthropic individuals. For others, bigger tax savings, less administrative hassles and lower operational costs associated with establishing an endowment (long-term) fund or a supporting organization through The Dayton Foundation provide a more attractive alternative.

Whether you want to leave a bequest in your will or be an active donor during your lifetime, there are many advantages to using The Dayton Foundation as a vehicle for your charitable giving. We can help you:

• achieve your charitable goals efficiently and effectively;
• save on administrative and legal costs;
• avoid restrictions and potential penalties imposed on private foundations by the Internal Revenue Service; and
• achieve valuable tax savings.

The following chart compares the advantages of establishing a private foundation vs. a donor-advised endowment fund or a supporting organization of The Dayton Foundation. A supporting organization of The Dayton Foundation, also known as a family foundation, is a separate legal entity and offers many of the advantages and controls of a private foundation, but with numerous additional benefits. By utilizing the resources and structure of The Dayton Foundation, a supporting organization can often be a more cost-effective, flexible and efficient alternative to a private foundation.

21 REASONS TO ESTABLISH A DONOR-ADVISED ENDOWMENT OR A SUPPORTING ORGANIZATION OF THE DAYTON FOUNDATION VS. ESTABLISHING A PRIVATE FOUNDATION

	Donor-Advised Endowment	Supporting Organization (SO)	Private Foundation (PF)
1. Legal Entity	Established by The Dayton Foundation	Must establish by the SO; 501(c)(3) must be obtained from IRS	Must establish by PF; 501(c)(3) must be obtained by IRS
2. Tax Status	Public charity	Public charity	Private foundation
3. Valuation of gifts, other than publicly traded stock	Fair market value	Fair market value	Cost basis
4. Tax Deductibility of Donations	50% of Adjusted Gross Income (AGI) for cash gifts; 30% of AGI for long-term capital gains	50% of AGI for cash gifts; 30% of AGI for long-term capital gains	30% of AGI for cash gifts; 20% of AGI for long-term capital gains
5. Taxes paid	None	None	2% excise tax on net investment income, possible penalty taxes
6. Tax Returns, States & Federal	Separate fund report not needed	Federal 990 filed by SO	Federal 990-PF filed by PF
	Donor-Advised Endowment	Supporting Organization (SO)	Private Foundation (PF)
7. Annual Payout Required	None	None	5% of net investment income
8. Governance	Not required, since donor-advised fund	Board of Directors, with some minor restrictions	Board of Directors
9. Legal & Tax Counsel	Retained by The Dayton Foundation	Can use The Dayton Foundation’s or retain separately	Must retain counsel
10. Accounting & Audit	All funds consolidated, no separate report	The Dayton Foundation handles if investments are merged with the Foundation; separate audit optional at the cost of SO if investments are not merged	Must establish accounting systems; separate audit may be needed
11. Grants	Suggested by donor & those appointed by donor	Controlled by SO board. Resources of The Dayton Foundation available	Controlled by PF board
12. Assets	Investments pooled	May hold unusual assets; e.g. real estate	Some restrictions depending on type of assets held
	Donor-Advised Endowment	Supporting Organization (SO)	Private Foundation (PF)
13. Asset Investment	Policy & mechanisms set, results measured & monitored	Can operate separately or with The Dayton Foundation	Must implement & manage
14. Fund Corpus	Ability to invade corpus determined by Donor at inception of fund	Board controlled, can grant all income & corpus	Board controlled, can grant all income & corpus
15. Knowledgeable Staff	In place	Can employ own or contract with The Dayton Foundation for staff support	Must employ & manage
16. Administration	In place through The Dayton Foundation	Can establish or contract with The Dayton Foundation for staff support	Must establish & maintain
17. Public Report	Part of The Dayton Foundation report	Separate or can be part of The Dayton Foundation report if assets are merged	Must advertise, print & distribute
18. Operating Expenses	Paid to The Dayton Foundation; currently 7/10 of 1% annually on first million; 3/10 of 1% on assets over one million	Individually negotiated; may be paid by grant to The Dayton Foundation	Paid by asset income — some IRS limitations
	Donor-Advised Endowment	Supporting Organization (SO)	Private Foundation (PF)
19. D & O Insurance, Surety Bonds	In place	Cost charged to SO	Must carry separate coverage
20. Gift Acceptance Policy & Procedure	Established by The Dayton Foundation	Established by The Dayton Foundation	Must establish
21. Complex Gift Planning	In place through The Dayton Foundation	Access to The Dayton Foundation staff for assistance	Must obtain

Let me, Joe Baldasare, vice president, Development, tell you more about the financial benefits of establishing a fund through the Foundation over a private foundation or how you can transfer a private foundation to The Dayton Foundation."

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File date: 12-6-2010