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Private Foundation or Community Foundation?

If your client is considering establishing a private foundation, check out the simpler, less expensive alternatives first.

You'll find Akron Community Foundation offers benefits that private foundations can't offer, including a more favorable tax status and no minimum annual payout requirement. We minimize the paperwork and administrative hassles, allowing your client to focus on the joy of giving and involving family members for generations to come. 

See how your client can accomplish this with a donor-advised fund: 

Download our donor-advised fund comparison chart. 
 

 

DONOR-ADVISED FUND AT ACF

PRIVATE FOUNDATION

Annual Fees 

Approximately 2%

Extensive annual administrative, legal and investment costs

Initial Gift/
Balance Minimum 

$5,000

$5-10 million recommended

Tax Deductions

Typically more favorable
(for example, 60% of AGI on cash gifts)

Typically less favorable (for example, 
30% of AGI on cash gifts)

Annual Tax Filings & Returns

No additional reporting required, 
part of ACF 990

Private foundation staff must file 990 annually

Record Keeping/
Accounting

Provided by ACF staff

Private foundation staff must provide

Administrative 
Support

Provided by ACF staff

Private foundation staff must provide

Payout/Grants 
Required

No

Yes – at least 5%

Annual Taxes

No

Yes – up to 2%

Governance & 
Oversight

ACF’s board of directors

Private foundation’s own board of directors

Grantmaking Strategy Assistance

ACF can provide direction and
insight and can even connect
donors directly with nonprofits
if desired by donor

Private foundation must do their own due diligence or hire staff to manage

Confidentiality

Yes – donor can choose anonymity
both in giving and grantmaking

No

Donor Control of Distributions

Donors can recommend grants
to any 501(c)(3) public charity in
the country and will be carried out
with ACF board approval

Donors can recommend grants to organizations or individuals, subject to private foundation’s board

Investments

ACF has a record of long-term growth
by top-tier investment managers
but donors can request their advisors continue managing their assets if they meet certain criteria

Private foundation staff must oversee investments and management can be costly depending on assets

 

Converting a private foundation

Section 507 of the Internal Revenue Code permits termination of a private foundation in either trust or corporate form and distribution of its assets to a public charity.To terminate, a private foundation must meet two primary requirements: 

  • It must distribute all of its net assets to one or more tax-exempt organizations. 
  • Each organization must have been in existence for a continuous period of at least five years preceding the distribution. 

Akron Community Foundation qualifies under both of these requirements. And, as part of the community foundation, a private foundation's assets can continue with the organization’s original charitable purpose as a permanent named fund.

There is no excise tax, payout requirement or need for a separate audit as a fund of the community foundation.

We also provide services for private foundations

Many times, private foundations struggle at year’s end to make their 5 percent mandatory grant payout. You can help them meet the requirement in a single, immediate transaction through a grant from their foundation to establish a donor-advised fund at Akron Community Foundation. Then, the private foundation’s board can take time to deliberate on their grant-making decisions. A minimum of $5,000 establishes a donor-advised fund, and your client gains all the charitable benefits a public charity can offer.

For more information about our services for private foundations, contact Margaret Medzie, vice president and chief development officer, or Laura Fink, director of development and professional advisor relations.