A fund at the Community Foundation of Lorain County is easy and inexpensive to establish. A private foundation requires a donor to create a new organization, apply for tax-exempt status, and pay taxes and legal and accounting expenses.
A gift of cash to a fund at the Community Foundation of Lorain County allows a deduction of up to 50 percent of a donor’s Adjusted Gross Income (AGI). A gift of cash to a private foundation allows a donor to deduct up to 30 percent of AGI.
By creating a fund at the Community Foundation of Lorain County, a donor may deduct gifts of most appreciated property at their fair market value, up to 30% of AGI. For a gift of appreciated property to a private foundation, the maximum deduction is limited to 20% of AGI.
No tax is imposed on the investment income of a fund at the Community Foundation of Lorain County because it is a public charity. A private foundation pays up to 2% federal excise tax on its net invested income and realized gain.
A donor may remain anonymous. A private foundation must make available to the public the name and address of any substantial contributor.
Minimum distribution requirements for a fund with the Community Foundation of Lorain County are negotiable. A private foundation, on the other hand, must distribute annually at least 5% of its net investment assets, regardless of whether that amount is actually earned.
There are fewer restrictions on a fund at the Community Foundation of Lorain County. 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% of a related corporation’s voting stock.
There are fewer investment restrictions on a fund at the Community Foundation of Lorain County. A private foundation may not make certain types of investments.
There are fewer IRS reporting requirements on the Community Foundation of Lorain County grants.
Gifts from a fund of the Community Foundation of Lorain County are almost always considered “public support,” thus helping the recipient charity retain its public charity status. A private foundation grant is usually not considered “public support” in its entirety and, thus, is not as helpful to the recipient charity in retaining its public charity status.