Donor Advised Funds vs Private Foundations

This helpful table outlines the benefits of investing your clients' philanthropic dollars in The Community Foundation for the National Capital Region (CFNCR).

CFNCR Donor-Advised Fund Commercial Donor-Advised Fund CFNCR Supporting Organization
(Type 1)
Private Foundation
Donor Control of Grantmaking and Investments Donor recommends grants to qualified nonprofit groups.  Donors may choose from CFNCR's's investment pools. Donor recommends grants to qualified nonprofit groups.  Donors may chose from among firm's investment pools. In some cases, donor's investment advisor can manage assets. Supporting Organization board has complete control over investments and grantmaking.  CFNCR and donor work together to select board. Donor appoints board, which controls investments and grantmaking.
Tax Status Covered under CFNCR's public charity status. Covered under nonprofit status of corporate entity's charitable subsidiary. Entitled to public charity status based on its relationship with CFNCR. Applies to IRS for private foundation tax-exempt status.
Income Tax Deductions for Gifts of:
Cash Up to 50% of adjusted gross income. Up to 50% of adjusted gross income. Up to 50% of adjusted gross income. Up to 30% of adjusted gross income.
Publicly Traded Securities Fair market value up to 30% of adjusted gross income. Fair market value up to 30% of adjusted gross income. Fair market value up to 30% of adjusted gross income. Fair market value up to 20% of adjusted gross income.
Real Estate, Closely Held Securities, and Other Special Categories Fair market value up to 30% of adjusted gross income. Fair market value up to 30% of adjusted gross income. Usually real estate and closely held securities are not accepted. Fair market value up to 30% of adjusted gross income. Deductible at cost basis up to 20% of adjusted gross income.
Grantmaking Advice and Follow-up Professional staff is available to help identify and assess grantees, provide input on community needs, and ensure recipients are qualified and effective.  Educational programs available. Varies. Most do not offer personalized advice on grantee selection. Professional staff is available to help identify and assess grantees, provide input on community needs, and ensure recipients are qualified and effective. Educational programs available. Foundation must arrange and support its own grantmaking and monitoring activities.
Distributions to Individuals Not allowed, except in specific instances(e.g., qualified scholarships). Typically not permitted. Not allowed, except in specific instances(e.g., qualified scholarships). Not allowed.
International Grants Allowed. Usually not allowed. Allowed. Allowed.
Distribution Requirements None. Varies.  Some require a minimum of 5% of the fund's net assets on a five-year rolling basis. None. At least 5% of net asset value annually. Penalty tax is 30% of undistributed amount.
Start-Up Considerations
Costs None. None. CFNCR covers most costs. Several thousand dollars for legal and accounting expenses and filing fees.
Time Frame Immediate. Immediate. Several months. Several months.
Minimum Contribution None. Varies, usually $5,000 - $25,000. $5 million recommended. None, but smaller private foundations may not be cost-effective.
Annual Administrative Requirements
Fees 1.1% of assets for administrative fees (minimum $500), plus investment expenses ranging from 0 to 0.6%. Based on size of fund, usually starting at 0.60% of assets and declining for larger funds. Investment expenses range from 0.10% to 1.25%. 0.5% of assets plus actual investment expenses, audit fees, and tax return preparation fees. Grantmaking, administrative, and investment support are staffed and financed independently.
Taxes None. None. None. Excise tax of up to 2% of net investment income, including net capital gains.
Reporting None. None. Annual tax returns and audits prepared and filed by CFNCR. Annual tax return, including detailed financial schedules.
Privacy Donors may remain anonymous. Donors may remain anonymous. Donors may remain anonymous, but IRS Form 990 lists officers, directors, and trustees. Donors may remain anonymous, but IRS Form 990-PF lists officers, directors, and trustees.

 

For more information:

Starlet Hunter

Director, Corporate and Professional Services 

(202) 263-4763

shunter@cfncr.org