Grays Harbor Community Foundation

GRAYS HARBOR COMMUNITY FOUNDATION

Polson Museum

PRIVATE FOUNDATIONS: A Comparison

A community foundation avoids classification as a private foundation and therefore enjoys certain advantages for two reasons:

A community foundation's assets are gifts from a wide range of unrelated donors.
A community foundation's board of directors is often large and broadly represents the area served.

Both facts make it very difficult for funds managed by community foundations to be used for self-interested purposes. Unfortunate examples of self-dealing led the IRS in the 1970s to impose on private foundations a variety of legal requirements and penalty taxes.

The comparison chart below summarizes the differences between private foundations and community foundations.

	PRIVATE FOUNDATIONS	COMMUNITY FOUNDATIONS
Set-up procedure	Must incorporate and apply to IRS for tax-exempt status; legal and accounting fees to establish	Simple agreement; no start-up fees or costs
Tax treatment of contributions	Current-year tax benefits are limited to 30% of income for cash gifts and 20% of income for appreciated property gifts	Current-year tax benefits are limited to 50% of income for cash gifts and 30% of income for appreciated property gifts
Excise taxes	2% of investment income annually	None
Investments, Audit, Accounting, and Tax Returns	Must perform financial and administrative services, or contract or hire staff Annual 990-PF tax return required	Community foundation handles all financial and administrative management Files single tax return for all funds; audited annually
Liability insurance	Any director's and officer's liability insurance, or office insurance must be separately purchased	Automatically covered by community foundation's liability and office insurance policies
Grant management	Must verify the charitable status of all recipient organizations independently	Community foundation handles all grants processing, verifies charitable status of grantees, and bring donors the advantage of being in the center of our community's charitable giving
Grant payout requirement	Required to distribute at least 5% of private foundation assets annually to avoid penalty taxes	No payout requirement

For more information about the differences between community foundations and other options available to donors, read this in our page of Frequently Asked Questions.

Grays Harbor Community Foundation is a tax-exempt public charity dedicated to serving the broad needs of Grays Harbor County in Washington State. We are a member of the Council on Foundations; we have committed ourselves to the National Standards for U.S. community foundations; we are audited annually; and we consider ourselves accountable to the public upon whom we depend for support.

We thank Darrell Westmoreland, Kevin Hong, Ellen Pickell, and the Polson Museum for providing the photographs used in this website. We'd like to showcase the work of more local photographers and artists on this website and in our publications. Please contact us if you'd like to help.

Mail: 707 J Street | P.O. Box 615 | Hoquiam, WA 98550

Email: info@gh-cf.org

Phone: 360.532.1600

Fax: 360.532.8111

Last modified: 01/11/06