For Professional Advisors
Options in Charitable Giving
Many people give directly to organizations recognized as tax-exempt public charities under Section 501(c) 3 of the Internal Revenue Code, and as a nonprofit organization also with 501(c)3 status we can offer donors tax deductions for gifts made to The Foundation. The Community Foundation of Middle Tennessee also serves as a leader and resource for such philanthropy through its experience and established relationships with nonprofits in the 40 counties of Middle Tennessee it serves. We welcome the chance to introduce donors to the many charitable opportunities in their communities.
Private Foundations
In the past, many have believed that the only way to be truly personally involved in significant charitable giving was to create a private foundation. While some donors may find this choice suited to their needs, current limitations often make such a decision an impractical option.
The tax benefits of gifts to a private foundation are more limited because a private foundation does not qualify for public charity status. Establishing and maintaining a private foundation is both time-consuming and costly. Finally, after the donor’s death, control of the foundation will pass to heirs or to others who may not have the time, skills, resources, or interest to continue the donor’s charitable objectives.
The Community Foundation of Middle Tennessee
Another option is to establish a charitable fund through The Community Foundation of Middle Tennessee. As a community foundation, it offers the simplicity and tax advantages of a public charity combined with donor involvement and personal attention and recognition.
For those making gifts to multiple organizations through gifts of appreciated assets, The Community Foundation can offer one-stop philanthropy by taking care of all the paperwork necessary to make all of the distributions. For those who want to “give back to the community,” The Foundation offers a variety of fund types, which donors can use to accomplish virtually any charitable purpose.
The process is flexible enough to satisfy donors’ unique requests and simple enough to complete in a short amount of time.
Weighing the Options for Giving
WHY GIVE THROUGH THE COMMUNITY FOUNDATION OF MIDDLE TENNESSEE
FLEXIBILITY: Donors have the flexibility to support existing funds or create charitable funds that reflect their particular interests and affiliations. Or donors can defer to the experience of The Community Foundation staff to select charitable causes and organizations needing assistance. A donor can specify the particular aspect of community life to which distributions from his or her fund shall be applied, choose a specific geographic area to receive grants, designate the specific charitable organizations which should benefit from the Fund, or advise The Community Foundation of Middle Tennessee, from time to time, as to which charitable organizations should receive grants.
RECOGNITION or ANONYMITY: By establishing a permanent, named fund within The Community Foundation of Middle Tennessee, a donor has an opportunity to give his or her family name a place in the philanthropic history of Middle Tennessee. Unless The Foundation is instructed to the contrary, their Fund is listed in its annual report, and all grants made from their Fund are identified to the recipients as coming from the donor's fund. If the donor desires anonymity, The Foundation will carefully protect the donor’s identity.
PERMANENCE: Individuals and corporations that choose to work with The Community Foundation of Middle Tennessee can do so with the knowledge that it will be managed prudently in perpetuity and that the gift always will serve the purpose outlined by donors when their gift was made. Every potential grantee is investigated, current records on each grantee are maintained, and grants are monitored by the professional staff and Foundation Board members.
COST EFFECTIVENESS: The Community Foundation of Middle Tennessee professionally manages more than 570 funds. The Foundation, its banks and investment managers invest individual gifts and bequests as a family of funds, achieving significant economies of scale in both investment and administration.
EXPERT INVESTMENT MANAGEMENT: The assets of most permanent funds are commingled with other Foundation property for investment purposes. Each permanent fund, therefore, enjoys the benefits of being a part of a large, professionally managed, diversified portfolio at a much lower cost than if it were invested separately. The Foundation assures that investment decisions are prudent and produce a reasonable rate of return. The Foundation has relationships with local banks and with a variety of other investment managers. In addition, for clients who wish to establish a fund with a sizable gift, clients have the option of selecting their own money manager. This option is available for gifts totaling more than $250,000.
TAX BENEFITS: Donors to The Community Foundation receive the full tax advantages available by law for gifts to public charities. Of course, the extent of such tax advantages will depend on the particular circumstances of each gift.
EFFICIENT ADMINISTRATION: Administration of all charitable funds within The Foundation is handled by a professional staff. As such, scale economies are achieved; individual funds are not required to pay for audits, tax returns and legal fees. And donors receive periodic reports on the status and activity of the funds they create.
COMMUNITY IMPACT: The Community Foundation of Middle Tennessee has more than a decade of experience working in partnership with nonprofits, professional organizations, corporations, and individuals to achieve shared community goals, to find solutions, and to maximize grant-making effectiveness. The Foundation can help donors effectively target their dollars toward projects that will meet the community’s most pressing needs and promising opportunities.
Key Advantages of a Donor-Advised Fund
Over a Private Foundation
| PRIVATE FOUNDATION | DONOR-ADVISED FUND | |
| EASE OF CREATION | Involves creation of a new organization, application for tax-exempt status, and Expenditure of time and money. | Execution of simple Deed of Gift is all that is required. |
| TAX BENEFITS | Cash gift deduction is limited to 30% of adjusted gross income.
Only the cost basis of certain types of appreciated property is deductible, and deduction is limited to 20% of adjusted gross income. |
Taxpayer can deduct up to 50% of adjusted gross income for cash
gifts.
Full value of gifts of appreciated real property is deductible up to 30% of adjusted gross income. (Consult your tax advisor concerning alternative minimum tax implications.) Gifts of appreciated securities to Donor-Advised Funds always allow the donor to use market value when establishing his/her deduction. |
| ACCOUNTING AND TAX PREPARATION | Detailed reporting required and a 2% federal excise tax (1% in some cases) must be paid on net investment income. | No separate tax return to file and no excise tax to pay. |
| INVESTMENTS | Certain types of investments prohibited, and The Foundation may not own more than 20% equity interest in a business. | No federal investment requirements and no equity concentration restrictions. |
| DISTRIBUTIONS | Approximately 5% of net asset value must be paid out for charitable purposes annually. | No minimum pay-out requirement. |
| ANONYMITY | Names and addresses of contributors must be made available to the public. | Donors' names are revealed only to the IRS. |
| PERPETUITY | Over time, oversight will change and your wishes may be forgotten. | Your objectives are protected by community leaders who, as your peers, are themselves charitably inclined. |
| STAFFING | Any staffing must occur within federally mandated self-dealing rules. | Professional staff can screen giving opportunities and community needs with maximal convenience, at a fraction of the cost. |
