What is a Community Foundation?
Cleveland Trust Company accountant and lawyer, Frederick Harris Goff, is given the credit for creating the first community foundation in 1914. Many people disposed of their wealth through use of philanthropic devices. The principal device in those days was private foundations. Goff had the idea that people of modest means could also engage in large-scale philanthropy if they pooled their contributions. He thought that the distributions from such a pool could be made not by a bank but by a committee representing the community. The bank as the sole trustee and with a five-member distribution committee was given responsibility for distributing proceeds from the trust funds.
Although they vary somewhat, all community foundations share a common purpose: they serve as bridges between donors in a community and the institutions whose collective mission is to improve the quality of life for everyone in their region. Community foundations make grants to community groups from funds established by individuals, families, businesses and others that want to support the work of nonprofits, schools and other groups that address community concerns. To ensure that resources will be available for many years, community foundations focus on establishing endowed funds that grow over time. The earnings on these funds are available for grantmaking.
Community foundations are knowledgeable about the communities they serve and the choices available to help donors reach their philanthropic and financial goals. They are governed by community leaders and are accountable to the communities they serve.
Today there are nearly 650 community foundations in the United States with assets of over $29.7 billion. In 2002 grants awarded exceeded $2.5 billion. In Washington State community foundations are based in Wenatchee, Moses Lake, Walla Walla, Spokane, Bellingham, Seattle, Tacoma, Vancouver. There are several just beginning or are affiliates to the above serving in different communities.
There are over 700 community foundations throughout the United States. We are tax exempt nonprofit organizations that facilitate charitable giving and provide donor services, focusing on a designated geographic area. Community foundations provide donors a variety of charitable giving vehicles and options to achieve their charitable goals. Community foundations manage charitable endowments for the current and future benefit of the communities they serve.
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Community Foundations
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Private/Family Foundations
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| Cash Gifts | Tax deduction of up to 50% of Adjusted Gross Income (AGI). | Tax deduction of up to 30% of Adjusted Gross Income (AGI). |
| Stock Publicly Traded & Closely Held |
Tax deduction of 100% of fair market value up to 30% of AGI. | Tax deduction limited to cost basis up to 20% of AGI. |
| Real Estate | Tax deduction of 100% of fair market value up to 30% of AGI. | Tax deduction limited to cost basis up to 20% of AGI. |
| Tax Exempt Status | A Community Foundation is a 501(c)(3) public charity and is fully tax exempt. | Private foundations are subject to excise taxes and 5% payout requirements. |
| Annual Tax Returns | Individual funds are not required to file. A Community Foundation prepares and files all tax reports to the IRS. | Must file annual Federal 990-PF and supporting schedules which indicate staff salaries, investment performance, fees, etc. |
| Establishing A Fund | A Community Foundation fund can be established in one day with a simple document. Administrative fees are held to 1% of the fund's annual market value and a share of the money manager's fee. | Establishing a new foundation requires extensive legal, accounting and operational expenses on an on-going basis. |
| Investments | A diversified portfolio and economies of scale offer greater cost-efficiencies and minimize risks. A Community Foundation and its affiliate funds work with professional money managers. A Community Foundation's Finance Committee provides experienced oversight. | Selection of investment strategies and professional fund advisors can become a very time consuming responsibility for a private foundation's Board of Trustees. |
| Expertise | A Community Foundation provides expertise to donors on a wide range of gift management, finance and fund administration issues. | Must hire staff or Board members carry out administrative tasks on their own. |
| Grantmaking | Full-time professional staff are available to assist donors with grant administration, research and program evaluation to ensure maximum community impact. | Requires extensive time to review proposals, investigate community needs, confirm status of grantees and evaluate previous distributions. |
| Accountability | A Community Foundation conducts an independent audit each year. Publication of an annual report, public disclosure of grants and thoughtful selection of Board members ensures funds are used in the communities' best interests. | Laws and regulations governing private foundations differ greatly from those of public charities and may require expensive specialized legal and finance expertise. |
| Flexibility | As a public charity, a Community Foundation's organizational structure is purposely designed to allow greater flexibility to respond to and meet emerging needs in the community. | Expensive and lengthy legal proceedings may be required to change the purposes of a private foundation. |
| Privacy | Individual donors or grants can be kept private. If the donor wishes, the community foundation can serve as a buffer between the donor and grantseekers. | Required to file tax returns on grants, investment fees, staff salaries, etc. These are public records and are compiled into grantseeker directories.. |