Challenge:

The foundation has its roots in a humble frontier feed store. Founded in the 1890s, the store eventually grew into a sizable company with a household name. Relatives of the three brothers who grew that company founded their foundation in the 1940s, and it has been in operation ever since.

Today, the board of the foundation, which is comprised of descendants of the brothers, pays homage to its history by keeping track of other descendants through familial records. There are now dozens of descendants and, upon reaching the age of 18, they are all eligible to join the foundation as a non-voting member and attend board meetings. The foundation will match up to three member gifts to charity for as much as $1,500 total in a given year. Members are also able to provide feedback via grant committees for organizations that have applied for funding.

The foundation’s tradition of making giving a (very large) family enterprise is one of its most cherished hallmarks. Even so, all that gift-matching and grant committee activity makes for an enormous amount of paperwork and a sizable administrative burden.

Collaboration:

Foundation Source set up their gift-matching program on Applications, our online grants management system for accepting, organizing, tracking, and replying to charitable requests. (Applications is available as an add-on to the robust platform our clients use to manage their foundations.)

Family members use Applications to apply for their gift match. Foundation Source verifies that the family member made a donation and that the recipient organization is eligible to receive grants from the foundation. We also customized Applications so that when a family member is a part of a grant committee, they can log in, review their committee’s applications, and then leave comments for board members.

Outcome:

Thanks to their experience with Applications, the foundation now benefits from a seamless, paperless process for its gift-matching program. The foundation is free to celebrate its heritage without worry that the growth of its family tree will outstrip its administrative capabilities.

The post How a Private Foundation Is Keeping An (Extended) Family Tradition Going Strong appeared first on Foundation Source.

Challenge:

The board of the Charles R. Wood Foundation carries on the work of its late founder by supporting children, the arts, and healthcare in upstate New York.

While traveling in rural North Carolina, the president of the foundation read an article in the local newspaper about Dolly Parton’s Imagination Library program and its outreach to the region. This national program, which is available to any community, mails a book to children under five years of age each month. The purpose of the program is to boost early childhood literacy and foster a love of reading.

As the Charles R. Wood Foundation wanted to promote childhood literacy in upstate New York’s rural counties, they asked their Private Client Advisor at Foundation Source to get them information on how they could get involved.

Collaboration:

The Private Client Advisor contacted the Dollywood Foundation, which was able to provide the demographic research the foundation required to assess regional need. Dollywood also identified possible literary agencies that might be willing to partner with the Charles R. Wood Foundation. Foundation Source coordinated the effort by discussing the program with the Literacy Volunteers of Clinton County, who agreed to handle the child registration process.

Foundation Source has streamlined the entire application process, saving the foundation significant time and administrative effort. The foundation is very pleased with their new process, but we revisit it each year and continue to refine it based on their evolving needs.

Outcome:

The Foundation now supports the Imagination Library program, enabling 3,500 children in Clinton, Essex, Franklin, and Hamilton counties to participate. The foundation is thrilled that Foundation Source could help connect them with the necessary partners to make this project happen, and they appreciate how easy we’ve made it for them to track its results, procuring semi-annual updates for their review.

The post Connecting a Private Foundation to An Opportunity for Literacy appeared first on Foundation Source.

If appreciated stocks are contributing to your client’s bottom line, one tax-effective strategy is to contribute up to 20% of their adjusted gross income (AGI) to a private foundation in the form of highly appreciated, publicly traded stock held for at least a year.

If your client were to sell these securities, they could have tax liability arising from long-term capital gains. If they’re in the highest marginal tax bracket, the effective long-term capital gains tax rate would be 23.8% (taking into account the 3.8% net investment income tax). However, if they were to take that stock and donate it to their foundation, they’d be eligible to get a fair-market value deduction and avoid the substantial capital gains tax.

UNLIKE OTHER CHARITABLE SOLUTIONS, THE FUNDS CONTRIBUTED TO A PRIVATE FOUNDATION STAY UNDER YOUR CLIENT’S DIRECT CONTROL AND YOUR FINANCIAL MANAGEMENT

Example: Let’s say Mary Smith, who is in the highest marginal tax bracket, bought stock for $100,000 five years ago, which has since appreciated to $1M. If she were to sell the stock for its current value, her capital gains exposure would be $214,200 ($900,000 gain at 23.8% = tax bill of $214,200), leaving $785,800 for her personal benefit. If, instead of selling the stock, she donated it to her private foundation, her foundation’s tax rate would be, at most, its 1.39% excise tax. The resulting tax bill would be $18,000, leaving $982,000 for charitable purpose under her direct control.

Make a Combined Donation of Stock and Cash

Alternatively, Mary could combine her donation of highly appreciated stock with a cash donation.

Example: Let’s say Mary’s AGI is approximately $5M. Her AGI maximum is therefore $1M for stock (20%). If she were to donate cash, she’d be permitted to donate up to 30% of her AGI—an additional 10%. She could therefore donate that same $1M of highly appreciated stock used in the previous example along with an additional $500,000 in cash. Assuming she has no other limitations (this example is exclusively for illustrative purposes), she would be eligible for a deduction of up to $1.5M. Meanwhile, her private foundation would only pay a 1.39% excise tax on the stock’s gain of $900,000, resulting in a tax bill of $18,000 and a $982,000 endowment for her foundation.

Donate Other Types of Appreciated Assets

Private foundations can be funded with a wide variety of assets. And unlike other giving vehicles that require liquidation of donated assets, private foundations can continue to hold them. These assets could include:

• Publicly traded securities
• Alternative assets, including private equity
• Real estate
• Tangible assets (art, jewelry, collectibles)
• Intangible personal property (copyrights, patents, royalties)
• Life insurance and annuities
• Cryptocurrency

Note that not all contributions are treated the same with respect to cost basis and deductibility. Whereas cash donations are deductible up to 30% of AGI, assets are generally deductible at the lesser of cost basis and fair market value (with the exception of certain publicly traded stock, as mentioned above) for 20% of AGI. Any contributions that exceed the applicable AGI caps can be carried forward for up to five years. And if your client has a charitable remainder trust, they can name their foundation as the beneficiary.

Additional Benefits of Private Foundations

Tax savings aside, private foundations offer nearly endless capabilities for investors to engage in philanthropy. Here are just some of the things one can do with a foundation:

• Make grants to non profit organizations – nationally and internationally
• Makegrants directly to individuals in times of emergency or hardship
• Issue loans to nonprofit organizations that are aligned with the foundation’s mission
• Create and run charitable activities (e.g., a camp for children with special needs; a shelter for victims of domestic violence)
• Establish scholarship/award programs for individuals
• Invest in for-profit companies that are aligned with the foundation’s mission

Additionally, private foundations afford investors the opportunity to build a meaningful legacy of giving and to unify their families through philanthropy.

(Almost) Immediate Gratification

Because Foundation Source can establish a new private foundation in less than a week, you don’t have to wait to lock in your client’s tax savings. They can get started on their philanthropic legacy right away! Schedule a call with us or reach us at 800-839-0054 to learn more about the important benefits of a private foundation.

The post Reducing the Tax Liability of Appreciated Assets appeared first on Foundation Source.

The post The Top 10 Advantages of Having a Private Foundation appeared first on Foundation Source.

Evaluating a nonprofit to ensure there’s alignment with your mission really depends on the type of funder you are—or want to be. Are you an innovator? An advocate? A change agent? A capacity builder? For example, let’s say you want to contribute to education. There are several ways to go about this, but you want to be sure the steps you
take tie back to the defined role you want to play in fulfilling your philanthropic objectives. Do you want to advocate for education change on Capitol Hill? Or build schools in Africa? Those are two very different paths, so before you find the right nonprofit, it’s important to define your philanthropic personality.

EVALUATING A NONPROFIT TO ENSURE THERE’S ALIGNMENT WITH YOUR MISSION REALLY DEPENDS ON THE TYPE OF FUNDER YOU ARE—OR WANT TO BE.

2. Does the Organization Have a Clear Mission That Aligns with Your Passions and Values?

Look for specificity. It should be focused, concise and clearly explain the entity’s unique set of skills for strategically solving problems. Ambiguous intent with statements such as “We’re dedicated to making the world a better place” often leads to vague, intellectual work. What is the overriding purpose of the organization? Is it clearly focused on an issue or cause that matters to you? When you do receive a proposal, does the need addressed align with your mission and objectives? It should be a clear fit— from the population they serve to their organizational strengths.

3. Does It Meet a Critical Need?

In other words, does the nonprofit matter? You need to determine that there’s a clear need for its services and whether there’s substantial data available to justify its mission and e orts. It’s important to understand what its target population is and what percentage of that population it serves. Then you can examine whether these numbers have increased or decreased over time.

4. Do You Agree With Its Approach?

How is the nonprofit fulfilling its mission? A group of nonprofits with similar missions, say ending childhood hunger, may approach the same problem from di erent angles and perspectives. Be sure you agree with the organization’s strategy and tactics for addressing the issues you care about. Do they make sense? Are they based on credible research? Are you comfortable with them? For example, if the nonprofit frequently lobbies state and national legislatures yet you dislike politics, it may not be the right fit for your donation.

To compare nonprofits with a similar focus, visit “watchdog” organizations like CharityWatch, Charity Navigator, Give, and GiveWell. These websites apply uniform standards to grade the financial and programmatic quality of nonprofits. They will also help you beware of scams, fraudsters, and fake charities trying to trick unwary, but well-intentioned donors.

5. Is It Making a Positive Impact?

For many people, impact-driven philanthropy is a top priority. Will you achieve a bonafide positive impact by donating? Can the nonprofit prove its success? Does it report tangible evidence that it’s successfully meeting its goals? If results aren’t publicized, consider it a red flag, and instead donate to a nonprofit that tracks data and provides metrics of success. After all, you have to trust the recipient to make your contribution count.

To take it a step further, choose a nonprofit that will partner with you to measure impact. For example, a nonprofit could work with you to provide serial funding with future gifts that are contingent on results. But don’t base success only on output. Instead, look at the outcome. For example, if your goal is to help at-risk school children do better
in class–and you want to gauge how e ective a charity’s after school program is in achieving this—look beyond how many kids participate. That’s the program’s output, but what may really count is its outcome; how significantly the children’s performance in school improves.

ONE OF THE BEST WAYS TO GET TO KNOW YOUR PROSPECTIVE NONPROFIT IS TO PAY THEM A VISIT. MEET THEIR LEADERS AND CONSIDER VOLUNTEERING FOR THEM.

6. Does It Have a Solid Reputation and a Credible Board of Directors?

Check to see if the nonprofit has been in the news—and if that news has been positive. Does it have an upstanding reputation? Any allegations of bad conduct? Even if you suspect that the organization has been unfairly tarred by controversy, whether deserved or not, negative publicity can compromise success.

Additionally, look at the board of directors. Are its members chosen logically and thoughtfully, or are they seemingly chosen at random? Is the board dominated by the founder and a few insiders? Ideally, a mix of influential individuals and rainmakers should comprise the board along with experts relevant to the organization’s mission.

7. Are They Transparent?

Do they make their financial information readily available? If so, be sure their expenses are in line with their budget and look at their 990-PF form to verify its tax-exempt status. It’s also a good idea to do a quick search to see if other reputable donors are funding the organization. If they’re hiding something, it’s in your best interest to move on.

8. Have You Looked Locally?

You don’t have to look far from home to find those who are in need. Nonprofits with local ties, particularly with communities that are marginalized, are often disproportionately impacted. This has been starkly illustrated by COVID-19, racial and social justice concerns and recent natural disasters that are having the greatest impact on communities of color, low-income communities, LGBTQIA+ people and people with disabilities. Also, try seeking out nonprofits taking the long-view approach as opposed to just focusing on the immediate aftermath of attacks, situations and extreme weather-related events.

9. Have You Done a Site Visit?

One of the best ways to get to know your prospective nonprofit is to pay them a visit. Meet their leaders and consider volunteering for them. This is a great way to get to know the people, how they operate and the quality of the work. Site visits also help you build relationships–it’s a great first step to learn more about them even before you ask for a formal proposal or grant request. However, a site visit alone isn’t sufficient— what you learn while there must be considered in the context of the other steps to ensure the right fit.

10 Are You Factoring in Flexibility and Responsiveness When It Comes to Giving?

It’s not always what you give–it’s also how and when you give that matters, so that nonprofits can use the funding in the way that is most important at that moment. For instance, nonprofits everywhere have been impacted by changes in funding due to the acute and unpredictable needs that emerged in 2020, as well as supply chain issues and a reduction in government support. To help them keep the lights on, consider giving to general operational purposes rather than specifying how the funds should be used.

YOU DON’T HAVE TO LOOK FAR FROM HOME TO FIND THOSE WHO ARE IN NEED.

NEXT STEPS

If you’re not finding the information you need, contact the nonprofit. And if you’re contemplating a sizeable gift or ongoing commitment to the organization, this warrants additional due diligence to ensure your giving creates the desired impact.

By researching before donating, you’ll gain valuable insight and experience. With time, you’ll acquire the skills to determine when your donation isn’t just a gift, but an investment in progress.

The post Every Dollar Counts: How To Evaluate a Nonprofit appeared first on Foundation Source.

Don’t Make Decisions in the Dark

Harness the power of Outcomes and see exactly what your grants have achieved. It’s never been easier to get monitoring reports from your grantees.

Outcomes organizes and automates the process of collecting follow-up reports from your grantees, saving your foundation time and effort.

“As our foundation’s grant manager, I can say that the Outcomes module of the platform has been a huge timesaver! We have been able to customize our templates to meet our unique requests to our grantees, and the ‘Flag for Results’ button has further helped to ensure that important follow-ups are not missed.”

AMELIA WHITECULTURES OF RESISTANCE NETWORK

The post Outcomes appeared first on Foundation Source.

Having supported thousands of private foundations for more than 20 years, our philanthropic experts found that our clients rely on the five following touchstones to help family members adopt a giving mindset and create a foundation that inspires younger generations.

1. Instill Values & Traditions

o Involve children in the causes you care about
o Work together as a family to give back
o Teach that giving is a habit, like brushing your teeth

2. Maintain Family Ties

o Hold quarterly or annual family meetings
o Schedule meetings outside of the holidays to stay focused on the purpose
o Provide virtual options for those who can’t attend in person

3. Deepen Social Consciousness

o Conduct a nonprofit site visit with family to better understand needs
o Use the foundation to discuss problems and how to solve them

4. Increase Personal Fulfillment

o Try psychologist Martin Seligman’s exercise to have the family engage in “one pleasurable activity and one philanthropic activity”
o Write about both experiences and have the family discuss

5. Develop Skill, Knowledge & Awareness

o Task young children with simple acts such as donating birthday gifts or toys
o Involve young adults in the foundation to develop skills such as leadership and financial management

Want to get the complete checklist?

Philanthropic Support Is Just a Call Away
Have questions about philanthropy? Want to talk about a specific client? We’re here to help! Schedule a call with us here or call 800-839-0054.

The post Q4 Conversations: Engage Clients with This Family Philanthropy Checklist appeared first on Foundation Source.

Further, for a new organization or less experienced Form 1023 preparer, it may not always be clear that a poorly worded or incomplete response to a question might give rise to unfounded compliance concerns. For example, the question regarding potential leases, contracts, loans, or other agreements between the organization and its officers, directors, or trustees; any family of officers, directors, or trustees; organizations in which any officers, directors, or trustees are also officers, directors, or trustees, or in which any such individual owns more than a 35% interest; highest paid employees; or highest paid contractors (Part V, Line 5), could trigger a false alarm for self-dealing concern if not answered thoughtfully and carefully. Under the self-dealing rules, it is permissible for an insider to loan money to his or her foundation at no charge for charitable purposes. However, if the foundation were to indicate in its response that it borrowed money from its officer, but failed to mention that the loan was interest-free and for charitable purposes, this could spark time-consuming IRS follow-up to rule out a violation, unnecessarily delaying the organization’s receipt of a determination letter, as there were no actual compliance issues from the start.

To minimize these issues, some contend that filing the IRS Form 1023-EZ, which is shorter and simpler than Form 1023, is a better choice. However, if an organization’s annual gross receipts have exceeded $50,000 in any of the past three years, or are expected to exceed that amount in any of the next three years, the organization is ineligible to use the form. Additionally, if the total fair market value of an organization’s assets exceed $250,000, it likewise cannot use Form 1023-EZ and must instead use Form 1023. Further, even organizations that are eligible to use the simplified form may be better served by using Form 1023 because in the past the Service has indicated that organizations that received a determination letter after filing Form 1023-EZ had a higher likelihood of being the subject of a correspondence audit. Although an audit may very well end with the organization’s exempt status intact, such audits can be time-consuming and costly. Therefore, the best practice for organizations seeking to complete this application process might be to invest a little more time upfront by filing Form 1023 to help avoid an audit after filing.

As Foundation Source has learned over the years, if you want to avoid delays and audits occasioned by Form 1023, it’s prudent to anticipate IRS concerns and satisfy them before they arise. Because we know from experience that a particular response might trigger a need for more information, we make it a point to provide that additional information up front. For example, we might furnish pertinent background information that explains how a given activity or transaction, which might otherwise unnecessarily alarm an IRS reviewer, is fully in compliance with IRS rules. If done properly, this proactive approach can save the applicant organization time, money, and the headache of waiting longer than necessary for a determination letter.

As a result of our research and our experience in fielding follow-up questions from the IRS, we at Foundation Source have distilled the repetitive and nuanced questions in Form 1023 into a streamlined client interview. This interview, which consists of a shorter series of pointed questions, is designed to get to the heart of potential concerns so they can be addressed by the client’s counsel before they’re uncovered by an IRS reviewing agent.

Furthermore, we can establish a private foundation for your client and provide a complete suite of services for its ongoing support. Because we do not provide legal advice, you can tap our expertise about foundation matters without worry that we will interfere in your client relationship. Instead, we mind your client’s day-to-day foundation activities and refer any compliance issues back to you should any concerns arise.

Why Choose Foundation Source to Complete your Client’s 1023?

• More than 2,000 successful applications
• Proprietary, streamlined process
• No interference in your client relationships

The post Form 1023: Proceed with Caution appeared first on Foundation Source.

Public charities generally are organizations that: (1) by their very nature conduct inherently public activities regardless of their sources of support, (2) have broad public support, or (3) actively function in a supporting relationship to other charitable organizations that have broad public support.

A. Inherently Charitable Organizations

This first type of public charity includes:

• Churches or conventions or associations of churches
• Educational organizations
• Hospitals and medical research organizations
• Organizations that normally receive a substantial part of their support from the government or from the general public and that are organized for the benefit of state and municipal colleges and universities
• Governmental units (federal, state, county, city, etc.)

Each of the above types of organizations is inherently charitable and is deemed a public charity regardless of its source of support.

The two most common types of nonprofit organizations started by individuals are public charities and private foundations, and within those two broad categories, there are different subtypes.

B. Publicly Supported Charities

The second type of public charity, which receives broad public support, can be subdivided into two categories: “donative charities” and “service-providing organizations.”

1. Donative Charities. Donative charities normally receive at least 33% of their annual support in the form of donations from members of the general public. “Normally” is based on an aggregation of the four years preceding the tax year in question and the tax year, for a total of five years. The 33% support formula does not include revenues the organization receives from performing its exempt activities–student tuition or patient fees, for example.

2. Service-Providing Organizations. This type of public charity includes entities that provide services to the public, such as museums, libraries, community centers, and the like. Like donative charities, service- providing organizations must meet public support tests. Unlike donative charities that disregard “fee for service” revenue in calculating public support, service-providing organizations count exempt function revenues and donations and grants as public support. Thus, this public charity category usually includes organizations receiving a major portion of their support from fees and charges for activity participation, such as day care centers, animal shelters, theaters, and educational publishers.

A two-part support test must be met to qualify as a service-providing organization:

a. Investment income cannot exceed 1/3 of the total support. Total support here means the organization’s gross revenue except for capital gains.
b. More than 1/3 of the total support must be received from exempt function sources made up of a combination of:

• Gifts, grants, contributions, and membership dues.
• Admissions to exempt function facilities or performances, such as theater or ballet performance tickets, museum or historic site admission fees, movie or video tickets, seminar or lecture fees, and athletic event charges.
• Fees for performance of services, such as school tuition, day care fees, hospital room and laboratory charges, psychiatric counseling, testing, scientific laboratory fees, library fines, animal neutering charges, athletic facility fees, etc.
• Merchandise sale of goods related to the organization’s activities, including books and educational literature, pharmaceuticals and medical devices, handicrafts, reproductions and copies of original works of art, by-products of a blood bank, and goods produced by disabled workers.

C. Supporting Organizations

The third listed type of public charity is commonly known as a “supporting organization.” Supporting organizations have been compared to barnacles: they attach themselves to (or support) one or more public charities and, in effect, acquire the public charity status of the organizations they support. The supporting organization must be carefully constructed to meet the complex tests required by the law and regulations. The two essential tests are a purpose test and a control test. The purpose test requires the supporting organization to benefit or carry out a purpose of the supported organization, ordinarily a public charity. The control test requires that the supported organization control the supporting organization. Here, the definition of “control” is fairly broad and can be satisfied applying one of several different approaches.

Two other important limitations on supporting organizations worth mentioning are:

Specified Public Charities. Normally it is expected that the charity or charities that will be supported will be specifically identified in the governing instruments by name. However, under some circumstances, specific identification can be avoided by identifying beneficiary organizations by class or purpose so long as other more technical tests are also met.

Limitation on Control. A supporting organization may not be controlled directly or indirectly by one or more disqualified persons, meaning substantial contributors to the foundation and their families. In this context, “control” means having 50% or more of the voting power of the organization or the right to exercise veto power over the activities of the organization.

Private Foundations

Private foundations are established for charitable purposes and to provide donors with a tax deduction for their contributions. These entities receive most of their support from a small number of contributors and are normally controlled by their founders or substantial donors. Amongst other requirements, foundations must make charitable distributions throughout their taxable year. Private foundations can be subdivided into two categories: “non-operating foundations” and “operating foundations.”

A. Non-Operating Foundations

These foundations must distribute annually an amount equal to 5% of their net investment assets in the form of qualifying distributions. Qualifying distributions include grants to qualified charities as well as all necessary and reasonable administrative costs (including Foundation Source’s fees) to make those grants. Non-operating foundations do not typically provide services or conduct charitable activities themselves—instead, they make grants to public charities of their choice that do provide such services or conduct such activities.

Private foundations are established for charitable purposes and to provide donors with a tax deduction for their contributions.

B. Operating Foundations

Operating foundations are subject to the same rules applicable to non-operating foundations, except with respect to the annual distribution requirement. An operating foundation is a charity that “does its own thing,” or, in the language of the Internal Revenue Code, “actively conducts activities constituting the purpose or function for which it is organized and operated.” Essentially, an operating foundation makes qualifying distributions by sponsoring and managing its own charitable projects rather than by making grants to other organizations. An operating foundation must make annual expenditures for its active programs under an income test and also meet one of three different assets tests.

Income Test. This test requires an operating foundation to spend the lesser of (1) 85% of its annual “adjusted net income” or (2) 4.25% of its investment assets on its self-initiated charitable programs.

AdjustedNetIncome=A–B–C–D

A = Gross income of all types for the year
B = Long-term capital gains
C = Contributions received
D = Ordinary and necessary expenses paid or incurred for the production or collection of gross income or for the management, conservation or maintenance of property held for the production of such income

Different Asset Tests. In addition to the income test, an operating foundation must meet any one of an “asset test,” an “endowment test,” or a “support test.”

Asset Test. Basically, the asset test measures the portion of the foundation’s assets devoted to the active conduct of its charitable activities. To meet this test, at least 65% of the fair market value of the operating foundation’s assets must be program related: an art collection, buildings, etc.

Endowment Test. Under the endowment test, an operating foundation’s annual distributions must equal at least 3% of its investment assets (compared to 5% for a non-operating foundation).

Support Test. Under the support test, an operating foundation’s revenues must come from donations from the general public and from five or more non-controlled charitable organizations, with none giving more than 25% of the operating foundation’s support.

The income and asset tests are applied each year for a four-year period that includes the current and past three years. An operating foundation has a choice of methods to calculate its compliance with the tests, but it must use the same method for both the income and asset tests:

• All four years can be aggregated, so that the distributions for four years are added together. An operating foundation must use only one of the asset, endowment, or support tests for all four years.
• For three of the four years, an operating foundation meets the income test and any one of the asset, endowment, or support tests.

If an operating foundation fails to qualify for a particular year, it is treated as a non-operating foundation
for that year. However, it can return to operating foundation classification as soon as it again qualifies under both the income test and the assets, endowment, or support test. New organizations generally must meet the test in their first year.

The most distinguishing characteristic of an operating foundation often is the most difficult quality to possess: the foundation must be significantly involved in its own projects in a continuing and sustainable fashion. To be involved might mean the foundation purchased goods and services to operate a museum, to conduct scientific research, to develop low-income housing, or to conduct some other charitable program. An operating foundation maintains a staff of researchers, teachers, curators, or other program specialists. Significant involvement of an operating foundation and its staff exists when the individual grants are part of a comprehensive program.

The post Comparing Public Charities & Private Foundations appeared first on Foundation Source.

MODERN PHILANTHROPY STARTS HERE
Our tech-enabled solutions make giving—and having a foundation—easier.

Foundation Management

New Foundation Creation

• Provide corporation structure (State of Delaware)
• File IRS Form 1023 for tax-exempt status
• Define foundation’s policies and guidelines
• Configure foundation’s cloud-based platform and provide orientation
• Coordinate with client’s financial, legal and tax advisors

Existing Foundation Implementation

• Configure foundation’s cloud-based platform and provide orientation
• Enter foundation grant history (up to seven years unformatted and unlimited formatted)
• Set up budgeting and any multi-year commitments
• Assess current state(s) filing status
• Coordinate with client’s financial, legal and tax advisors

Administration and Governance

• Undertake foundation recordkeeping
  › Funding and income
  › Expenses and fees
  › Assets and valuations
  › Grant history
  › Substantial contributors
• Track 5% minimum distribution
• Archive corporate, tax and other foundation documents
• Manage online access rights

Compliance

• Verify grantee’s 501(c)(3) public charity status
• Provide USA PATRIOT Act due diligence
• Identify supporting organizations
• Monitor “Advance Ruling” expirations
• Monitor grants and expenses to help prevent:
  › Self-dealing
  › Taxable expenditures
  › Excess business holdings, etc.
• Monitor affiliations with other nonprofits
• Track substantial contributors

Transaction Processing

• Process contributions to the foundation
• Prepare grant checks and transmittal letters
• Pay fees and expenses
• Provide payroll services (if applicable)
• Provide transaction accounting

Tax Preparation and Filing

• Calculate and pay quarterly estimated taxes
• Prepare and file federal 990-PF return
• Prepare and file 990-T UBIT return as needed
• Prepare Forms 1099 and 1042 for independent contractors
• Prepare and make state filings
• Provide donor substantiation receipts
• Maintain tax records in foundation archive

Financial and Grant Reporting

• Grant activity and transaction reporting
• Expense reporting
• Financial reporting

Advanced Foundation Management

Specialized Grantmaking Services

• Expenditure responsibility grants
• Equivalency determination
• International granting
• Program-Related Investments and recoverable grants
• Scholarship, fellowship and award programs
• Direct charitable activities
• Set-asides

Specialized Compliance and Tax Services

• Transition-year tax returns and amended tax returns
• Audit support (not IRS audit)
• Limited partnership, trust and S-corporation investments
• Foundation DBA (doing business as) filings

Specialized Accounting Services

• Budgets for expenses and grantmaking
• Prepare monthly financial reports, including customized statements
• Statement of Financial Position and Statement of Activities
• Internal control protocols
• Cash flow projections

Expertise

YOUR PARTNER IN GIVING

Let us join you on your philanthropic journey with the experience and tools you need to reach your goals.

Advisory Services

• One-on-one customer service
• Set up customized cloud-based platform
• Configure granting permissions and grant-approval processes
• Provide orientation and technology support for platform users
• Monitor qualifying distributions
• Manage schedules for state and federal filings
• Review and process foundation expenses
• Review grants for compliance with IRS regulations
• Review grant letters to help avoid compliance issues
• Provide implementation support for advanced services
• Facilitate board meeting preparation

Philanthropic Advisory Services

Governance

• Establishing a board
• Creating decision-making approaches
• Facilitating a board meeting
• Developing a succession plan

Leadership and Staff

• Defining staff roles
• Transitioning to new leadership
• Professional development for board members and staff
• Identifying opportunities to engage with other funders and nonprofits

Strategic Planning

• Determining focus areas
• Crafting a mission
• Setting long- and short-term goals
• Evolving foundation priorities

Sunsetting

• Defining a model for spending down a foundation’s assets

Grantmaking

• Cultivating and managing grantee relationships
• Streamlining grantmaking processes
• Building grant selection criteria

Grantee Relations

• Grantmaking guidelines and procedures
• Identification and due diligence of potential grantees
• Manage application process
• Review, verify, and document grantee eligibility
• Manage grant payment schedules and post-award process
• Monitoring and reporting on programs
• Annual grant analysis and onsite meetings

Program Development and Management

• Maximizing the giving capabilities of private foundations
• Creating programs with measurable impact
• Developing philanthropy beyond grantmaking

Asset Growth

• Adjusting giving goals when foundation assets increase
• Meeting a suddenly higher minimum distribution requirement

Next-Generation Family Engagement

• Engaging younger generations in the family foundation
• Unifying diverse generations through the foundation

Monitoring and Evaluation

• Measuring impact of charitable activities
• Conducting an annual review

Corporate Philanthropy

• Establishing and managing a corporate foundation
• Introductory or advanced skill development in grantmaking, due diligence, communications, leadership transition and governance
• Guiding the foundation through a company merger

To learn more about Philanthropic Advisory Services offerings, including custom engagements, please contact us.

Technology

AMPLIFY YOUR IMPACT
Our tech platform was built with one thing in mind: more effective philanthropy.

Online Resources

Web-Based Foundation Management Tools

• Cloud-based platform
• Orientation and training

Online Research

• Database of more than 1 million IRS-approved charities
• Access to GuideStar® and Charity Navigator
• Charity research requests

Online Granting

• Automated granting to IRS-approved charities and others
• Customized grant approval workflows
• Favorite charities list for expedited granting
• Hardship, emergency, and medical distress grants to individuals
• Grant certificates

Advanced Online Resources

Online Tracking

• 5% minimum distribution requirement
• Grant history by date, donor and program area
• Pending grants
• Funding history by date and donor
• Foundation expenses

Online Reporting

• Over 25 customizable report templates
• Financial activity, expenses, grant history

Online Administration

• Foundation document archive
• Personal profile
• Report codes
• Contact file

APPLICATIONS

• Customized grants management platform
• Online applications
• Online eligibility quiz to vet applicants
• Communication and collaboration tools
• Correspondence management

OUTCOMES

• Online portal to monitor grant performance and impact
• Uploading additional grant history
• Multi-year commitments
• Program areas with budgeting
• Multi-payment grant management
  › File management

APPLICANT PORTAL

• Complete, view and track applications and outcome reports
• Track status of grant payments
• Create and manage charity profile
• Information hub

As Your Foundation Grows, We Grow With You

You get the horsepower and expertise you need to make a real difference without overseeing a team of advisors or building a bureaucracy. Whether you need support for essential functions today, or guidance to explore some of the more complex capabilities of a private foundation tomorrow, you can rest assured that we’ll be with you every step of the way.

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