Advantages of a Donor-Advised Fund Over a Private Foundation
|Donor-Advised Fund||Private Foundation|
|Ease of Creation||Execution of a simple Deed of Gift: "one day/one document." No set-up fees.||Creation of a new organization, application for exempt status and expenditure of time and money. Lengthy IRS approval process.|
|Tax Benefits^||Taxpayer can deduct up to 60% of adjusted gross income for cash gifts. Full value of gifts of appreciated property is deductible up to 30% of adjusted gross income.||Cash gift deduction is limited to 30% of adjusted gross income. Deduction is limited to 20% of adjusted gross income.|
|Closely-Held Stock, LP & LLC Interests, Real Estate||Valued for charitable deduction at market value.||Value limited to cost basis.|
|Accounting and Tax Preparation||No separate tax return to file, and no tax to pay. Annual audit and 990 done by the DuPage Foundation.||Detailed reporting required and a 2% federal excise tax (1% in some cases) must be paid on net investment income, including gain on assets gifted to the foundation. Separate account statements required.|
|Grant Administration||Staff expertise in identifying potential recipients, reviewing proposals and evaluating performance.||Trustees must perform, contract or hire for these services.|
|Investments||No federal investment requirements; no equity concentration restrictions; opportunity to participate in investment pools.||Certain types of investments prohibited, and the foundation may not own more than a 20% equity interest in a business.|
|Distributions||No minimum payout required.||Approximately 5% of net investment values must be paid out for charitable purposes annually. Prohibition against grants to support lobbying. Restriction on scholarship and research grants.|
|Confidentiality||Names of donors need be revealed only to the IRS.||Asset balances, names/addresses of directors and contributors, grants, investments, fees and salaries must be made public through the 990-PF*.|
|Administration||The DuPage Foundation handles phone, mail, and bookkeeping.||Trustees must perform, contract or hire for these services.|
|Size||$25,000 minimum, payable over five years.||Substantial assets required.|
^Consult your tax advisor concerning alternative minimum tax implications and the five-year carry-over rule.
*Private foundations have little confidentiality and no anonymity. Anyone can access www.guidestar.org to gain information on any private foundation because all of the information is scanned from a foundation's 990-PF.