What is a community foundation?

A community foundation is a way for all people to make a lasting difference in their community. The purpose of a community foundation is to serve the needs and philanthropic goals of donors who wish to improve their community, now and in the future. Community foundations do this by providing donors with flexible, efficient and tax-effective ways to ensure that their charity achieves the greatest possible impact.

Contributions to a community foundation are never spent. Instead, they are treated as endowments and are permanently invested to produce income. This income is then used to help meet the community’s charitable needs and interests. Gifts to a community foundation continue to benefit the community long term. As a donor, you may set up individual funds in your name or the name of a loved one, and choose from a variety of ways in which to direct your contributions. You may have as little or as much control as you wish in determining which charities benefit from your fund. You may also choose to contribute to a variety of existing funds, setup to serve particular purposes. Or, you may choose to contribute to a general endowment fund, the income from which is distributed by the community foundation’s board of directors to address the needs and opportunities in your community as they change over time.

CYCLE OF GIVING

GCF-Cycle-of-Giving

The work of the Foundation is a continuous cycle that perpetuates itself through donor giving, financial stewardship, regulatory compliance and distribution of grants.

A community foundation is governed by a local board of directors, who are chosen for their knowledge of the community and fairly represent the diversity within it. The directors possess expertise in the areas of management that are necessary to carry out the functions of the foundation.

A community foundation does not usually conduct programs of its own. Rather, it supports new or existing programs of other nonprofit organizations and agencies. As a result, community foundations often serve as a link between these various nonprofit organizations and agencies, bringing diverse opinions together for the good of the whole community.

A community foundation is a tax-exempt organization under Section 501(c)(3) of the Internal Revenue Code. All contributions are tax deductible to the maximum amount allowable for gifts to a public charity. Indeed, because community foundations are classified as public charities under the tax code, some donors are able to claim larger tax deductions on gifts to community foundations than they are on gifts to their own private foundation.

The Uniqueness Of Community Foundations

Community foundations are the fastest growing area of philanthropy today.

More than 400 community foundations exist nationwide.
Indiana leads the nation with 95 community foundations and affiliate funds. Every county of the state is served by a community foundation or an affiliate fund of a community foundation.
Thousands of individuals have realized the unique opportunity community foundations offer to fulfill their philanthropic wishes. Thus, in the past decade, assets nationwide have tripled to more than $10 billion.
Indiana community foundation assets are growing at more than twice the national rate and more than $300 million has been added to the state’s community foundations in the last four years alone.
Individuals are not the only ones who have realized the value of community foundations. Many private foundations and corporations have become strong advocates of community foundations and have introduced significant initiatives to support the growth of the community foundation movement in America. They have devised programs to stimulate the development of local community foundations and to encourage individuals and families to create endowments for various charitable purposes through the community foundation vehicle. The largest of these programs by a private foundation is the GIFT Initiative (“Giving Indiana Funds for Tomorrow”), funded by Indiana’s Lilly Endowment Inc.

The Benefits Of Contributing To Community Foundations

Permanence. As a safe and permanent endowment, you can be assured that the earnings from your gifts will continue to support the agencies and residents of your community.

Flexibility. You have the flexibility of choosing from several types of funds and your donations may include cash, stock shares, life insurance and real estate.

Tax incentives. As a contribution to a public charity, gifts to a community foundation can be deducted from income taxes as allowed by the IRS. In most instances, by donating appreciated assets, you can eliminate the capital gains tax you would otherwise incur by selling the assets. And by contributing funds through your estate, estate taxes can be avoided.

Professional administration. For unrestricted and field-of-interest funds, the community foundation assures that your gift is distributed effectively by continually assessing the changing needs of your community and awarding grants to the agencies that best address those needs. In the case of designated funds, the community foundation efficiently handles the issuance of annual grants to the organizations you specify.

Private foundation alternative. Donors who want the individual involvement of a private foundation, without the administrative complexities, restrictions and expenses, can accomplish the same result by establishing funds within a community foundation. Establishment of a fund is easy, convenient and inexpensive.