A donor advised fund is often a preferred alternative to a private foundation. Donor advised funds allow you to make charitable contributions, receive immediate tax benefits and recommend grants from the fund over time.
While you may maintain complete control over branding and investments with a private foundation, you are also subject to IRS requirements, must research and secure your own investment vehicles, and are burdened with startup costs, taxes and administration fees.
Learn more about the differences between donors advised funds and private foundations.
Charitable Giving Benefits
The San Diego Foundation Donor Advised Fund
Private
Foundation
No startup cost
No need to establish tax exempt status
Highest charitable tax deduction
Donor information is private
Fiduciary responsibility is delegated
Administrative support services
Grantmaking support services
No annual 5% payout requirement
No annual taxes
Donor owns brand
Donor controls investments
Private Foundation Burdens
Donor Advised Fund Benefits
Start Up
Must start nonprofit corporation created by donor
Fund is established at The San Diego Foundation, with no startup costs to donor
Taxes
- Must apply and be approved for private foundation tax exempt status from the IRS
- Cash gifts tax deduction is limited to 30% of adjusted gross income
- Appreciated property tax deduction is limited to 20% of adjusted gross income
- Subject to excise tax of up to 2% of net investment gain, including net capital gains
- Required annual tax filings and returns
- Shares the public charity tax exempt status of The San Diego Foundation
- Cash gifts tax deduction is up to 50% of adjusted gross income
- Appreciated property tax deduction is up to 30% of adjusted gross income
- No annual taxes
- No required annual tax filings and returns
Admin
- Must establish and/or attain administrative support, including personnel, facility, gift and grant management
- Must hire staff or consultant for grantmaking support
- Board has full fiduciary responsibility
- Must research and secure own investment vehicles
- Required 5% payout of the average market value of net investment assets
- Strict self-dealing rules prohibit most transactions between a private foundation and donors, including related persons or corporation
- Administrative support, including personnel, facility, gift and grant management provided by The San Diego Foundation
- Full-service grantmaking research, analysis monitoring and follow up provided
- Minimal administrative costs (0.5%-2.0%)
- The San Diego Foundation fulfills the associated fiduciary responsibilities
- Fund assets are professionally invested
- No annual 5% payout requirement
- Private foundation self-dealing rules do not apply
Engage
- Tax returns are public records, available on the internet and compiled into
grantseeker directories - Donor retains control over investments and grantmaking, subject to IRS
requirements
- Availability of information is at donor’s discretion
- Donor makes advisory grant recommendations, with final approval from The San Diego Foundation board to ensure due diligence
