The National Heritage Foundation is a public foundation. At first, most people don't see a difference between private and public foundations. But there are three crucial elements that distinguish public foundations, such as NHF, from their private counterparts.

Reporting Requirements

Not only are private foundation reports more extensive, they are less protected by privacy laws. Private foundations must provide copies of their annual reports to a state's attorney general and to the IRS. Once this type of information falls into a state's domain, it is accessible by both the media and the general public.

A private foundation must also post a newspaper notice of the availability of its annual tax return and send a copy of that notice to the IRS. If there is any question of asset control the IRS scrutinizes the operating history of the private foundation.

Limited Deductibility of Gifts

With the exception of a few publicly traded stocks, the deductibility of gifts to a private foundation is limited to the cost basis. Furthermore, a gift of cash is limited to 30% of adjusted gross income unless the organization qualifies as an operating foundation or it distributes all its gifts within 75 days of the end of a tax year. Gifts of appreciated property can be deducted only up to 20% of their adjusted gross income.

Rigid and Risky Rules of Operation

Private foundations face at least five limitations not encountered by public foundations such as NHF:

• A private foundation must distribute at least 5% of the fair market value of its assets annually. Failure to do so results in a 15% tax on undistributed income.

• A private foundation faces taxes and penalties on any investment that jeopardizes its charitable purpose, including any bad business decision.

1. A private foundation pays from 1% to 2% tax on its annual income.

Advantages of Choosing A Public Foundation

There are many compelling economic reasons to choose a public charity like NHF, where you can begin your Family Foundation.

• Gifts of cash are deductible up to 50% of adjusted gross income.

• Gifts of appreciated property are deductible up to 30% of adjusted gross income.

• There is no requirement to distribute annually a certain percentage of the assets.

• There is no income tax on your donation annually.

• There are no cumbersome reporting requirements (NHF takes care of all reporting requirements).

• Your Foundation account at NHF will be much less expensive to begin and operate.

Because NHF encourages active participation from the Foundation director, you gain the advantages of independence without the disadvantages associated with a private foundation.

And, NHF will take care of all the "administrivia" in regard to your Foundation so that you can focus on your charitable purpose!

 

*Note:  A charitable foundation is a legal categorization of nonprofit organizations that either donate funds and support to other organizations (public), or provide the sole source of funding for their own activities (private). You may wish to refer to the Wikipedia entry for Charitable Foundation for further explanation.

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