As a community foundation, the Eau Claire Community Foundation is legally classified as a publicly supported charity.At the same time, the Foundation shares some of the features of a private foundation, particularly its grant-making expertise. Because of this hybrid quality, the Eau Claire Community Foundation can offer a number of services to private foundations. Here are just a few:
Minimizing or Eliminating Administrative Burden
Clients who established private foundations years ago may find that they are no longer suitable or convenient. Perhaps no family members or friends are available to run the foundation as volunteers. Perhaps the administrative burdens have become a nuisance, or the size of the private foundation now makes it difficult to justify the operational costs. Whatever the situation, working with the Eau Claire Community Foundation is a great alternative. The private foundation may transfer all of its assets to the Eau Claire Community Foundation and then elect with the IRS to terminate both its private foundation status and legal existence. The private foundation could then create any type of fund at the Foundation, such as a field of interest fund, to continue grant-making in areas important to the private foundation, or a Donor Advised fund with family members or trustees as donor advisors. The private foundation may transfer all of its assets to the foundation without electing to terminate. Through this method, the private foundation avoids excise taxes and the obligation to file a tax return, since it has no assets and no income. But the private foundation still exists as a legal entity in order to advise the community foundation on disbursements from the fund.
Meeting Annual Distribution Requirements
Clients who have private foundations may occasionally have difficulty meeting the foundation’s annual federal payout obligation. Perhaps the private foundation has not received sufficient applications within its focus area, or a favored project is not quite ready to proceed. In these situations, the private foundation can create a Donor Advised fund at the Eau Claire Community Foundation and contribute all or part of the current year’s required distribution to the fund. Because the Foundation is a public charity, this contribution to the Foundation is a “qualifying distribution” that counts towards the federal payout requirement. The private foundation’s trustees can then recommend grants from the Donor Advised fund as needed.
Identifying Worthy Charities
With more than 1.5 million public charities in existence nationwide, and thousands locally, it can be difficult for private foundations, particularly those with no staff and few volunteers, to identify the most worthy agencies. In such a case, the private foundation could create a fund at the Eau Claire Community Foundation and then ask our grant-making staff to develop a portfolio of charities for the private foundation’s consideration and recommendation.
Making Grants Anonymously
For any number of reasons, a private foundation might want to support a nonprofit anonymously. If so, the private foundation could establish a Donor Advised fund at the Eau Claire Community Foundation, and then recommend that a grant from the fund be made anonymously to the ultimate beneficiary. All of the private foundation’s grants are public information. The Eau Claire Community Foundation’s grant lists are also public, but the Foundation is not required to specify which fund was the source of a particular grant.