SUPPORTING FOUNDATIONS
Supporting foundations are special entities that are similar to private foundations, yet have the investment and tax advantages of public charities. They are separate not-for-profit corporations which support the mission of the Jewish Federation of Greater Dallas, and are therefore classified as a public charity. This enables donors to maximize tax benefits and eliminates the record keeping and administrative demands of a private foundation.
A supporting foundation, although separately incorporated, is affiliated with the Dallas Jewish Community Foundation, which handles all bookkeeping and record maintenance. However, the assets of the supporting foundation may be managed by outside investment experts of your client’s choice and need not be commingled with Foundation assets, as is the case with philanthropic funds.
Unlike private foundations, which have strict limitations on tax deductions, supporting foundation contributions are subject to public charity deduction limitations. Donors can donate closely held stock and can deduct up to 50% of adjusted gross income for gifts of cash and up to 30% for adjusted gross income for appreciated property. In addition, gifts of appreciated securities are deductible at their full fair market value. Also, unlike private foundations, there is no excise tax on net investment income. Supporting foundations are not subject to the restrictions on investments and minimum distribution requirements of private foundations.
Family members can be appointed to the Board of Trustees of the supporting foundation, and can be involved in recommending and approving charitable distributions. A supporting foundation is an excellent method of involving loved ones in a charitable endeavor.
AT-A-GLANCE
The supporting organization is classified as a public charity, which means that the donor receives the most favorable tax treatment for contributions
A private foundation is subject to numerous Internal Revenue Code restrictions and prohibitions, which do not apply to supporting organizations
A private foundation pays up to 2 percent excise (income) tax on its investment income; a supporting organization pays no income tax
A private foundation is required to distribute at least 5 percent of its assets each year, whereas no specified percentage distributions are required of a supporting foundation
The donor chooses the name of the supporting foundation, and can, if desired, achieve the same name recognition in the community as he or she would with a private foundation by including the family name in the name of the foundation
The administration of the supporting foundation is handled by the Foundation, rather than by the donor or an outside administration, as is the case with a private foundation, thus saving costs and personal effort and time
The donor will have the opportunity to include younger generations in their philanthropic traditions