What is a community foundation?

A community foundation is a tax-exempt, public charity created primarily to manage endowment for a defined geographic region. It is a cost effective and efficient resource for individuals, families, businesses, and  nonprofit organizations to create permanent charitable funds that help build stronger, more vibrant communities.

Here is how it works:  A client makes a gift to the community foundation.  The money flows into a separate fund, with a name and a purpose, created by the client.  The community foundation invests and administers the fund on the client's behalf.  Every year a portion of the earnings from the fund is used to make grants to charitable organizations designated by the client.  The individual funds are pooled for investment purposes to gain cost efficencies and strong returns yet accounted for separately.  Over time, investment proceeds increase the value of the fund and the cumulative impact of its grants.  Quite simply, each fund may be thought of as a foundation within the community foundation.

There are over 700 community foundations across the United States and approximately 30 in Wisconsin.  Several hundred others exist around the world.

What are the benefits of giving through a community foundation?

A community foundation makes the charitable giving process simple and the work of investing meaningful. One of the distinct advantages of working with a community foundation is flexibility. Community foundations provide you with a wide range of cost effective options to make a measurable difference.  You can self-direct your contributions to specific causes, invest in broader areas of interest, or provide unrestricted gifts to support emerging opportunities.

A community foundation can help you receive the greatest tax benefit from gifts of cash, stock, real property, retirement assets, and more. You can create or add to your fund whenever it makes the most sense for you financially and qualify for tax benefits immediately. The community foundation maintains the fund tax records and provides all the information you need at tax time.

The fund accounting, auditing, investment management, and grantmaking procedures are handled by the community foundation.

All of the Foundation's assets are pooled for investment management purposes, minimizing cost and increasing return. The pooled asset concept gives a small client the same professional investment management as a large client, and it creates an economy of scale that ensures more funds support your charitable interests.

How can people give to a community foundation?

Individuals, families, businesses, and nonprofits may establish a fund with a community foundation or make gifts to existing funds.

A community foundation accepts many types of assets as long as they are marketable and not encumbered by a liability. Gifts include cash, stocks, bonds, mutual funds, retirement assets, real property, and planned gifts, to name a few. A fund may be created with as little as $25,000, or $100,000 for an agency fund.  A gift of any size may be made to an existing fund.

Because the Foundation is a public charity, contributions qualify for the maximum tax benefits allowed by law. All contributions are tax deductible in the year they are made. 

How is a community foundation different from a private foundation?

Community foundations make philanthropy easy. They allow individuals, families, and businesses to establish a customized charitable fund without having the personal obligations of a private foundation such as creating and managing the foundation, regulatory requirements, and tax liabilities.  The regulations, taxes and administrative requirements required to establish and manage a private foundation do not apply to community foundations because they are public charities.  More individuals and private family foundations are moving their fund management to a community foundation for ease of administration and to ensure longevity.

(Enhancing A Private Foundation)

How does a community foundation differ from a nonprofit organization?

Most standard nonprofit organizations have a specific mission to address an immediate opportunity within a community.  By contrast, a community foundation is created to manage endowment which supports the long-term opportunities within a community.  It's mission reflects its ability to make distributions to a broad range of charitable opportunities within the communities it serves. Both are necessary to build strong communities.

A community foundation is complementary to, not competitive with, nonprofit organizations.  It benefits nonprofit organizations through client connections, grantmaking, and endowment management.

What is endowment?

An endowment is a commitment to hold principal intact and spend only a portion of the investment earnings.  Since only a portion of the earnings is spent, the fund will grow forever.  Over time, investment proceeds increase the value of the fund and the cummulative impact of its distributions.