What is a community foundation?
A community foundation is a tax-exempt public charity that brings donors, nonprofits, and community leaders together to address challenges and create positive change in a specific geographic area. More than 800 community foundations across the United States currently work to improve their local communities in unique and meaningful ways.
How does a community foundation work?
Community foundations receive and manage charitable gifts, steward grants, and lead community initiatives and partnerships. They offer an array of funds and management services to help donors achieve their goals and meet community needs. These funds are invested, and the income generated is used to support donors’ gifts to local, regional, and national nonprofit organizations.
Why do people give through a community foundation?
People give through a community foundation for several reasons:
Local Expertise: Community foundations have deep knowledge of local needs, opportunities, and nonprofits, ensuring that donations are directed to where they can have the greatest impact.
Flexibility: Donors can establish various types of funds (e.g., Donor Advised funds, Scholarship funds, Field-of-Interest funds, etc.) and support multiple causes over their lifetime. Donors can also choose their own investment managers if they desire.*
Ease and efficiency: Community foundations handle the administrative work, from investment management to grant distribution, allowing donors to focus on their philanthropic goals.
Tax Advantages: Contributions to community foundations often come with distinct tax advantages, making giving more financially efficient.
Lasting Legacy: Donors can create lasting legacies through planned gifts and endowed funds that continue to support their chosen causes indefinitely.
Family Engagement: Community foundations can foster opportunities for learning and engagement across generations through family philanthropy funds, educational workshops, and assistance with legacy planning.
*Funds must meet minimum balance requirements in order to use their preferred financial advisor.
Why a community foundation over a commercial fund charity?
While donor advised funds through major commercial institutions offer the same tax deductibility as a fund at a community foundation, donor advised funds housed at a community foundation are relationship—and service-based. Their deep community experience and connections help donors become more aware of local needs and opportunities, enabling them to create giving strategies that reflect their donors’ interests.
Although a commercial fund charity’s fees are lower, unlike a commercial fund, 100% of the administrative fees paid to a community foundation are recycled back into the community. At CFMT, administrative fees strengthen our capacity to take an active leadership role in leading and supporting important city-wide initiatives, respond to disasters, provide comprehensive data on over 2,100 nonprofit organizations, and offer any nonprofit in our community a place and space to come together, just to name a few.
