A donor-advised fund is one of many types of funds you can establish at the Community Foundation. Field-of-interest funds, designated funds and unrestricted funds are also popular and can make a big difference in the community while also fulfilling your goals for tax and charitable planning.
Advantages of a Donor-Advised Fund
When you establish a donor-advised fund at the Community Foundation, you can make a tax-deductible transfer of cash or marketable securities that is immediately eligible for a charitable deduction. Then, you can recommend donations from the fund to your favorite charities to meet community needs as they emerge.
IRS Requirements for Donor-Advised Funds
Your gifts to your donor-advised fund are tax deductible transfers to the Community Foundation, which is a charitable organization recognized under Internal Revenue Code Section 501(c)(3). The Community Foundation follows the IRS requirements to ensure disbursements from your donor-advised fund meet important qualifications to preserve that charitable tax status–for everyone’s benefit.
Types of Non-Permissible Disbursements
It’s a good idea to periodically review a few types of disbursements that don’t meet the IRS’s rules and therefore are not permissible donations from your donor-advised fund. For example:
Personal Pledges
You cannot use a donor-advised fund to satisfy a personal pledge to a charitable organization, such as a capital campaign. The Community Foundation team can help you develop ways to support your favorite organization’s fundraising goals. Please reach out if you are in this situation.
Supporting Private Family Foundations
Donor-advised funds at the Community Foundation cannot support a private family foundation due to different IRS rules. Contact the Community Foundation team to learn more about this requirement. We’d love to explore how your donor-advised fund and private family foundation can work together to achieve your charitable goals. Some fundholders decide to close their private foundation and consolidate their giving with the Community Foundation for greater impact, lower expenses and better tax results.
Fundraising Event Tickets
You cannot use a donor-advised fund to buy tickets to a fundraising events like galas and golf tournaments, where the cost of the ticket is not fully tax-deductible. The IRS views the taxpayers as receiving benefits from the event (food, drinks, swag), which affects tax deductibility. Even if a portion of the ticket is deductible according to the charity, it’s still not permissible distribution from a donor-advised fund. Contact the Community Foundation team if you’re asked to sponsor a charity’s fundraiser. We are happy to discuss solutions to achieve both your charitable goals and involvement with the event.
Contact Us to Learn More About Donor-Advised Funds
Contact Michael Nuno, Vice President of Philanthropic Services, at mnuno@pacf.org to learn more. We look forward to hearing from you! As always, the Community Foundation team is honored to be your first call when you encounter a question about your donor-advised fund or any other charitable giving opportunity.
