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What are community foundations? (FAQ)


Description of "Community Foundation" from the Foundation Center's website (March 2002):

These foundations build their endowments through contributions from several donors, usually within a given geographic region. Community foundations support charitable activities focused primarily on "local" needs - those of a particular town, county or state. They are designated "public charities" rather than "private foundations" by the IRS because they raise a significant portion of their resources from a broad cross-section of the public each year.

Community foundations provide an array of services to donors who wish to establish endowed funds without incurring the administrative and legal costs of starting independent foundations. There are approximately 300 community foundations across the U.S. today. The Cleveland Foundation is the oldest; the New York Community Trust is the largest. Examples of recently started, thriving community foundations include the Community Foundation for the Fox Valley Region, Wisconsin, and the Delaware Community Foundation.

Definition of "Community Foundation"

Adopted by Community Foundations Leadership Team (3/4/08)

http://www.cof.org/files/Documents/Community_Foundations/commfounddef.pdf

Foundation Center website (December 2006):

A community foundation is a tax-exempt, nonprofit, autonomous, publicly supported, nonsectarian philanthropic institution with a long term goal of building permanent, named component funds established by many separate donors to carry out their charitable interests and for the broad-based charitable interest of and for the benefit of residents of a defined geographic area, typically no larger than a state.

A community foundation:

1. Is officially recognized by the Internal Revenue Service as tax-exempt under Section 501(c)(3) and passes the public support test as a public charity under sections 509(a)(1) and 170(b)(1)(A)(6).

2. Has or is developing a history of broad support in the form of contributions from the community it serves.

3. Has an independent, nonsectarian, governing body broadly representative of the public interest and that is not appointed by a single outside entity.

4. Has an annual independent audit that is open to inspection by members of the public.

5. Has the power to modify any restriction or condition on the distribution of assets, if circumstances warrant (variance power).

6. Operates primarily as a grantmaking institution and may also provide direct charitable services.

7. Focuses its primary grantmaking and charitable services within a defined local geographic area that constitutes, in some meaningful sense, a “community”.

8. Maintains a broad grants program to multiple grantees that is neither limited by field of interest nor limited to serving only parts of the population.

9. Is structured primarily as a collection of named funds that carry out the diverse charitable purposes specified by the governing body and donors, and has a long-term goal to increase the assets held as unrestricted endowment

"Community Foundation" Information From the IRS website (irs.gov - December 2008):

Community Foundations Compliance Project

Exempt Organizations is conducting a project to determine if community foundations are complying with section 501(c)(3) of the Internal Revenue Code. Community foundations began as groups of small charitable trusts established at local banks or trust companies to benefit community residents. However, over the last decade, there has been a significant increase in the number, size, and complexity of community foundations. This compliance project will provide the IRS information on how these organizations operate and allow us to follow up on organizations that may have compliance issues.

A community foundation is a public charity that conducts grant making activities that often but not always benefit local charities and charitable community projects. Generally, community foundations do not operate their own programs.

Additional information:

- Community Foundations Questionnaire (http://www.irs.gov/pub/irs-tege/f13807_community_foundation_questionnaire_072007.pdf)

- Community Foundations (continuing professional education text - general background information about community foundations) (http://www.irs.gov/pub/irs-tege/eotopick94.pdf)


Added 03/06/2002 by tpollak, Modified 12/08/2008 by jdurnford

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