Supporting Organizations

Transcription

1 Supporting Organizations A flexible, hassle-free alternative to a private foundation 1200 Fifth Avenue, Suite 1300 Telephone (206) Seattle, WA Fax (206) Produced by Pyramid Communications; Design: Poetica Design; Photos: Jeff Corwin, cover; Jerry Davis, spread one portrait The Seattle Foundation

2 1 The Seattle Foundation is your foundation SUPPORTING ORGANIZATIONS Through your philanthropic investments, you make a lasting impact on issues and organizations that matter to you. A supporting organization at The Seattle Foundation allows you to take an active approach to your giving, backed by professional staff who make it easy. A supporting organization is a separate legal entity that qualifies for the tax advantages of a public charity due to its affiliation with The Seattle Foundation. A supporting organization is an alternative to a private foundation for people who want an involved approach to their giving and minimal administrative work while still enjoying some autonomy.

3 Understanding supporting organizations2 How it works How you benefit A case study You select the name, identity, mission and issue areas you want to support. Your supporting organization operates independently as a separate legal entity with its own 501(c)(3) status. The Seattle Foundation assists you with required federal and state regulatory reporting. You create a board of trustees in cooperation with The Seattle Foundation. You and the board of trustees establish the investment strategy and grant priorities. You can rely on The Seattle Foundation s community expertise to lead you to effective, innovative organizations and strategies you wish to support locally, nationally or internationally. Family members can actively participate in your giving, and you can create a lasting legacy by involving successive generations. Supporting organizations have no minimum payout requirement. Unlike a private foundation, gifts to the supporting organization qualify for the highest tax-deduction limitations and are not subject to excess business holdings rules. Tom and Betty Osborne were interested in utilizing closely held assets to establish a private foundation to support education for underprivileged kids. However, after exploring the process of establishing a private foundation, Tom and Betty decided to create the Osborne Foundation as a supporting organization of The Seattle Foundation because they wanted to take advantage of the Foundation s extensive community knowledge. Supported by The Seattle Foundation s research and guided by its expert staff, the Osbornes designed a giving plan to provide children living in Supporting organizations are not subject to the excise taxes that private foundations must pay. poverty with after-school programs. Meanwhile, they were able to benefit from the greater tax advantages of a public charity.

4 Making the right choice for you3 Why a supporting organization? Set-Up Considerations Supporting Organization of The Seattle Foundation Private Foundation Time frame Generally 1 to 2 months Initial set up 1 to 2 months Recommended $1 million At least $1 million recommended to Minimum Contribution justify startup and maintenance costs The Seattle Foundation is dedicated to making your giving effective and convenient. Our knowledgeable staff is here to guide you through the process of establishing and administering a supporting organization. Tax Considerations Cash Deduction of up to 50% of AGI Deduction of up to 30% of AGI Publicly Traded Securities FMV deducton of up to 30% of AGI FMV deduction of up to 20% of AGI Closely Held Stock/ FMV deduction of up to 30% of AGI Deduction is limited to the donor s Real Estate cost basis or FMV, whichever is lower, up to 20% of AGI Administrative support allows you to focus on giving while we take care of the paperwork. Consultation to you and the board of trustees regarding mission development, grantmaking priorities and communications strategies Due diligence and expenditure responsibility for grants you wish to make locally, nationally or internationally Request for proposal support, including screening applications and creating reports for the board and grantees Corporate recordkeeping for board functions Allowance for legal services for initial preparation and amendment to organizing documents and policies Branded letterhead, checks and collateral, and website hosting and maintenance Access to the Foundation s support staff, systems and facilities Financial and tax-reporting services are all provided for you. Financial and accounting services, including GAAP financial reporting, coordination of Form 990 preparation and filing with the IRS Annual reporting to state and local government agencies Management of all procedures and documentation necessary to be compliant with current laws and regulations Community expertise, based on the Foundation s long, deep ties to King County, allows you to give with confidence. One-on-one consulting with experienced staff members knowledgeable in your area Connections with other donors and stakeholders with similar interests Opportunities to co-invest with The Seattle Foundation and other Foundation donors Tax Status 501(c)(3) public charity due to its 501(c)(3) private foundation; not relationship with TSF as favorable as public charity status Tax Return & Audits Annual returns can be prepared Must be performed by foundation and filed by TSF managers or a professional accountant Private Foundation Not applicable Excise tax of 2% or 1% on net Excise Taxes investment income and substantial excise taxes imposed for failure to meet payout requirement and for engaging in certain prohibited transactions such as self-dealing Administration Administrative Services Most services covered by an annual Must be performed by board fee of 1% of FMV of assets (minimum members or offices ( foundation $10,000); reduced fee structure managers ) or any hired staff above $2 million Investment Management Professional investment management Responsibility of foundation available at low cost, typically in the with assistance from a professional range of 70 to 90 basis points investment manager Payout Requirement Donor Involvement Grantmaking Support No required payout Supporting Organization board has control over investments and grantmaking; TSF and donor appoint board members TSF s professional staff can help identify and assess grantees, and advise on community needs; educational events and consultation available Annual payout of at least 5% of foundation assets Donor appoints board, which controls investments and grantmaking Grantmaking activities must be conducted by foundation managers or hired staff The Internal Revenue Code imposes a number of requirements and restrictions on private foundations and their managers. Donors frequently serve as foundation managers, which is a significant responsibility. Definition of Terms: TSF = The Seattle Foundation; AGI = Adjusted Gross Income; FMV = Fair Market Value

5 A wide variety of gifts are accepted4 A case study Sasha and Dave Jefferson managed their own private foundation for a number of years. When they retired, they realized they were committed to giving but did not want the administrative responsibilities that came with running a private foundation. To simplify their lives, they converted their When you establish a fund at The Seattle Foundation, you can choose to transfer a wide variety of assets to the fund, each of which may offer different tax advantages. Cash Marketable securities such as stocks, bonds and mutual funds Real estate Closely held assets and other assets (upon review by The Seattle Foundation) Life insurance Converting a private foundation made easy Many individuals create private foundations to facilitate their giving but later discover that managing a private foundation s affairs is not as easy or rewarding as it once seemed. Every year, The Seattle Foundation helps an increasing number of private foundations terminate and transfer their assets to a supporting organization at The Seattle Foundation. Foundation staff will assist you with this process. private foundation into a supporting organization at The Seattle Foundation. They were able to stay actively involved in their giving and to include their children by appointing them to the board of trustees. Together they are building a legacy of family giving while The Seattle Foundation provides expert staff and complete administrative support.

6 Starting a supporting organization5 If you think a supporting organization might be right for you, contact our Gift Planning team at (206) They will answer your questions and guide you through the processs of completing the establishing documents.