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Foundations - Introduction
With more than 37,000 foundations in the United States, only about 10,000 of them have more than $1 million in assets or make more than $100,000 in yearly donations. At the same time, these 10,000 control 96 percent of all foundation assets. Their grants combined account for 93 percent of all foundation giving. According to the latest records, more than $9 billion in grants were given away by foundations.
There are five different types of foundations, differentiated by specific tax codes regulated by Congress and the Internal Revenue Service.
Independent Foundations
Usually founded by one individual, these private foundations are usually formed by individuals or groups of people, such as family members, while the donors are still living. Originally governed by the donor's family, many of the large independent foundations are now governed by boards made up of community, business and academic leaders.
These foundations make grants to other tax exempt organizations to enable them to carry out their charitable purposes. Private foundations are required to make charitable expenditures of approximately 5 percent of the market value of their assets each year. Though exempted from federal income tax, they must still pay an annual excise tax of one or two percent on their net investment income.
"Family foundation" refers to those private foundations that are managed and/or heavily influenced by the original donor or members of the donor's family. Almost two-thirds of all foundations in the United States are family foundations. They hold nearly $86 billion in assets and make grants of around $5 billion per year. Asset size can range from a few hundred thousand dollars to hundreds of millions of dollars. However, most are small with less than $5 million in assets. Most of these foundations are run by family members who serve as trustees, or directors, on a voluntary basis. In many cases, second and third generation descendants of the original donors manage the foundations. Most family foundations concentrate their giving locally in their communities.
Example: The Rockefeller Foundation; John D. and Catherine T. MacArthur Foundation
Community Foundations
These foundations build their endowments through contributions from several donors, usually within a particular geographic location and tend to support charitable activities focused mainly on "local" needs. Because they raise a major portion of their funds from various sections of the public each year, they are designated "public charities" rather than "private foundations" by the IRS.
Community foundations provide A number of services to donors who are looking to establish endowed funds without incurring the administrative and legal costs of starting independent foundations. There are nearly 300 community foundations across the country today.
Example:The Cleveland Foundation (oldest); The New York Community Trust (largest)
Company-Sponsored Foundations
These receive the same tax and regulatory treatment as independent foundations. They are different mainly because they are established by existing for-profit corporations. These corporations may establish foundations with initial endowments, make regular contributions from profits or combine both methods to provide the funds for the foundation. Legally, company-sponsored foundations are separate from their parent corporations.
Example: The Aetna Foundation; The Monsanto Fund
Corporate Giving Programs
These are not foundations. They are in-house contributions programs run by corporations. Through these programs, companies can make grants directly to charities. Logistically, giving programs are usually administered through the company's community relations office.
Example: BP America, Inc.; The St. Paul Companies, Inc.
Operating Foundations
These foundations are private foundations that use most of their funds to provide charitable services or run charitable programs of their own. They make few if any grants to outside organizations.
Example: The Carnegie Endowment for International Peace; The Getty Trust
***The top 100 U.S. Foundations are ranked by givings and assets, based on the most current data available from the Foundation Center, an independent nonprofit information clearinghouse established in 1956. The Center's mission is to promote public understanding of the foundation field by collecting, organizing, analyzing and disseminating information on foundations, corporate giving and related subjects. Grantseekers, grantmakers, researchers, policymakers, the media and the general public all access the Center's resources. The Center operates a library of national collections in New York City (its headquarters) and Washington, D.C. (field office) and regional collections in Atlanta, Cleveland and San Francisco.
This information is provided by The Foundation Center. Please visit: The FOUNDATION CENTER Website
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