Questions and Answers About Supporting Foundations

Family and philanthropy are two time-honored traditions of the Jewish people. THE ASSOCIATED’s supporting foundation program offers the opportunity to combine these traditions into a meaningful and tax-advantaged plan for a total approach to charitable giving.

Q. WHAT IS A SUPPORTING FOUNDATION?

• A Supporting Foundation is a charitable foundation that qualifies as a public charity (and therefore is a tax-exempt entity) because of its affiliation with THE ASSOCIATED. A Supporting Foundation is run by a board of directors chosen by you and THE ASSOCIATED. In order for the Supporting Foundation to receive its tax-exempt status, a majority of the board of directors must be appointed by THE ASSOCIATED. The remainder of the board of directors is appointed by you and may include you as a director.

Q. WHY IS A SUPPORTING FOUNDATION GOOD FOR MY FAMILY?

• Perhaps the most important benefit of a supporting foundation is the opportunity for intergenerational involvement in the philanthropic process, epitomizing the Hebrew phrase Dor L' Dor – from generation to generation. Because a supporting foundation has a perpetual life, your children, grandchildren and successive generations can be assured a seat at the foundation table, fostering a strong chain in the tradition of giving. In addition, you can also craft your own special mission statement to help guide those who follow you.

Q. HOW DO I FORM A SUPPORTING FOUNDATION?

• A minimum gift of $1 million in cash or other assets is necessary to establish a Supporting Foundation. Once you begin the process of creating a supporting foundation, the staff of THE ASSOCIATED will work with your legal and financial advisors in drafting and filing the corporate organizational documents, including the articles of incorporation and bylaws, and in preparing the application for tax-exempt status to be submitted to the Internal Revenue Service. The cost of incorporating and filing the application for tax-exempt status (which is also required of private foundations) is not substantial.

Q. HOW ARE CHARITABLE GRANTS MADE?

• Any person the donor directs or who serves on the Board of Directors may recommend a grant. Generally it will be the donor and/or his or her family which initiates recommendations. However, it will be up to the Board to vote to approve such grants, either at its annual meeting or by special consent. Distributions may be made to any charity listed in the Cumulative List of Organizations of the IRS and complies with Section 170(c) of the Internal Revenue Code. However, if you wish you may insert into the foundation’s organizational documents limitations on what kind of charities may receive grants from your foundation.

Q. WHY FORM A SUPPORTING FOUNDATION RATHER THAN MY OWN PRIVATE FOUNDATION?

• What makes a supporting foundation unique is that you, as the donor, retain a great deal of control on how the foundation functions without having to commit the time and expense of meeting all of the compliance issues associated with a private foundation. THE ASSOCIATED will provide all of the administrative support necessary to operate the supporting foundation, at a fraction of the cost of operating a typical private foundation.

Q. WHAT ARE THE TAX ADVANTAGES OF A SUPPORTING FOUNDATION?

• What makes a supporting foundation useful from a tax savings standpoint is the variety of assets which can be used to fund it. Gifts of real estate and closely held stock are deductible in full at appraised market value; for private foundations, the deduction is generally limited to your cost basis. There are no restrictions on how much closely held stock can be owned by a supporting foundation. You can deduct a higher limit of your adjusted gross income for donations to a supporting foundation. For example, gifts of long-term appreciated property are deductible up to 30% of your adjusted gross income (as compared to a 20% limitation for gifts to private foundations) and gifts of cash and non-appreciated property can be deducted up to 50% of your adjusted gross income (as compared to a 30% limitation for gifts to private foundations). As with other charitable deductions, you may, if necessary, carry-over unused deductions to subsequent tax years (up to five years from the year of your gift).

Q. WHAT SOME OTHER ADVANTAGES OF A SUPPORTING FOUNDATION?

• Additional advantages to establishing a supporting foundation with THE ASSOCIATED include:
  1. No mandatory annual distributions; unlike private foundations, which must distribute 5% of their assets every year, there are no such requirements on supporting foundations, which can accumulate assets for special projects and purposes.
  2. Your foundation can access THE ASSOCIATED’s Consolidated Investment Fund for investment which in recent years has had a superior investment record, beating out all other Jewish Federations and many top universities. In the alternative, the directors of a supporting foundation may invest the foundations assets separately, pursuant to the supporting foundation's own investment policy.
  3. Most of the day-to-day administrative requirements of a supporting foundation are handled by THE ASSOCIATED. All documents related to creation and ongoing administration of supporting foundations (articles of incorporation, bylaws, minutes of annual meetings, etc.) are maintained by THE ASSOCIATED. Regular financial statements, grants summaries and investment reviews are provided to the Board on a quarterly or more frequent basis. In addition, THE ASSOCIATED will file all necessary annual tax returns and forms.

For further information, contact the Legacy & Endowment Department at THE ASSOCIATED, 101 West Mount Royal Avenue, Baltimore, Maryland 21201 or specifically contact Michael Friedman at (410) 369-9233, mfriedman@associated.org.

THE ASSOCIATED
101 W. Mt. Royal Avenue
Baltimore MD 21201
410-369-9228 | Fax: 410-837-1342
Email: mfriedman@associated.org