Funding Vehicles (Continued)
Private Foundations As with DAFs, donors receive a tax deduction when contributing to a private foundation, which may only make grants to 501(c)(3) public charities or their equivalents, and not to (c)(4) social welfare organizations or political candidates. The founders of a private foundation determine its governance structure and choose a board of trustees, who exercise authority over making grants and investing the endowment. With some limitations, the endowment may be invested for social purposes, and a provision of the Internal Revenue Code permits program-related investments that are made to advance the foundation’s charitable purposes rather than to generate income. As with DAFs, because donations to a foundation are irrevocable, they necessarily limit your impact portfolio’s ability to make political contributions.
- Private Foundations. Because donations to a private foundation are irrevocable and can only be distributed to 501(c)(3) public charities, they necessarily limit your impact portfolio’s ability to make political contributions.
- Limited liability companies (LLCs) and family offices provide staff support for high net worth donors who may wish to engage in some combination of charitable and political donations and impact investments. An LLC has no special tax status; for tax purposes, it is a pass-through and is just an extension of your checkbook. If an LLC makes a charitable contribution, you get a deduction; if it makes a political contribution or socially motivated investment, you don’t.
- Bequests. 501(c)(3) public charities are typical beneficiaries of bequests, and bequests may also be made to political organizations, subject to campaign contribution limitations imposed by election laws.[1]
- Volunteering. In addition to providing funding, you may volunteer your time and expertise to organizations working to achieve social impact.
[1] See https://www.fec.gov/resources/legal-resources/litigation/lnc_lnc_mot_cert_facts.pdf