Philanthropy In AAction: A Blog of the Center for Arab American Philanthropy

Philanthropy comes in many flavors: Different types of foundations

With more than 1.2 million public charities and foundations in the U.S., it can be confusing to sort out the differences between the types of foundations. The term “foundation” is applied somewhat liberally, but the general definition of a foundation is a nonprofit, non-governmental organization set up to donate money to causes chosen by its donors and board of directors. Structural differences in foundations may vary greatly, but most foundations have:

their own board of directors
at least a portion of their assets invested in an endowment, and
grant money on at least a yearly basis.

The different types of foundations include:

Public foundations, which according to the Council of Michigan Foundations, are nongovernmental public charities that operate grant programs benefiting unrelated organizations or individuals as one of its primary purposes. There is no legal or IRS definition of a public foundation. Increasingly, public foundations have been established to receive funds and make grants for populations with special needs, for specific subject areas, or around other non-geographic communities of interest.

Private foundations, of which there are more than 120,000 in the U.S., are usually founded by one individual, often by bequest. They sometimes face public scrutiny due to the autonomy of their grantmaking priorities, which do not require public input.

Community foundations are usually location based, and are set up to support the charitable activities of a town or other geographic area through mutual investment from community members. Community foundations also house donor-advised funds, much like a bank houses accounts. There are more than 1400 community foundations worldwide, with half of those operating in the U.S.

Family foundations are a type of private foundation whose funds are derived from members of a single family. At least one family member must continue to serve as an officer or board member. Family foundation board members have 100 percent control over their grantmaking decisions. The largest operating family foundation today is the Bill and Melinda Gates Foundation, which has an endowment of more than $36 billion. Many celebrities like to set up foundations to strategically support causes that matter to them, such as the Michael J. Fox Foundation for Parkinson’s Research.

For the past 100 years or so, the philanthropic sector has been dominated by white males, and grants largely ignored the needs of minority populations. Ethnic foundations were created to change this convention and to put a new face on philanthropy. A great example of an ethnic foundation is The Potlach Fund, which focuses on expanding philanthropy within Tribal Nationals and Native communities in the Northwest, United States.

Corporate foundations represent the charitable giving arm of a corporation; their funds derive from corporate profits (and employee donations), and their funding priorities often relate to the mission or product of the company. For example, the Newman’s Own Foundation supports nutrition programs for children, appropriate for a company that makes its money selling food products.

Of course, these are only a few types of foundations, and hybrid variations definitely exist - like the Center for Arab American Philanthropy (based on a community foundation model, but focused on supporting an ethnic group). Do you know of any foundations? What causes do they support? Leave a comment below!

Leaving a Legacy: Planned Giving

Part of a Philanthropy A-Z series

A planned gift is any charitable gift, immediate or deferred, that considers an individual’s personal tax, financial, and estate planning circumstances. Planned gifts can be as simple as an outright gift of cash, or as sophisticated as a charitable trust or foundation that is integrated into a multifaceted financial and estate plan.

Benefits of Planned Giving

Planned gifts have significant tax advantages
Planned gifts can help minimize the estate tax.
Planned gifts ensure the long-term support of organizations that you care about, even beyond your lifetime.

Planned giving should involve the services of a professional advisor. A professional advisor can discuss your personal philanthropic goals with you, explain legal terminology, and detail the pros and cons of different giving vehicles — including how various options will affect your tax obligations.

For more on on planned giving and leaving a legacy for the future, please consult CAAP’s Guide to Arab American Giving.

A flourishing donor-advised fund

Part of a Philanthropy A-Z series

Often thought of as charitable giving bank accounts, donor-advised funds allow philanthropists to channel resources through their local community foundation, financial institution, or identity-based giving program like CAAP to causes that matter most to them. A donor-advised fund requires care and cultivation to flourish - just like any garden plant requires water and sunlight. The donor establishes a fund with a set amount of money (or stocks, or property), receiving a tax-deduction at that time. Then, at any point in the future, the donor recommends certain amounts be directed to 501(c)3 organizations of the donor’s choice. The money directed to a nonprofit from a donor-advised fund is called a grant.

But before that happens, community foundation donor officers perform due diligence on the recommended nonprofit organizations to make sure that they are in compliance with government regulations. With our plant analogy, you might think of this as weeding and pruning the garden.

While many gardeners grow flowers and plants purely for pleasure, reaping a garden’s vegetable harvest is also a great reason to cultivate plant life. In the context of a donor-advised fund, the garden harvest comes in the form of tax benefits - as well as the knowledge that, like a green-thumb sows and grows, you are helping to nurture programs and projects that make a difference for our planet and its people.

One of our current fund holders, Mona Sahouri, likes the ease and peace of mind that comes with housing her and her husband Saed’s fund at the Center for Arab American Philanthropy (CAAP):

Our CAAP fund organizes our giving and helps us to strategically plan our giving trends for the future years. It gives us an idea of just how much we give and to which causes we tend to give more - not to mention the tax benefits as we often used to make donations and forgot to report them.

Additionally, by giving through their fund at CAAP, Mona and Saed are leveraging their charitable giving with others to tell a powerful story of Arab American philanthropy in this country.

The specifics for setting up donor-advised funds vary depending on the institution that houses the fund. We encourage you to learn more about the many benefits of setting up a donor-advised fund at CAAP by visiting our website. Keeping your donor-advised garden well stocked will allow your charitable impact - and legacy - to grow, sometimes forever.

Photo courtesy Arwyn J.M.

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Identity-based philanthropy

Part of a Philanthropy A-Z series

Giving within ethnic communities is not a new phenomenon, and formal identity-based philanthropy began in 1895 when German Jews in Boston formed a fundraising federation to help new Jewish immigrants adjust to life in the U.S. What began as a local initiative in Massachusetts has expanded across the nation, and includes formal giving vehicles for many ethnic and minority communities, including Hispanics, Asian Americans, African Americans, Native Americans, and most recently, Arab Americans. The Center for Arab American Philanthropy operates on a community foundation model to promote strategic identity-based giving in the Arab American community, and is the only institution of its kind.

The mission of identity-based philanthropy is for minority communities, many of which are marginalized and under-served in the traditional philanthropy model, to band together to form giving structures that address critical issues in their communities. These communities are defined by ethnic or racial origin, gender, and sexual orientation. According to the W.K. Kellogg foundation,

identity-based funds are the primary vehicle through which this philanthropy gets expressed. Identity-based funds work by pooling together solicited donations and contributions from community donors and then redistributing those funds (through grants) to individuals or organizations doing work in that community to promote social change.

Also known as “population-focused funds,” this type of giving model distributes nearly $400 million each year, and giving among “donors of color” continues to increase.