CHARITABLE FAMILY FOUNDATIONS^©

The NAFEP, PREMIER VII Family Foundation Trust
& PREMIER VIII Private Foundation

A Family Legacy of Charitable Acts..Continued (3)

Premier VII Family Foundation Specifics.
The Premier VII is termed a supporting organization* in federal tax laws. This foundation is created as a trust and is run by a family chosen Board of Trustees. The Board of Trustees may in fact be the family. Donors may be anyone, whether family members or not. The foundation has a tax exempt Federal Tax ID, and files an annual informational return with the IRS (Form 990, which must be made available to the public). As a supporting organization the foundation must name one or more "qualified" public charities as its beneficiary. The beneficiary charity is known as a "supported organization". The foundation must then either carry out some of the charitable activities of the beneficiary charity, or must provide income to the beneficiary charity to carry out charitable activities for itself.

Supporting organizations like the Premier VII Family Foundation may not passively and simply provide funding to some other charity. For example, the foundation could not simply write checks to a church for the church to then control the use of those funds (though the Premier VIII Private Foundation could). The foundation must take an active role in charitable works or an active role in selecting those works. An active foundation might for example actually run a church's youth program, as opposed to simply funding the program. Or, the foundation may spend considerable time and resources searching for or creating suitable charitable projects for the beneficiary charity. The foundation might then provide some oversight or monitoring to ensure that the funds are spent as planned.

Supporting organizations, such as the Premier VII, have more flexibility and better tax advantages than the private foundation (like the NAFEP, Premier VIII) because Federal Tax laws treat the supporting organization the same as public charities (and not so for the private foundation). Supporting organizations aren't governed by the strict federal excise tax rules as private foundations are. Further, supporting organizations do not pay income taxes and are not required to distribute 5% of their net value each year, as private foundations are required to.

Supporting organizations like the Premier VII are treated as "50% organizations" under federal tax laws (vs. 30% for private foundations). For 50% organizations, an individual may deduct contributions of up to 50% of their adjusted gross income (AGI). (The 50% limits apply to cash contributions; other property types have lower limits.) The supporting organization, then, has many clear advantages over the private foundation. But, be aware that a private foundation has a definite place and advantage in smaller and simpler situations. And, the supporting organization may be more complicated to administer, takes more time to achieve tax exempt status, and costs more to have created.

* Supporting organizations were created under Section 509(a)(3) of the Internal Revenue Code (IRC), and are described in legal detail in Section 1.509(a)-4 of the Treasury Regulations. A description which is lay person oriented is given by the IRS in their Publication 557.

* This percentage of the donor’s Adjusted Gross Income is the limit of charitable deductibility per year, with a five year carryover for gifts which exceed this AGI percent. The Premier VII has the advantage.

PREVIOUS | >NEXT | >1 | >2 | >3 | >4


>TOP OF PAGE