Whether charitable giving has a regular place in your business or typically occurs in response to unexpected events, you’ve likely wondered whether your company is maximizing its philanthropic impact – and capitalizing on tax benefits – to the fullest extent possible.

Charitably inclined businesses of all sizes wrestle with these questions. After deciding to formalize their giving programs and planning for implementation, companies often look to establish a private foundation. A corporate donor advised fund, however, is an effective and efficient alternative that merits serious consideration.

For companies that are just getting started or those that are rethinking how to use their current private foundation, a corporate donor advised fund is often the better strategic option. From tax considerations, compliance requirements, investment support, grant distributions and privacy restrictions, as well as the back-end resources and assistance to manage it all, companies are finding that such a fund is often a better fit for their philanthropic initiatives.

What are corporate donor advised funds?

In a nutshell, corporate donor advised funds offer companies a simple, flexible and tax-efficient way to give to charities, with fewer expenses and requirements than a private foundation. This charitable vehicle shares its public charity status with a sponsoring organization, such as a community foundation, and the company retains advisory privileges over the grants and investment of the fund’s assets.

Companies can contribute different types of assets to the fund, such as stock and closely-held business interests or real property, and identify causes and nonprofits to support – all while the sponsoring organization handles the administrative burdens.

Donor advised funds can also be used to foster employee engagement. For example, they can be used to:

• Match employees’ charitable contributions to their favorite causes.
• Incorporate employees’ interest in grantmaking.
• Allow employees to contribute directly to your company’s fund.

Benefits of using a corporate donor advised fund:

• Tax-efficient: Contributions to a donor advised fund can be made with a wide variety of assets, and each contribution creates an immediate tax deduction. Investment options allow the fund to grow tax-free until you recommend grants.
• Cost-effective: Donor advised funds have no start-up costs, ongoing reporting or payout requirements, with low annual administrative costs.
• Convenient: A single contribution to a donor advised fund can be later granted out to multiple qualified charities. And since they don’t require the same reporting as private foundations, recommending and tracking grants is simplified.
• Flexible: Grants to nonprofits can bear your company’s name or can be made anonymously. By contrast, private foundations must publicly disclose their contributions and grants in annual tax filings.

Choosing and leveraging a philanthropic partner

There are different types of sponsoring organizations, but community foundations – such as Foundation For The Carolinas – are especially well-equipped to work with companies who want to amplify their impact both locally and beyond. In addition to expertise in managing giving funds, community foundations have unique insights into local nonprofits, community needs and charitable giving opportunities.

At FFTC’s Center for Corporate Philanthropy, we work closely with corporate partners and fundholders to deliver the greatest possible impact for your charitable investments. Contact us at Philanthropy@fftc.org to learn more.