The number of private foundations in the United States is nearing 150,000 with combined assets topping $1 trillion, so it’s no wonder that a lot of people immediately think about establishing a private foundation when they begin to explore structuring their charitable giving activities. You’re likely working with several clients who’ve established private foundations somewhere along the way. 

Recently, though, the growth of donor advised funds to nearly 2 million in number–with grants from these vehicles reaching $50 billion in some years–signals that many people are starting to use both a donor-advised fund and a private foundation. Some of your clients may even be considering transferring a private foundation’s assets to a donor advised fund at the community foundation to carry out the family’s mission. This particular trend is on the rise, so take a moment to skim this checklist to help guide conversations. 

“Reality check” the hassle. Day-to-day management and administration of a private foundation can become time-consuming, especially as the responsibilities fall to second- and third-generation family members. Even the first generation may realize at some point that administrative work is taking too much focus away from nonprofits, the community, and making grants.

Review the tax rules. The IRS’s rules related to investments, distributions, and “self-dealing” are complex. Over time, family members may become frustrated navigating the potholes of tax compliance. For instance, if a client plans to transfer all or part of a family business, now or in the future, it is critically important to communicate the benefits of using a donor-advised fund at the community foundation versus transferring the business interests to a private foundation (which can be disastrous from a tax standpoint).

Lean on the community foundation. Our team is happy to walk alongside you and your client through the steps to terminate a private foundation and move the assets to a donor-advised fund at the community foundation. The first step is for the board of the private foundation to approve the termination and capture that approval in meeting minutes or a consent of directors. 

Set up a donor advised fund. Your client can establish a donor advised fund at the community foundation and choose the name (e.g., Smith Family Foundation Fund). Similarly, selection and succession of fund advisors (who will handle grantmaking) can mirror the private foundation’s board structure. As a result, the donor-advised fund will look and operate a lot like the private foundation. 

Make a grant. The private foundation will distribute (“grant”) most of its net assets to the newly-established donor advised fund. The private foundation will need to be sure it pays all of its liabilities and expenses before accounts are closed, so your clients will want to leave a reserve in the private foundation to cover final bills before completing the termination.

Finalize the termination. As long as the private foundation corporate entity is in good standing according to state laws, termination for tax purposes will be automatic and smooth because assets were transferred to the community foundation, a longstanding organization. The private foundation will then simply file an informational tax return with the Internal Revenue Service for its final year (even if it is a short tax year). The final step is for the private foundation to take any steps required for termination under the laws of any and all states in which it was registered, especially if the private foundation was organized in corporate form.

Whether your client is ready to transfer a private foundation this year or is simply evaluating options, please give us a call. We’re happy to help! 

What Professional Advisors Need to Know

The U.S. House of Representatives recently passed the “One Big Beautiful Bill Act,” a sweeping tax package that now moves to the Senate for consideration. While the bill includes a range of tax reforms, several provisions are drawing serious concern from the nonprofit sector—especially those that could negatively affect charitable giving and the long-term planning strategies of individuals and families.

The Community Foundation of Northeast Iowa (CFNEIA) is closely monitoring this legislation and strongly encourages professional advisors—particularly those working in estate planning, philanthropic advising, and financial planning—to stay informed and take action. Below is a breakdown of the key provisions and CFNEIA’s position on each, tailored to support your work with charitably inclined clients.

We Oppose

New or Expanded Taxes on Foundations and Nonprofits

These provisions would impose or expand taxes on nonprofit organizations and private foundations. This effectively diverts limited philanthropic dollars away from mission-driven work and into federal coffers. For families and individuals establishing or contributing to donor-advised funds, family foundations, or other charitable entities, these taxes could reduce the impact of their giving and increase administrative complexity.

Why It Matters to Advisors:
Tax burdens reduce the amount of funding available for grantmaking, potentially discouraging the creation of charitable vehicles altogether. For your clients interested in creating legacy gifts or long-term charitable funds, this undermines the effectiveness of those tools.

We Oppose

Limits on Charitable Deductions

These sections propose limiting the deductibility of charitable gifts, especially those made by corporations and high-net-worth individuals. Often used as a revenue “pay-for,” these provisions threaten to depress charitable giving across the board.

Why It Matters to Advisors:
Reduced tax incentives can directly influence donor behavior. Your clients may be less inclined to make major gifts—particularly appreciated assets or estate bequests—if the tax benefits are diminished. These provisions make long-term charitable planning less attractive just when communities need philanthropic support the most.

We Support

Expanding Charitable Giving Incentives: The Charitable Act

CFNEIA strongly supports inclusion of the Charitable Act in the final Senate bill. This bipartisan proposal would restore and expand a non-itemizer deduction for charitable contributions, allowing taxpayers who do not itemize to still benefit from giving to nonprofits.

Why It Matters to Advisors:
This would provide a simple, accessible incentive for a broader base of donors, including middle-income households—often overlooked in charitable tax policy. For advisors, it means more flexibility in helping clients of all income levels integrate giving into their financial and estate plans.

For more information and advocacy tools, please refer to the National Council of Nonprofits' advocacy webpage and overview of the Charitable Act.

Together, we can help preserve the integrity and impact of charitable giving for future generations.

As attorneys, CPAs, and financial advisors, you are well aware that you have clients’ attention when tax season rolls around. This makes it a great time to cover tax planning strategies for the current year and beyond. To help incorporate charitable giving topics into your tax season client conversations, we’ve put together tips to address three scenarios where the Community Foundation of Northeast Iowa can assist your efforts. 

Evaluate QCDs sooner rather than later. 

If: Your client missed the 2024 deadline for a Qualified Charitable Distribution. 

Then: Make sure the client took an RMD for 2024 (if required to do so). Start planning now for 2025 QCDs, paying very close attention to the required process. QCDs are an excellent tool for your clients who’ve reached the age of 70 ½ to give to a designated, field-of-interest, or unrestricted fund (donor-advised funds are not eligible), but if the client waits until the last minute at year-end, there might not be time for the transaction to be completed by December 31 as required. Plus, QCDs executed early in the year can help avoid negative effects of the "first-dollars-out rule” so that the QCD can count towards your client’s 2025 RMD.

Watch for charitable giving opportunities in business succession planning.

If: Your client is beginning to consider exit strategies for a closely-held business.

Then: Reach out to the community foundation right away. Gifts of closely-held stock to a charitable fund can be a very useful component of a business succession plan. That’s because a client can gift shares of the business, which in turn means that no capital gains tax will apply to the gifted portion when the business eventually sells. The proceeds of the gifted shares flow into the fund to be used for your client’s charitable priorities. Keep in mind that timing is crucial; if a deal is in the works at the time the shares are transferred to the charitable fund, the charitable deduction is in jeopardy. 

Consider gifts of appreciated stock early in the year.

If: Your client’s stock portfolio made big gains last year.

Then: Evaluate whether it might be wise to make gifts of appreciated stock to a fund at the community foundation early in the year, rather than waiting until the end of the year. If certain stock positions are high right now, it’s worth considering whether a gift in the very near future could be a good move to maximize charitable dollars. As a reminder, gifts of stock to a public charity are eligible for a charitable deduction in the amount of the stock’s fair market value at the time of transfer. And, when the stock is sold so that its proceeds can be deployed to further your client’s charitable goals, no capital gains tax will apply.

Our goal is to be your go-to sounding board for any client situation where charitable giving is an option. Please reach out anytime you and a client are discussing philanthropy. In most cases, the community foundation can help. Even if our tools are not a fit, we will point you in the right direction!