When you recommend grants from your fund, Greater Houston Community Foundation must ensure that your grant distributions are used exclusively for the use and benefit of charitable organizations and programs recognized by the Internal Revenue Service. To this end, Greater Houston Community Foundation continually works to protect the integrity of the charitable tax deductions you received from your gifts to your fund.
The following guidelines help us fulfill our oversight responsibility and ensure the charitable integrity in two areas: special events/memberships and legally binding pledges.
Bifurcated Gifts
To ensure compliance with IRS regulations and to prevent potential penalties for Donors/Advisors and interested parties, Greater Houston Community Foundation will not approve grants that aim to cover any portion of a gift resulting in more than an incidental benefit for an individual. This includes benefits related to fundraising events, like gala table sponsorships, event tickets, 5K race registrations, items at a charitable auction, museum memberships, and the like. In simpler terms, grants cannot be used to pay for parts of a gift that provide the donor or advisor with benefits they wouldn’t have received otherwise. If attendance at an event or any other benefit is dependent on a grant from a donor advised fund account, we cannot approve the grant recommendation. If a Donor/Advisor wants to receive goods or services (like event tickets) from a charity in exchange for a specific contribution, they should make the contribution directly, without involving their donor advised fund.
Example 1:
Some charitable organizations promote giving levels. A $2,000 level (for instance, “Platinum Sponsor”) allows the Donor/Advisor to enjoy about $600 worth of benefits and $1,400 goes to support the charity’s mission. The Donor/Advisor cannot recommend a $1,400 grant from Greater Houston Community Foundation and fulfill the rest with a $600 personal check.
Example 2:
A Donor/Advisor would like to recommend a grant for $5,000 from their donor advised fund to support a charitable organization’s annual gala. In return for the grant, the charitable organization gives the Donor/Advisor ten tickets to attend the gala. While the Donor/Advisor can recommend the $5,000 grant from the Community Foundation, the Donor/Advisor must decline the tickets in order to make the gift using the donor advised fund as the tickets would be considered more than an incidental benefit. The charitable organization can acknowledge the donor advised fund in its advertising materials in an effort to recognize the Donor/Advisor for the general support/recognition of the event.
Policy and IRS Regulations for Pledges
In accordance with IRS Notice 2017-73, donor advised funds may be used in limited circumstances to support a donor’s pledge, but only if specific conditions are satisfied
One such condition is that the Community Foundation may not communicate to the organization that the grant payment is in fulfillment of a donor’s personal pledge. Accordingly, donors should make no reference to “pledge” or “commitment” at the time of grant recommendation submission. Donors should communicate their intent directly with the organization.
Our intent is to safeguard the deductibility of your gift to Greater Houston Community Foundation and at the same time make your charitable giving easy and rewarding. This policy is designed to provide accurate and authoritative information in regard to the subject matter covered. It is distributed with the understanding that the Community Foundation is not engaged in rendering legal, accounting, or financial advice. If legal advice or other expertise is required, the services of a competent professional should be sought.
Third Party Investment
With an initial investment of $500,000, Community Foundation donors may recommend their trusted advisor to manage the assets of their fund. Financial advisors, working in accordance with Greater Houston Community Foundation’s Investment Policy Statement, can help donors meet their financial goals for grantmaking. For more information, or to recommend an advisor, please contact your Philanthropic Advisor.