Community Foundation of the Virgin Islands

How do community foundations differ from private foundations?
A community foundation is supported by a broad and ever-widening group of unrelated individuals, families, corporations, and institutions. The only thing that connects all of our donors is a desire to improve local communities. Because of their broad base of support, community foundations are classified by the IRS as publicly supported charities. This gives community foundations tax advantages not enjoyed by private foundations.

Community foundations are also allowed to treat all funds within their control (known as "component funds") as part of a single corporation. This gives them administrative advantages over private foundations as well.

Private foundations, by contrast, are generally supported by a single individual, family, or business. Rarely does it make sense to establish a private foundation if the principal endowment is not large. Today, of course, the world's largest foundations -- Gates, Ford, Kellogg -- are all still private foundations.

To prevent abuse and self dealing, private foundations have been subjected since the 1970s by the IRS to numerous penalty taxes and legal requirements. For a more detailed comparison of the differences between private and community foundations, click here.

Because community foundations are controlled by large, diverse, and unrelated boards of directors and the possibility of abuse is slim, the IRS does not impose any tax penalties or burdensome legal requirements on community foundations.

What is an endowment?
An endowment is a type of fund that is set up to produce income for charitable purposes. A typical endowment fund will distribute only the income generated from investments. Its principal will never be distributed. A typical distribution rate from a foundation endowment fund is 4% or 5% per year.
An endowment fund is likely (though not, certain) to remain permanent as long as principal is never invaded, and as long as the distribution rate reflects the long-term growth patterns of investments.
What happens to a contribution to the Community Foundation of the Virgin Islands (CFVI)?
There are several possibilities, depending on the donor's wishes. Here are six (6) major possibilities:
If a donor makes an unrestricted gift, the contribution will be added to and permanently recognized in the fund for CFVI. (Alternatively, some donors may wish to establish and name a separate unrestricted fund.) The income from the total fund (built up by many donors over many years, one gift at a time) will be distributed annually for charitable purposes as determined by the board of directors. Unrestricted contributions directly support our general grants program.
Other donors may want to support a general area of need in our territory (education, children’s health, or arts and culture, for instance). Such area-of-interest gifts support specific areas in our grants program. These contributions will never be used for projects outside their specified area. Contributions of any size are always welcome to support these funds. Again, all specific grant-making decisions from area-of-interest funds are made by our board of directors.
A few donors ask us to restrict the use of their gift to one or more specific non-profit organizations. These gifts create what are called designated funds. A community foundation will often be asked to handle such gifts because of its experience with managing endowments.
Many donors choose to establish donor-advised funds. In this case, the donor may periodically recommend to the foundation that a distribution be made to a specific non-profit organization. (CFVI is not legally bound to follow these recommendations. However, we will do so in most cases when the intended grantee is a legitimate non-profit organization and is doing work consistent with the mission of the foundation.) Donor advised funds are especially suited to donors with a variety of charitable interests and an interest in getting and staying involved with philanthropy. They are an attractive alternative to establishing a private foundation, which is typically less efficient and more costly.
The Community Foundation of the Virgin Islands also operates a scholarship program which allows donors to create new scholarships in memory of loved ones without the complexity and expense of having to establish and administer each scholarship separately. We accept donations of any size to support existing scholarship funds, including our general scholarship program, but we ask donors interested in establishing new scholarship funds to seek our assistance in designing the new funds.
Angels are those essential people in the life of CFVI who make an annual gift of $500 or more. People from all walks of life are CFVI Angels.
Programs, operating costs, and much of our community outreach are provided each year through generous donations from CFVI Angels. Angel gifts support all we do in the community.
The Community Foundation of the Virgin Islands can also be used for a variety of other purposes, including short-term gifts, pass-through grants, and gifts which allow a donor to remain anonymous.