1.2 Donor Advised Funds vs Forming An Independent 501(c)3:

Why not become a Donor Advised Fund under a community foundation?

  • Fees. Most community foundations (CF) will charge some kind of a fee. The Impact 100 Model calls for 100% of member donations going directly to the community in the form of transformational grants.
  • Lack of control – Relying on CF staff to quickly and accurately input each member – as they make their membership commitment – can cause friction between your organizations
  • Grant process. The CF has ultimate “veto power” over your grant recipient(s).
  • Ownership – The CF “owns” the membership list. This could get complicated if/when you choose to separate from them in the future. 
  • Conflicting goals – Your goal as an Impact 100 leader is to engage and retain as many members as possible – year after year. The CF has a goal of increasing their DAFs. Ideally, they would hope to convert your members into DAF holders. Although this may naturally happen, often CF leadership can be impatient, due to the high amount of administrative burden they face with Impact100 annual member renewals.
  • Change Happens: You form an agreement with current staff and board. Leadership at the CF transitions, and the new leaders are unwilling to bear the administrative burden of your Impact100 organization without payment or “guaranteed” return of their investment. It can get complicated very quickly.
  • The fine print. Read the DAF agreement your local community foundation presents, paying close attention to the details. Your signature is your agreement – regardless of the verbal assurances you may believe are incorporated in the document.

As an Independent 501(c)3, you have several advantages:

  • Control your own destiny and “own” your membership lists, process, etc
  • Create the exact structure and organization that suits your purpose
  • Transparent communication to members
  • Better brand identity

Obtaining your tax exempt status is fairly straightforward. You’ll need a CPA and/or attorney on your founding board anyway. Typically, she will be happy to file your paperwork free of charge. 

There are clear benefits to creating your own 501(c)3. Go for it!