By GERALDINE FABRIKANT
Published: June 7, 2008
According to the Urban Institute’s National Center for Charitable Statistics, there were 76,849 private foundations — of all sizes — at the end of 2005, the latest year for which data is available. That represents a 49 percent increase over the number in 1995.
Still, the amount of money in most private foundations is often minuscule. In fact, at the end of 2005, 67 percent of all private foundations had assets of less than $1 million and 27 percent had assets of $1 million to $10 million.
Timothy Walter, chief executive of the Association of Small Foundations, with 3,100 members, said the acceleration in the formation of foundations is directly linked to the increasing wealth in the stock market as well as an “awareness that a private foundation gives you flexibility in when and how you give away money.”
Changes in the tax laws in the 1990s have also played a role. Thomas E. Chomicz, a lawyer who specializes in charitable organizations at Quarles & Brady in Chicago, said that the law now allows donors to deduct the fair market value of public stock transferred to a private foundation rather than just deducting the cost of the stock.
That means a donor who gives stock to a foundation that cost $10 a share but is now worth $500 a share can deduct the entire $500 from his gross income, subject to some tax limitations.
While those rules had also been in place in the 1980s, they did not become law until 1998. “I think that was a catalyst for the creation of — and contributions to — private foundations,” Mr. Chomicz said.
But donors often have loftier goals in mind and want their foundation to play a continuing role in their particular area of interest. And whatever the financial returns, every foundation is required by law to give away at least 5 percent of its assets annually.
Given the recent turmoil in the stock market, producing strong enough returns…
