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• Introduction
• Donors and Contributions
• Investments
• Grants to Charities
• Tax Considerations
• Record Keeping and Foundation Reporting
• Miscellaneous

Introduction

The American Foundation is a 501(c)(3) public charity. Using our public charity status, we help individuals, families, and corporations create foundations that give financial support to their favorite charities. We strive to make the entire process of philanthropy easy and rewarding for you, the donor(s), by providing simple procedures, ongoing education and the greatest amount of donor direction allowed by law. Contributions made to your family foundation established with the American Foundation are deductible at the highest "public charity" level. As with any charitable donation, the gift or transfer is irrevocable.

Donors and Contributions

Eligible Donors
The American Foundation will accept contributions from individuals, companies, trusts, grant-making foundations, associations, and estates.

Donor Contribution(s)
Contributions of cash, mutual fund shares, stocks, bonds, and other securities, including certain private and restricted stock, are eligible for contribution to a family foundation. The minimum initial contribution to a family foundation with the American Foundation is $5,000 ($100,000 for trusts, $1 million for support organizations, and $10 million for private foundations). Subject to approval, multiple donors may pool their contributions into a single foundation with the American Foundation. The minimum amount for subsequent contributions is $1,000.

All new contributions must be accompanied by a completed Donor Application, which can be delivered to the American Foundation via mail or facsimile. Cash contributions must be denominated in U.S. dollars and delivered by check or wire. Checks should be delivered to: The American Foundation, 4518 North 32nd Street, Phoenix, AZ 85018.

Shell Foundations
Those who set up major charitable trusts or testamentary plans can establish a "shell" family foundation that will eventually receive those funds. Shell foundations can be established with a contribution of $300. This $300 will be divided three ways: $100 to the American Foundation, $100 to the American Community Foundation, and $100 to the World Foundation in support of their charitable operations.

Review and Approval
All contributions are subject to review and approval by the Directors prior to acceptance. Contributions not accepted will be returned as soon as is practical. The American Foundation will provide written confirmation at the time of acceptance of any contribution. The confirmation will include the amount of the contribution of any mutual funds or publicly tradable stocks, bonds and other property. The American Foundation does not value private securities, real estate or limited partnership interests. Donors should obtain an independent appraisal prior to making such a contribution for tax deduction purposes.

Please Remember: Any contribution, once accepted by the Directors, represents an irrevocable charitable contribution to the American Foundation that is placed into a family foundation account.

Investments

Accounts
The American Foundation will set up a component family foundation, which will be used to maintain an internal accounting of donor contributions and grants to qualified charitable organizations. Your contribution may be allocated to one or more investment accounts. Contributions to component family foundations under $100,000 may be placed in common investments. Funds placed in common investments will maintain the appropriate family foundation accounting, reflecting contributions, the foundation's share of investment return, and grant activity. The foundation is an asset of the American Foundation or the American Foundation for Charitable Support, and donors have no ownership interests in it.

Investment Advisors
The American Foundation works with many investment advisors and brokers, and welcomes the opportunity to work with any professional a donor might recommend. Investment charges to foundations or trusts will vary depending on the recommended investments and/or investment advisors selected.

Investment Recommendations
A donor may make investment recommendations, but the American Foundation will determine investment policy and make all final investment selections or, under its sole and complete discretion, instruct investment advisors to assist with these tasks.

Securities
The American Foundation will determine in its sole discretion whether to hold or sell donated securities. If securities are sold, the American Foundation will obtain the most favorable sales price under the prevailing market conditions. For non-publicly traded securities, or other securities for which no readily liquid market exists, the American Foundation will exercise discretion as to the time and price of sales in an attempt to maximize the sales proceeds. Any costs incurred by the American Foundation necessary to the disposition of such securities (e.g., legal or appraisal fees) will be applied to reduce the net proceeds to the foundation.

Under IRS rules and regulations, the fair market value of publicly traded securities is the mean of the high and low sales prices on the contribution date. Other rules apply if there were no sales on that date or if the securities are not publicly traded. In any event, the value of the deduction for contributed securities may differ from the actual sales price. The value of the contribution (but not the amount of the charitable deduction) is determined on the date on which the American Foundation receives the net proceeds from the sale of contributed securities. Therefore, the net proceeds from the sale of securities, and the corresponding value of the foundation, may differ from the charitable deduction attributable to the contribution.

Grants to Charities

Recommendations and Grants
A donor has the opportunity to recommend grant recipients. A "grant" is a gift from a foundation, out of income or growth, to a recognized 501(c)(3), 509(a)(1) or 509(a)(2) public charity by way of the Grants Recommendation form. The donor may also designate long term or ongoing recommended grants to named charities on the Donor Charitable Interest Worksheet. Any such recommendations are subject to review and approval by the Directors and/or American Foundation staff as may be designated by the Directors. If the recommendations are approved, the American Foundation will then make the appropriate grants. If the American Foundation does not accept a recommendation, or if a recommended organization no longer qualifies as a 501(c)(3), 509(a)(1) or 509(a)(2) public charity at the time the grant is to be made, the American Foundation will make reasonable efforts to notify the donor and obtain recommendations for grants to alternative charitable organizations.

A Perpetual Endowment that Grows
Family foundations established at the American Foundation will be held as perpetual charitable endowment funds. Principal will be preserved and protected. Part or all of the annual income or growth is distributed annually to qualified charities or charitable programs as may be recommended by the donor. Family foundations are expected to distribute a minimum of 5% of the annual value of the foundation each year. If donors would like their foundation to grow, part or all of the annual interest or growth over the 5% can be added to principal.

Charitable Advisor Election
During his or her lifetime, a donor may designate and authorize in writing another person or group of persons (called the "charitable advisor(s)" or "Director(s)") to recommend grants to charitable organizations. Once so authorized by a donor, those so designated shall possess the full authority to recommend grants at any time from the foundation until written revocation of such authority is actually received by the American Foundation from the donor.

Successor Charitable Advisor
Upon the donor's death, the successor charitable advisor(s) shall be assigned the rights and duties associated with the family foundation at the American Foundation. If a family foundation is maintained jointly, upon the death of one donor, the remaining donor(s), unless otherwise specified, would succeed to the rights to recommend grants to charities and designate successors. Successor Charitable Advisors would be engaged only at the recommendation of the donor(s) or after the deaths of all donors of the foundation unless otherwise specified in writing.

The successor must provide written notification and sufficient proof to the Trustees of the donor's death and will then succeed to all rights and duties of a donor to the American Foundation, including the ability to recommend subsequent grants. If the successor individual(s) is a minor, the Trustees reserve the right to require that the minor's legal guardian make recommendations for grants. Successor individuals may in turn assign successors in the event of the successor individual's death.

Grants to Public Charities
Grants can only be made to charitable organizations which are tax-exempt under Code Section 501(c)(3) and which are also public charities under Code Section 509(a) (1) or (2), or for qualifying charitable programs or projects as approved by the Directors of the American Foundation. Grants cannot be made to private foundations.

Grants to Foreign Charitable Organizations
The American Foundation will consider grants to foreign charitable organizations where we can properly monitor expenditure of those funds. The American Foundation may also make grants to charities that are qualified as Section 501(c)(3) public charities that in turn fund and exercise expenditure responsibility over foreign charitable activities.

Other Restrictions on Grants
Grants from the American Foundation may not be used in whole or in part for any pre-existing pledge or any private benefit (such as school tuition or scholarships that directly benefit a specific individual), dues, membership fees, benefit tickets, or goods bought at charitable auctions; nor may grants be used for lobbying, political contributions, or to support political campaign activities. The American Foundation will reject grant recommendations for improper purposes and will take remedial action if we discover that grants have been made for improper purposes, which action may include, but not be limited to, requiring a return of the grant from the charitable organization or requiring that donors make an additional non-deductible contribution.

Variance Power
The donor should understand that if, at any time, the designated charities or charitable programs become obsolete or go out of business or otherwise significantly change in operation or mission, the Directors of the American Foundation may make changes that will more appropriately fulfill the donor's purposes. In the event this should occur, the Directors of the American Foundation will first look to the donor and/or the component foundation's Charitable Advisor for their recommendations and direction for any such needed change or modification (this "Variance Power" provision is a regulatory requirement of the Internal Revenue Service). In policy and practice, we favor donor charitable involvement and direction to the fullest extent permissible under law. This Variance Power is intended to protect and benefit the donor and society. The American Foundation believes that donor direction results in more effective philanthropy, which is part of our primary charitable mission.

Minimum Amount for Grants
Each grant recommendation must be in $50 increments above $100 to any one charitable organization.

Maximum Number and Amount of Grants
The number of annual grants from a family foundation is limited only by the amount of income and growth of the foundation and the $100 per grant minimum. "Income or growth" is any increase in the value of a foundation over and above the initial and subsequent contributions.

Minimum Charitable Grant Activity
It is the policy of the American Foundation that all foundations make annual grants of at least 5% of the value of the foundation principal (determined on January 1st of each year). This policy may be modified only when there are clear and reasonable reasons for doing so. Requests for grants may be made at any time, and should be made no later than December 1st of each year to qualify for the current calendar year.

If this requirement is not met in a year, the American Foundation will contact donors who have not had grant activity in their foundations of at least 5% of the foundation's average net assets and provide them with the opportunity to recommend grants for the requisite amount. If such donors do not provide recommendations within 60 days after such notice, the American Foundation will make every effort to honor the wishes of the donor(s) by making the 5% annual grant in keeping with the respective donor's Charitable Interest Mission Statement, if provided. If no written instructions are available, the American Foundation will make the 5% annual grant based on past grants. If this is not possible, then the American Foundation will use its best judgment to make grants to worthwhile charitable organizations and programs.

Distribution of Principal
It is the policy of the American Foundation to protect and preserve principal, in order to create lasting endowments and family charitable legacies.

Definition of Principal
Principal is the initial contribution plus any subsequent contributions. Any amounts of growth or income not distributed may be re-classified as principal, if the donor wishes.

Timing of Charitable Grant
The American Foundation generally reviews charitable grant recommendations daily, and, upon approval by the Directors, will seek to make the grant as soon as is possible. The American Foundation, however, reserves the right to process grants every four to six weeks if necessary. In the event the family foundation value fluctuates between the time of a donor's recommendation and when the grant actually is made, the donor will be contacted.

Grant Checks and Confirmations
Grants to charities are made by the American Foundation for Charitable Support accompanied by a letter recognizing the family foundation name and the name of the donor recommending the grant, unless anonymity is specifically requested. After your recommended grant is made, you will receive a written confirmation from the American Foundation.

Gift Allocation to the American Foundation
All foundations transfer 1% of their foundation value (0.5% in the case of charitable trusts) annually to the American Foundation as a gift allocation. Investment charges to foundations or trusts will vary depending on the recommended investments and/or investment advisors selected.

Mobility and Distribution of Principal Policy
All of our foundations are intended to operate as perpetual endowment funds.
We promote the concept of preserving principal. We think the perpetual family foundation is a more effective and successful way to financially benefit charities and charitable programs. Giving to charity also becomes a more meaningful family endeavor. Because we recognize there may be legitimate reasons to make larger grants of more than just income, we allow for the distribution of principal. However, the American Foundation needs to retain a meaningful amount of the principal to validate the donor-donee relationship that is created when we first establish the foundation.

Satisfaction Guaranteed Policy
If the American Foundation changes its declared and documented mission and vision, including its position of allowing donors to retain the maximum charitable direction permitted under law, or as we call it, "charitable ownership," our donors will have the unequivocal right to transfer their family foundation funds to any other qualified charity of their choice.

Tax Considerations

Always Seek Assistance
The American Foundation strongly recommends that individuals seek assistance from a qualified legal, financial, tax or other professional to review and determine the tax and legal issues regarding donations to a family foundation.

Charitable Deduction
Contributions made to a family foundation established with the American Foundation are deductible at the highest "public charity" level. You will be eligible to take an itemized deduction for a charitable contribution to a public charity on the date that the contribution is made to your family foundation, subject to the following general limitations. Your deduction will in part depend on the type of asset contributed to the American Foundation. You are encouraged to consult your legal or tax advisor to review your personal situation.

Cash
A cash contribution to your family foundation qualifies for a full income tax deduction (up to 50% of adjusted gross income).

Publicly Traded Securities
For publicly traded securities held for more than one year, your deduction is determined by the mean of the high and low prices reported on the date the contribution is made to your family foundation. For mutual fund shares held for more than one year, your deduction is determined by the closing price on the date the contribution is made. For securities or mutual fund shares held for one year or less, the deduction is for the lesser of your cost basis or fair market value.

Securities That Are Not Publicly Traded
For securities that are not publicly traded which have been held for more than one year, the donor determines the fair market value in a reasonable manner on the date the contribution is made to the family foundation. To that end, the donor will be required to provide the IRS with a qualified appraisal for any contributed property for which the donor will claim a deduction of more than $5,000. For securities held for one year or less, the deduction is for the lesser of the cost basis or fair market value.

Other Deduction Limitations
Individual donors are eligible for an itemized deduction for cash contributions to your family foundation in an amount up to 50% of their adjusted gross income in the tax year in which the contribution is made. Deductions for contributions of appreciated securities held for more than one year are limited to 30% of AGI. Any excess amount may be carried forward and deducted in the five-year period after the year of contribution. A donor's ability to deduct itemized deductions may be subject to certain other limitations. Please contact your tax advisor to determine tax deductibility limits.

Estate Planning and Probate
Contributions to your family foundation and any earnings related to them are not part of your taxable estate and are not subject to probate. Amounts contributed to your family foundation should not be included in your gift and estate tax unified credit calculation.

Tax Treatment of American Foundation's Income and of Grants Made to Charitable Organizations
Income that accrues to the foundation is income to your family foundation. It is not income to the donor(s) and is not available as a charitable deduction. Income to the American Foundation will be reflected in the value of the family foundation.

When the American Foundation makes grants from family foundations to qualified charitable organizations, the American Foundation is distributing its own assets. Donor(s) will not be eligible to claim additional charitable deductions in the amount of these grants. The amount distributed may include appreciation in the value of the foundation since the date of contribution.

Record Keeping and Foundation Reporting

The American Foundation will provide donors with financial reports or information required by applicable law, as well as semi-annual or annual foundation reports. The American Foundation will send the donor a funding letter and sign the "Donee Acknowledgment" at the bottom of IRS Form 8283 (when property requires appraisal). The IRS requires that Form 8283 be completed and filed with an individual's federal income tax return for gifts of property valued at $500 or more, or publicly traded securities valued at $5,000 or more.

Miscellaneous

The American Foundation
The American Foundation is a 501(c)(3) public charity as described in Sections 501(c)(3), 509(a)(1) and 170(b)(1)(A)(vi) of the Internal Revenue Code of 1986, as amended. The procedures and policies covered in this Program Description are identical for both the American Foundation and its primary funding organization, the American Foundation for Charitable Support.

Participation is Subject to Terms and Conditions
All activities of the American Foundation and donor participation in the program are subject to the terms and conditions of the American Foundation's By-laws ("By-laws") and this Program Description ("Description"). The American Foundation Directors reserve the right to modify the program at any time, subject to the provisions of the By-laws.

Conflict of Terms
In the event of any inconsistency between the terms of this Plan Description and the By-laws, the terms of the By-laws will govern the rights and obligations of the American Foundation and donors.

Please Note
The information in this publication is not intended as specific legal or financial advice.
Since each individual's circumstances will vary, the American Foundation urges individuals to seek advice from their qualified legal, financial, tax or other professionals when pursuing ideas presented in this publication

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