Did you know that you can make a community investment into the Local Return DCIF through your donor advised fund (DAF)? We’ve recently partnered with Realize Impact to make that possible.
The difference between a charitable donation and community investment
People often want to know more about the difference between a charitable donation and an investment into the Local Return DCIF. After all, the Fund exists for a clear mission: to increase community wealth, improve community resilience, and reduce place-based disparities. It was established by a nonprofit organization and is guided by principles like cooperative ownership and community-based governance. So it makes sense that people want to know why they can’t get a charitable tax deduction for their investment or why they wouldn’t invest directly from their donor advised fund.
A charitable donor makes a gift of money or property to a nonprofit organization, which that organization uses to pursue its mission. The nonprofit does not provide the donor with anything in return for their donation. The donor is able to deduct donations to recognized 501(c)3 nonprofit organizations from their federal tax obligations.
Many people have established donor advised funds (DAFs) to facilitate their philanthropy. A DAF is an account at a sponsoring organization. A donor makes an irrevocable gift to create the DAF, getting the benefit of the tax deduction immediately, and then recommends grants to charitable organizations from that fund over time.
An investor puts money into a venture (e.g. company, property, or fund) with the expectation of receiving a financial profit. A community investor expects a social return – i.e. a benefit to the community – as well as a financial return.
An investor into the Local Return DCIF purchases shares of Preferred Stock. That means you own a piece of the Rhode Island Community Investment Cooperative and are entitled to certain voting rights and financial dividends. Investors sign a subscription agreement, a legal document that outlines the mutual understandings of the investor and the Fund.
But what if I am only able to invest from my DAF?
Some people think of community investment as an extension of their philanthropy, and they’d prefer or need to invest into the Local Return DCIF through a DAF. If that’s you, we have great news: you can do that, thanks to Realize Impact, a 501(c)(3) nonprofit organization and accredited investor.
Here’s how it works: You recommend an investment to Realize Impact by filling out this simple form. You donate the investment capital through a Philanthropic Investment Grant (PHIG) from your DAF. Realize Impact does its own due diligence on the Fund and makes the investment with the Fund. Realize Impact then becomes the owner of Local Return DCIF Preferred Stock and one share of Common Stock, entitling them to one vote. (They invest like any other investor, so no matter how many people invest through Realize Impact, they have just one vote.)
For investments of $10,000 or more, Realize Impact will donate 99% of any financial returns on that investment to a DAF, foundation, or nonprofit organization you recommend. They also charge a one-time $500 fee. There is no fee for donations under $10,000, but Realize Impact retains 100% of the returns.
If you are interested in investing through your DAF, check out the FAQs on Realize Impact’s website for more information or contact us.
