Clarifying Community Foundations with the Key Biscayne Bar Association

Joseph Kellogg image (Joseph Kellogg via Key News)

By: Joseph Kellogg

Key News Contributor

Confused about the role of Key Biscayne Community Foundation in the activities of the Village of Key Biscayne? If so, you are not alone.

Lawyers from the Key Biscayne Bar Association were also confused, so they reached out to Sherry Reed, Audit Partner of Lancaster & Reed CPAs (Key Biscayne).

On Thursday evening, the 26th of September, as the sun set over Biscayne Bay, Ms. Reed shared her experiences working with not-for-profit organizations across the United States, including tax reporting for charities, donor advised funds, membership organizations and pension funds, as well as community foundations like the one on our island. 

Sherry Reed talks to members of the Key Biscayne Bar Association about non-profits, Key Biscayne Yacht Club, Sept.26. (Joe Kellogg via Key News)

Although a community foundation does not pay taxes, Ms. Reed explained the complexity of the bookkeeping required of them by the Internal Revenue Service. Since community foundations do so many activities to support their corresponding geographic community, they need to diligently track all the inflows of money and make sure that corresponding expenses are properly associated with the respective function.

Activities of a foundation can include its own projects which are funded by general purpose donations; separate charitable activities of independent donor advised funds that are funded by designated donations; and general community services that are funded by municipal government payments in what are called “exchange transactions.” 

A long-standing practice across the United States, exchange transactions by community foundations are accepted by the IRS as long as the money flows are separately tracked and reported. Recognizing the numerous community projects administered by the Key Biscayne Community Foundation, their tax reporting is extraordinary, and if you’re interested, it is publicly available through the IRS website or GuideStar.