A project of the Council of Michigan Foundations
Following the passage of the Michigan Tax Credit for Community Foundations in 1988, the Council of Michigan Foundations (CMF) realized the need for a more formalized definition of “community foundations” for two reasons. First, they wanted to ensure that community foundations were eligible to receive gifts that qualified for the new tax credit. Second, community foundations were expanding rapidly due to the Michigan Community Foundations’ Youth Project (MCFYP) and an increased knowledge about community foundations. A formal and operational definition of a community foundation would ensure the integrity of the tax credit, and assure donors that their dollars would be treated the same regardless of which community foundation they donated to.
At the time the Michigan tax credit was passed, the field of philanthropy held a more nuanced understanding of the role, function, and operational characteristics of a community foundation. These characteristics included, for example, a commitment to building permanent endowment funds to serve a specific and defined geographic region. There were common roles such as making grants, providing community leadership to solve local problems, and assisting local donors in achieving their giving goals. This understanding of the specific attributes of a community foundation was not widely held beyond the field itself.
A formal and operational definition of a community foundation was necessary to accurately determine which organizations were eligible for receiving gifts that qualified for the new tax credit. In 1990, a formal definition of community foundations was developed and adopted through the work of the Community Foundation Policy Task Force (part of CMF) to assist the Michigan attorney general in certifying organizations that qualified for the credit.
The definition codified observable behaviors and services that distinguish a community foundation from other nonprofits and grantmaking entities. The adopted definition clarified, for example, that community foundations were bound to a certain geographical area, were permanent, frequently sought large contributions, and more. The full working definition as originally adopted can be viewed in the historical documents below.