Commercial Insights

The benefits of establishing a corporate foundation

A corporate foundation has the potential to enhance brand image and long-term impact.

Today’s consumers are perhaps more interested in corporate responsibility than ever before. To that end, more and more companies are striving to strengthen their charitable programs and increase the public’s recognition of their work. For some organizations, establishing a private foundation under its corporate name may be an effective way to accomplish both goals.

What is a corporate foundation?

“Generally speaking, a corporate foundation is a nonprofit organization that’s established by a company for charitable purposes and operates separately from the company,” explains Marcie Braswell, Philanthropic Solutions Executive at Regions.

Corporate foundations typically receive the majority of their funding from the corporation itself. Some corporations donate a percentage of their profits each year to their foundation, while others look to endow the foundation up front. An endowment in this instance is a pool of funds that are invested to provide ongoing resources for support. Properly funded, a corporate foundation allows organizations to tackle larger philanthropic initiatives and provide more consistent support to the causes that align with their interests.

Why establish a corporate foundation?

Ultimately, your company’s donations still go toward the causes you want to support, so what are the benefits of establishing a corporate foundation?

Increased visibility

First, bringing all of your programs under one name can bring increased visibility to your charitable efforts. “Customers, communities, and employees are asking for more information about corporate giving, and having a corporate foundation is another way for corporations to provide that,” says Braswell. Further, managing all programs under a single authority—with its separate finances—may help streamline measuring and reporting efforts.

Similarly, establishing a corporate foundation may also reflect positively on your brand. “If the foundation is named for the company, then that may inherently benefit the company’s image,” she adds.

Employee engagement

If your company’s charity work is more visible to the public, it will be more visible to your employees, as well.

The positive impact this visibility has on employees can also be enhanced through their involvement in the foundation itself, such as by serving on a grants committee. Having emerging leaders serve on the committee that awards grants can be a rewarding experience that fosters the employees’ sense of engagement in the community, something that is especially crucial for employees who want to make an impact.

Strategic financial benefits

Additionally, establishing a corporate foundation may have strategic financial benefits for those organizations that prioritize community engagement. For one, having a corporate foundation allows a business to vary contributions each year, contributing more in years of higher profits to stretch through years when there may be priorities for other corporate expenditures.

Under the One Big Beautiful Bill Act, changes to the tax code have been introduced to encourage greater giving by corporations. Specifically, a 1% floor to the charitable deduction allowed for corporate gifts takes effect Jan. 1, 2026. Previously, no floor existed and donations were deductible up to 10% of the corporation’s taxable income.

Under the new law, the first 1% of giving is not deductible, rather, only the amount between 1% and the 10% cap. For example, if a corporation earns $10 million in taxable income, the first $100,000 donation is not deductible, however, the next $900,000 donated is deductible. Amounts in excess of the 10% cap can be carried over for the next five years as previously allowed.

Considerations for implementing a corporate giving strategy

Corporate foundations typically steer their giving with foundation policies that detail how they respond to requests, award grants, and otherwise operate. Importantly, these fundamental guidelines allow executives to develop a strategic plan for grantmaking that is consistent with the company’s values and strengths. “These policies also allow the company to decline donation requests that do not fall within those strategic priorities,” Braswell explains.

Foundations also open up additional giving options. “For instance, with advance approval from the IRS and proper administration, a corporate foundation may be able to design a scholarship program for its employees and their families.”

Establishing a corporate foundation can provide valuable benefits. There are, however, aspects related to the establishment of a foundation that deserve careful consideration. For instance, there are costs associated with establishing and operating a foundation. “It’s a separate legal entity, so there is a cost in creating it,” Braswell says. “There are also accounting and reporting requirements, which have associated costs.”

In addition to the initial legal work needed to file for nonprofit status, private foundations must also deal with unique restrictions and tax laws. For example, they must ensure that they do not engage in transactions that would violate self-dealing rules and are required to distribute roughly 5 percent of their assets for charitable work each year, or they may be subject to penalties.

How to establish a corporate foundation

First, you’ll need to consider the legal setup of your foundation—although this is often a straightforward choice. Foundations are structured as a trust or a corporation. Most corporations operate their own foundation as a corporation rather than a trust. The corporate structure is more in line with their existing business structure, including having a board of directors.

From there, start building your team. “There are a number of external advisors who would be helpful in establishing a corporate foundation,” Braswell says.

• An attorney can help prepare necessary documents and complete the Form 1023 exemption application. Many states have their own requirements for filling and reporting as well.
• A tax advisor can help determine how your corporation’s taxes are affected by establishing a foundation, as well as filing the foundation’s annual informational return with the IRS.
• And if your goal is to eventually grow an endowment fund so the foundation is self-sufficient, you’ll want to select an investment advisor partner.

Endowing the corporate foundation and investing those assets accordingly can support charitable activities in perpetuity. It allows for a more consistent level of giving, providing support for grantmaking during a company’s less profitable years. Building a reserve of charitable dollars helps create a stable foundation, which can be necessary for longer-term projects that require regular funding for several years. The business may choose to endow the foundation all at once, such as in a year when company profits are high, or over the course of several years.

To learn more about establishing an endowment fund, listen to Episode 26 of Regions Wealth Podcast, The Benefits of an Endowment: Ensuring the Longevity of Your Nonprofit.

Creating the right team

While you could use your company’s existing partners to meet these needs, there are benefits to working with an organization with specific foundation experience. “Organizations want to know that they are in line with what similar organizations are doing. Having a group dedicated to working with nonprofits gives us the ability to share what we are seeing in the landscape,” Braswell explains.

As a banking institution, Regions has additional advantages as a foundation management team. “The extent that we are looped in with accounting and legal firms, as well as the knowledge of our work with other foundations all benefits the nonprofit,” notes Braswell.

Corporate charity has several well-known benefits for companies, both internally and externally. Establishing a well-run corporate foundation may be an effective way to organize, amplify, and receive recognition for your company’s charitable work.

Interested in establishing a corporate foundation? Connect with our Philanthropic Solutions team to explore your options.