Foundations may undergo three types of audits: independent audits (those elected by your foundation); Internal Revenue Service (IRS) audits; and state-level audits. An independent audit happens when a foundation hires an outside auditor to assess its finances and show that it has internal controls and built-in checks and balances. Independent audits ensure that your foundation’s... Read More
Taxable expenditures are grants or expenditures made by a private foundation that are either prohibited, or in Internal Revenue Service (IRS)-specified areas without following the strict IRS rules. The following list provides brief descriptions of those expenditures that are completely prohibited; the list after that provides additional requirements to avoid being taxable expenditures. The following... Read More
A foundation must deposit all depository taxes (e.g., employment tax, excise tax, and unrelated business income tax) electronically using the Electronic Funds Transfer. Generally, such transfers are made using the Electronic Federal Tax Payment System (EFTPS). If the foundation has not yet used EFTPS, enrollment will be required. After the foundation’s information is validated with... Read More
Supporting organizations are 501(c)(3) public charities with a subclassification of 509(a)(3), whose legal structure is formed with a certain relationship with one or more other public charities, the “supported” organization(s). Supporting organizations might be university or hospital foundations; foundations created to support libraries, elementary schools, or other governmental units; or trusts created by individuals to... Read More
Foundations frequently wonder what costs are acceptable to incur while making grants. Grantmaking foundations that have higher-than-average costs often defend themselves by pointing out they sometimes include direct charitable activities (DCAs) in their administrative costs, which are part of their 5% qualifying distributions. These grantmaking foundations sometimes sponsor charitable work, such as convening meetings of... Read More
Private foundations, or PFs, occasionally consider making investments in vehicles in which one or more of their disqualified persons, or DPs (e.g., officers, directors, substantial contributors) also have invested or also are considering an investment. This article focuses on issues raised for investments in vehicles that are owned and managed by persons unrelated to the... Read More