The best protection against audit problems is to know the Internal Revenue Service (IRS) rules and keep good records. The interest and dividend statements, canceled checks, and so forth that back up your return should be kept with the return. A typical foundation IRS audit notice requests that the following records be made available: Organizing... Read More
Amounts that foundations set aside or save for specific projects may be treated as current qualifying distributions. To qualify, the foundation must satisfy the Internal Revenue Service (IRS) rule that the amount set aside for a specific project be paid out within 5 years, and that the set-aside amount is appropriate because the project can... Read More
Private foundations are subject to a range of legal regulations. The following list is not comprehensive but provides a sense of the scope of laws that apply to private foundations. Laws that apply to private foundations and public charities General legal requirements Fiduciary duties Conflicts of Interest Private inurement and public benefit Records and disclosures... Read More
In 1964, Congress enacted mandatory distribution rules to prevent private foundations from receiving gifts and investing the assets—yet never spending funds for charitable purposes. Congress thought it unfair to allow a charitable deduction when, in some cases, funds were not being directed to charity. A private foundation must make annual charitable expenditures, called qualifying distributions, equal... Read More
Most foundations cannot directly earmark money to support a lobbying campaign. (Community foundations and others that have public charity status are notable exceptions to this rule.) What constitutes lobbying, however, often is murky. Support for a public education campaign, for example, usually is not lobbying, assuming it does not urge lawmakers or the public to... Read More
Board members should be aware of three key legal requirements that may impact foundation investments. Avoid jeopardizing investments The board has the legal responsibility to manage the foundation’s assets in a manner that avoids imprudent investments. The Internal Revenue Service (IRS) may penalize the foundation if it is found to be engaging in investments that... Read More