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
With self-dealing rules that are sometimes confusing, can a small foundation determine whether a potential transaction constitutes self-dealing? It can! Apply these three straightforward questions to any situation. Does the transaction involve a disqualified person? The Internal Revenue Service defines a disqualified person as one of the following: Officers, directors, trustees, and others with similar... Read More
Less than one-quarter of 1% of all tax returns filed by private foundations are examined by the Internal Revenue Service. Yet, certain states have seen an increase in attorney general inquiries (i.e., audits) into the operations of private foundations and components of the Form 990-PF, which usually accompanies a state filing. Attorney general audits can... Read More