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More About This Title Private Foundations, Fourth Edition + Website: Tax Law and Compliance
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Stay updated on the latest tax regulations with this private foundation tax manual
Knowledge of tax regulations surrounding private foundations isn't enough if you're an executive of such an organization or a professional supporting a tax-exempt foundation. Annual changes to IRS rules and increased scrutiny by regulators mean it's necessary for you to keep abreast of myriad changes that come into existence each year. From authors Bruce R. Hopkins and Jody Blazek comes the definitive guide for those responsible for guiding the financial and tax filing operations of private foundations.
The complexity of tax regulations related to private foundations extends to a level that is out of proportion to the relatively small number of such entities. Nonetheless, recent statutory requirements that apply solely to private foundations can make untangling filing and reporting activities overly burdensome without a developed knowledge of the underlying theory and practice. To navigate this maze of add-on regulations, Hopkins and Blazek provide background knowledge, in-depth explanations of regulatory changes, and real-world examples to bring as much simplicity to the process as possible.
- Receive guidance from the 2007 Outstanding Nonprofit Lawyer Award recipient
- Learn about the details of private foundation taxes from leading experts in the field
- Make use of checklists and sample documents to prepare organizational filings
- Utilize line-by-line instructions for completing exemption applications and forms
For professionals working closely with private foundations, including accountants, lawyers, and foundation executives, Private Foundations: Tax Law and Compliance, 4th Edition is a welcome resource for keeping your clients or your organization on the right track.
- Brings clarity, real-world examples, and checklists to help professionals deal with the burdensome process of complying with IRS regulations governing private foundations
- Clarifies the underlying logic behind statutory tax regulations governing private foundations and the practical implications of maintaining compliance
- Supplemented annually online to keep subscribers up-to-date on relevant changes in IRS forms requirements, and related tax procedures
- Includes easy-to-use checklists highlighting such critical concerns as tax-exempt eligibility and tax compliance
- Offers line-by-line instructions for completing a variety of exemption applications and tax forms<
- Features sample documents, letters of application, completed forms and practice aids summarizing the differences between public and private charitable organizations
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BRUCE R. HOPKINS (Kansas City MO) is a senior partner with the firm Polsinelli Shughart PC. He is also the author of more than 35 books, including The Law of Tax-Exempt Organizations, 10e, The Law of Fundraising, 4e, Nonprofit Law for Colleges and Universities, Nonprofit Governance, and Nonprofit Law Made Easy, as well as the monthly newsletter Bruce R. Hopkins' Nonprofit Counsel, all published by Wiley.
JODY BLAZEK, CPA, (Houston TX) is a partner in Blazek & Vetterling, LLP, an accounting firm that focuses on financial planning, tax compliance, and auditing for tax-exempt organizations and the individuals who create, fund, and work for them.
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Preface xiii
Book Citations xix
1 Introduction to Private Foundations 1
1.1 Private Foundations: Unique Organizations 1
1.2 Definition of Private Foundation 5
1.3 History and Background 6
1.4 Private Foundation Law Primer 9
1.5 Statistical Profile 16
1.6 Foundations in Overall Exempt Organizations Context 17
1.7 Definition of Charity 18
1.8 Operating for Charitable Purposes 19
1.9 Organizational Rules 24
1.10 Private Foundation Sanctions 26
2 Starting and Funding a Private Foundation 33
2.1 Choice of Organizational Form 33
2.2 Funding a Foundation 36
2.3 Estate Planning Principles 38
2.4 Foundations and Planned Giving 39
2.5 Acquiring Recognition of Tax-Exempt Status 44
2.6 Special Requirements for Charitable Organizations 104
2.7 When to Report Back to the IRS 107
3 Types of Private Foundations 117
3.1 Private Operating Foundations 117
3.2 Conduit Foundations 139
3.3 Common Fund Foundations 141
3.4 Research and Experimentation Funds 142
3.5 Other Types of Foundations 143
3.6 Nonexempt Charitable Trusts 144
3.7 Split-Interest Trusts 147
3.8 Foreign Private Foundations 149
4 Disqualified Persons 153
4.1 Substantial Contributors 153
4.2 Foundation Managers 158
4.3 Certain 20 Percent Owners 159
4.4 Family Members 161
4.5 Corporations or Partnerships 162
4.6 Trusts or Estates 162
4.7 Private Foundations 163
4.8 Governmental Officials 163
4.9 Terminating Disqualified Person Status 166
5 Self-Dealing 169
5.1 Private Inurement Doctrine 171
5.2 Private Benefit Doctrine 174
5.3 Definition of Self-Dealing 180
5.4 Sale, Exchange, Lease, or Furnishing of Property 184
5.5 Loans and Other Extensions of Credit 196
5.6 Payment of Compensation 200
5.7 Indemnification and Insurance 221
5.8 Uses of Income or Assets by Disqualified Persons 227
5.9 Sharing Space, People, and Expenses 238
5.10 Payments to Government Officials 243
5.11 Indirect Self-Dealing 245
5.12 Property Held by Fiduciaries 251
5.13 Early Terminations of Charitable Remainder Trusts 256
5.14 Additional Exceptions 257
5.15 Issues Once Self-Dealing Occurs 260
6 Mandatory Distributions 273
6.1 Distribution Requirements—In General 273
6.2 Assets Used to Calculate Minimum Investment Return 275
6.3 Measuring Fair Market Value 285
6.4 Distributable Amount 294
6.5 Qualifying Distributions 297
6.6 Distributions to Certain Supporting Organizations 319
6.7 Satisfying the Distribution Test 322
6.8 History of the Mandatory Distribution Requirement 329
7 Excess Business Holdings 335
7.1 General Rules 335
7.2 Permitted and Excess Holdings 341
7.3 Functionally Related Businesses 347
7.4 Rules Applicable to Certain Supporting Organizations 350
7.5 Rules Applicable to Donor-Advised Funds 350
7.6 Excise Taxes on Excess Holdings 351
8 Jeopardizing Investments 353
8.1 General Rules 354
8.2 Prudent Investments 359
8.3 Program-Related Investments 373
8.4 Investment Frauds 379
8.5 Excise Taxes for Jeopardizing Investments 382
9 Taxable Expenditures 387
9.1 Legislative Activities 389
9.2 Political Campaign Activities 399
9.3 Grants to Individuals 402
9.4 Grants to Public Charities 424
9.5 Grants to Foreign Organizations 434
9.6 Expenditure Responsibility 440
9.7 Internet and Private Foundations 459
9.8 Spending for Noncharitable Purposes 465
9.9 Distributions to Certain Supporting Organizations 468
9.10 Excise Tax for Taxable Expenditures 468
10 Tax on Investment Income 477
10.1 Rate of Tax 478
10.2 Reducing the Excise Tax 480
10.3 Formula for Taxable Income 488
10.4 Reductions to Gross Investment Income 501
10.5 Foreign Foundations 509
10.6 Exemption from Tax on Investment Income 510
10.7 Legislative Proposal 511
11 Unrelated Business Income 513
11.1 General Rules 514
11.2 Exceptions 525
11.3 Rules Specifically Applicable to Private Foundations 532
11.4 Unrelated Debt-Financed Income 543
11.5 Calculating and Reporting the Tax 547
12 Tax Compliance and Administrative Issues 553
12.1 Successful Preparation of Form 990-PF 558
12.2 Reports Unique to Private Foundations 575
12.3 Compliance Issues 595
13 Termination of Foundation Status 669
13.1 Voluntary Termination 671
13.2 Involuntary Termination 673
13.3 Transfer of Assets to a Public Charity 674
13.4 Operation as a Public Charity 681
13.5 Mergers, Split-Ups, and Transfers between Foundations 683
13.6 Termination Tax 698
13.7 Abatement 699
14 Charitable Giving Rules 701
14.1 General Rules 701
14.2 Gifts of Appreciated Property 704
14.3 Deductibility of Gifts to Foundations 706
14.4 Deduction Reduction Rules 707
14.5 Planned Giving Revisited 710
14.6 Administrative Considerations 710
15 Private Foundations and Public Charities 715
15.1 Distinctions between Public and Private Charities 716
15.2 Evolution of Law of Private Foundations 719
15.3 Organizations with Inherently Public Activity 721
15.4 Publicly Supported Organizations—Donative Entities 727
15.5 Service Provider Organizations 743
15.6 Comparative Analysis of the Two Categories of Publicly Supported Charities 754
15.7 Supporting Organizations 757
15.8 Change of Public Charity Category 784
15.9 Noncharitable Supported Organizations 786
15.10 Relationships Created for Avoidance Purposes 786
15.11 Reliance by Grantors and Contributors 787
15.12 Other Rules 792
15.13 Public Safety Organizations 792
15.14 Termination of Public Charity Status 792
16 Donor-Advised Funds 795
16.1 Basic Definitions 796
16.2 General Concept of a Gift 797
16.3 Types of Donor Funds 799
16.4 IRS Challenges to Donor Funds 802
16.5 Prohibited Material Restrictions 803
16.6 Department of Justice Position 808
16.7 Public Charity Status of Funds 809
16.8 Interrelationship of Private Foundation Rules 810
16.9 Statutory Criteria 812
16.10 Department of Treasury Study 816
16.11 Congressional Research Service Study 816
17 Corporate Foundations 821
17.1 Corporate Foundation Overview 821
17.2 Reasons for Establishment of a Corporate Foundation 822
17.3 Private Inurement Doctrine 823
17.4 Disqualified Persons Rules 824
17.5 Self-Dealing Rules 825
17.6 Other Private Foundations Rules 833
About the Authors 837
About the Online Resources 841
Index 843
