Those starting a private foundation are often surprised to learn that private foundations are some of the most highly regulated members of the philanthropic community. The rationale for increased scrutiny of private foundations is that they typically derive their support from a single company, family, or individual.
In contrast, public charities derive significant support from fundraising or revenues from mission-based activities. In this regard, private foundations are not subject to the same degree of public scrutiny as public charities that depend on outside support for their survival.
In the absence of intense public scrutiny, Congress feared founders of private foundations might divert or use foundation assets for their own benefit. Accordingly, Congress has subjected private foundations to a series of strict penalty excise taxes imposed at rates up to 200 percent.
The IRS assesses these penalty taxes on acts of “self-dealing,” on the failure to meet minimum payout requirements with respect to distributions to public charities, on retaining “excess holdings” in a business, on investing in ways that Congress feels may jeopardize the charitable interest, on making grants or providing scholarships to individuals, on engaging in prohibited legislative activity, etc. In addition, private foundations must pay a 1-2% tax on investment income as an “audit tax.”
As highly regulated entities, private foundations must manage greater legal complexity and higher risks than their public charity counterparts while simultaneously seeking to maximize their impact. Our goal is to educate our foundation clients so that they can spend their time confidently pursuing their mission rather than worrying about their compliance obligations.
Our services include and advice and counsel with respect to the following:
- Forming and securing tax-exempt status for independent, family and corporate foundations.
- Providing advice regarding corporate procedures and governance, operation of the board of directors, and appropriate board resolutions and minutes.
- Designing processes and procedures to streamline grant-making.
- Documenting complex grants including those to nontraditional grantees such as: international grantees, grants to individuals, prizes and grants to grantees that are not 501(c)(3) public charities.
- Advising foundation boards regarding advocacy grant-making and efforts to influence public policy.
- Documenting expenditure responsibility grants, matching gifts, naming rights gifts, disaster relief programs, employee scholarship programs, endowment gifts, international grants, and grants with complex conditions and benchmarks.
- Structuring transactions to avoid both direct and indirect self-dealing.
- Qualifying as a private operating foundation or a private pass-through foundation.
- Obtaining IRS approval of programs to make grants to individuals.
- Providing advice and legal opinions regarding program-related investments.
- Reviewing investment documents.
- Conducting legal reviews to ensure compliance.
- Addressing and correcting self-dealing, minimum distribution and other violations.
- Helping family foundations creatively resolve internal governance disputes including by restructuring.
- Advising foundations on winding down and dissolving.
Caritas Law Group has experience representing private foundations focusing in the areas of education, religion, healthcare, bioscience, arts, international development, and conservation. Our experience includes working with family foundations as well as independent and corporate foundations.
- Types of Foundations
- Organizing Documents
- Employer Identification Number
- Charitable Registration and Solicitation
- Help from the IRS
- Requirements for Exemption – 501(c)(3) Organizations
- Application Forms
- Help from the IRS
- IRS Processing
- Annual Exempt Organization Return
- Requirements for Filing
- Power of Attorney
- Unrelated Business Income Tax
- Employment Taxes
- Jeopardizing Exemption
- Private Foundation Excise Taxes
- Substantiation and Disclosure of Charitable Contributions
- Public Disclosure Requirements
- Retirement Plan Information for Exempt Organizations
- Help from the IRS