Private Foundations & Donor Advised Funds
Private foundations are the nonprofit structure of choice for a wealthy donor who wants to retain control over his or her charitable dollars. Like public charities, private foundations are organizations that meet the requirements of section 501(c)(3).
However, they typically have very limited revenue sources. Moreover, private foundations and their “disqualified persons” are subject to the excise tax provisions of sections 4940 – 4945 of the Internal Revenue Code.
I advise private foundation clients on how to comply with these excise tax provisions:
- Net Investment Income Tax of Section 4940
- Prohibition on Self-Dealing under Section 4941
- Payout Rule of Section 4942
- Excess Business Holdings Rule of Section 4943
- Jeopardy Investments Prohibition of Section 4944
- Expenditure Responsibility Regime of Section 4945
In particular, I can help private foundations meet the set aside rules, create program related investments, establish scholarship programs, and determine when they must exercise expenditure responsibility over foreign grants.For philanthropists who do not have the time or funds to justify operating a private foundation, a donor advised fund is a useful way to implement charitable goals. I advise wealthy individuals on the pros and cons of using a donor advised fund instead of a private foundation. I also advise programmatic donor advised funds of the pros and cons of being a standalone charitable organization.