Description
BRUCE R. HOPKINS practices, with the Bruce R. Hopkins Law Firm, LLC, in the field of tax-exempt organizations, including private foundations, and is widely recognized as one of the country’s leading lawyers in the field. JODY BLAZEK is a partner in Blazek & Vetterling, a CPA firm focusing on tax and financial planning for exempt organizations and the individuals who create, fund, and work with them and is recognized as a leading accountant in the field. Preface ix Book Citations xi 1 Introduction to Private Foundations 1 1.1 Private Foundations: Unique Organizations 1 1.2 Definition of Private Foundation 1 1.7 Operating for Charitable Purposes 1 1.9 Private Foundation Sanctions 2 1.10 Statistical Profile 9 2 Starting, Funding, and Governing a Private Foundation 11 2.1 Choice of Organizational Form 11 2.5 Acquiring Recognition of Tax-Exempt Status 11 2.6 Special Requirements for Charitable Organizations 12 2.7 When to Report Back to the IRS 12 3 Types of Private Foundations 15 3.1 Private Operating Foundations 15 3.3 Conduit Foundations 16 3.9 Foreign Private Foundations 16 4 Disqualified Persons 17 4.1 Substantial Contributors 17 4.2 Foundation Managers 17 4.3 Certain 20 Percent Owners 17 4.4 Family Members 18 5 Self-Dealing 19 5.1 Private Inurement Doctrine 19 5.2 Private Benefit Doctrine 20 5.3 Definition of Self-Dealing 22 5.3A Excess Compensation Tax 23 5.4 Sale, Exchange, Lease, or Furnishing of Property 28 5.5 Loans and Other Extensions of Credit 29 5.6 Payment of Compensation 30 5.8 Uses of Income or Assets by Disqualified Persons 30 5.11 Indirect Self-Dealing 32 5.12 Property Held by Fiduciaries 40 5.14 Additional Exceptions 48 5.15 Issues Once Self-Dealing Occurs 48 6 Mandatory Distributions 55 6.1 Distribution Requirements–in General 55 6.2 Assets Used to Calculate Minimum Investment Return 55 6.5 Qualifying Distributions 56 7 Excess Business Holdings 57 7.1 General Rules 57 7.2 Permitted and Excess Holdings 59 7.3 Functionally Related Businesses 60 8 Jeopardizing Investments 61 8.2 Prudent Investments 61 8.3 Program-Related Investments 61 9 Taxable Expenditures 63 9.1 Legislative Activities 63 9.2 Political Campaign Activities 64 9.3 Grants to Individuals 64 9.5A Funding of Employee Hardship Programs 67 9.6 Grants to Foreign Organizations 73 9.9 Spending for Noncharitable Purposes 73 9.10A Distributions to Group Exemption Organizations 74 9.11 Excise Tax for Taxable Expenditures 76 10 Tax on Investment Income 77 10.1 Rate of Tax 77 10.3 Formula for Taxable Income 77 10.5 Foreign Foundations 78 11 Unrelated Business Activity 79 11.2 Exceptions 79 11.3 Rules Specifically Applicable to Private Foundations 80 11.4 Unrelated Debt-Financed Income Rules 80 11.5 Calculating and Reporting the Tax 81 12 Tax Compliance and Administrative Issues 89 13 Termination of Foundation Status 91 13.1 Voluntary Termination 91 13.3 Transfer of Assets to a Public Charity 91 13.4 Operation as a Public Charity 91 13.6 Termination Tax 91 14 Charitable Giving Rules 93 14.1 Concept of Gift 93 14.2 Basic Rules 94 14.4 Deductibility of Gifts to Foundations 94 14.5 Qualified Appreciated Stock Rule 94 14.9 Administrative Considerations 95 15 Private Foundations and Public Charities 101 15.2 Evolution of Law of Private Foundations 101 15.3 Organizations with Inherently Public Activity 101 15.4 Publicly Supported Organizations–Donative Entities 103 15.5 Service Provider Organizations 104 15.7 Supporting Organizations 106 15.8 Change of Public Charity Category 106 15.9 Noncharitable Supported Organizations 108 16 Donor-Advised Funds 109 16.1 Basic Definitions 109 16.3 Types of Donor Funds 109 16.9 Statutory Criteria 109 16.12 Tax Regulations 110 16.13 DAF Statistical Portrait 110 16.14 Criticisms and Commentary 112 17 Corporate Foundations 121 17.3A Private Benefit Doctrine 121 17.5 Self-Dealing Rules 122 17.6 Other Private Foundations Rules 122 Table of Cases 123 Table of IRS Revenue Rulings and Revenue Procedures 129 Table of IRS Private Determinations Cited in Text 133 Table of IRS Private Letter Rulings, Technical Advice Memoranda, and General Counsel Memoranda 141 About the Author 157 About the Online Resources 159 Cumulative Index 161
