Private Foundation Law Made Easy

by Bruce R. Hopkins (Member, District of Columbia Bar)

• ISBN13: 9780470414491
• ISBN10: 0470414499
• Format: eBook
• Copyright: 2009-04-01
• Publisher: Wiley

Summary

Now your foundation can be fully informed about the basic legal requirements affecting private foundations and avoid the perils lurking in nonprofit tax law traps. Private Foundation Law Made Easy clearly shows you how, with information on reaping the charitable and tax advantages of your private foundation. Filled with straightforward guidance, author Bruce Hopkins?a leading authority on the laws regulating private foundations?demystifies this topic for you and your board members with practical legal information in easy-to-understand English.

Table of Contents

Preface

About the Author

Private Foundations and Public Charities

Private Foundation Defined

Private Operating Foundations

Exempt Operating Foundations

Conduit Foundations

Nonexempt Charitable Trusts

Concept of Public Charity

Institutions

Donative Publicly Supported Organizations

Service Provider Publicly Supported Organizations

Comparative Analysis of Publicly Supported Charities

Supporting Organizations

Public Safety Testing Organizations

Import of Public-Private Dichotomy

Some Statistics

Summary

Disqualified Persons

Basic Concepts

Foundation Managers

Substantial Contributors

20%-Plus Owners

Members of Family

Corporations

Partnerships

Trusts and Estates

Private Foundations

Government Officials

Termination of Disqualified Person Status

Private Benefit and Self-Dealing

Summary

Tax Law Rules In General

Form of Organization

Organizational Test In General

Organizational Test for Foundations

Operational Test

Primary Purpose Test

Charitable Purposes and Activities

Recognition of Tax Exemption

Private Inurement Doctrine

Intermediate Sanctions

Legislative Activities

Political Campaign Activities

Prohibited Tax Shelter Transactions

Personal Benefit Contracts

Tax on Investment Income

Termination of Foundation Status

Summary

Mandatory Payout Rules

Some History

Payout Rules In General

Determining Payout Percentage Amount

Types of Assets Used in Calculation

Future Interests or Expectancies

Exempt Function Assets

Dual-Use Property

Assets Held for Future Use

Acquisition Indebtedness

Determining Fair Market Value

Distributable Amount

Qualifying Distributions

Set-Asides In General

Set-Aside Type I: Suitability Test

Set-Aside Type II: Cash Distribution Test

Distributions to Foreign Recipients

Distributions to Certain Supporting Organizations

Imposition of Excise Tax Penalties

Correction

Tax Abatement

Third-Tier Tax Regime

Summary

Prohibited Expenditures Rules

Overview of Rules

Legislative Activities

Political Campaign Activities

Grants to Individuals

Grants to Public Charities

Grants to Foreign Organizations

Expenditure Responsibility

Expenditures for Noncharitable Purposes

Distributions to Certain Supporting Organizations

Imposition of Excise Tax Penalties

Correction

Tax Abatement

Third-Tier Tax Regime

Summary

Self-Dealing Rules

Basic Definition of Self-Dealing

Sales or Exchanges of Property

Leasing of Property

Furnishing of Property

Co-owned Property

Loans and Other Extensions of Credit

Payment of Compensation

Advances and Expense Reimbursements

Bank Fees

Indemnification and Insurance

Uses of Income or Assets

Sharing Space, People, Expenses

Office Space, Equipment, and Personnel

Payments to Government Officials

Indirect Self-Dealing

Property Held by Fiduciaries

Early Termination of Charitable Remainder Trusts

Exceptions to Rules

Imposition of Excise Tax Penalties

Correction

Tax Abatement

Third-Tier Tax Regime

Summary

Investment Rules

Purpose of Rules

General Rules

Defining Jeopardy

Donated Assets

Prudent Investment Standards

Program-Related Investments

Imposition of Excise Tax Penalties

Correction

Tax Abatement

Third-Tier Tax Regime

Summary

Business Holdings Rules

General Rules

Business Enterprises

Passive Income Businesses

Investment Partnerships

Percentage Limitations

Permitted and Excess Holdings

Functionally Related Businesses

Imposition of Excise Tax Penalties

Correction

Tax Abatement

Third-Tier Tax Regime

Unrelated Business Law Statutory Framework

Affected Tax-Exempt Organizations

Conduct of Business

Regularly Carried On Businesses

Related or Unrelated?

Unrelated Business Taxable Income

Excepted Activities

Excepted Income

Exceptions to Exceptions

Foundations and Unrelated Business Rules

Summary

Charitable Giving

Basic Concepts

Defining Charitable Gift

Qualified Donees

Gifts of Property

Limitations on Deductibility

Deduction Reduction Rules

Qualified Appreciated Stock

Twice-Basis Deductions

Partial-Interest Gifts

Gifts of or Using Insurance

Planned Giving

Summary

Reporting and Disclosure Requirements

Federal Tax Law Reporting Basics

Form 990-PF

Form 990-T

Form 990

Form 990-N

State Law Requirements

Federal Tax Law Disclosure Requirements

Filing Requirements and Tax-Exempt Status

Electronic Filing

Summary

Alternatives to Private Foundations

Factors to Consider

Private Foundations

Public Charities in General

Supporting Organizations

Creative Uses of Supporting Organizations

IRS Shell Game

Donor-Advised Funds In General

Gifts Revisited

Donor-Advised FundsÆ Statutory Criteria

More about Donor-Advised Funds

Quick Comparative Analysis

Summary

Governance Principles and Trustee Liability

Basics of Governance Principles

Emerging Concepts

Nonprofit Governance Principles

IRS Draft of Good Governance Principles

Redesigned Annual Information Return

Subsequent IRS Guidance

Board Member Responsibilities

Lawsuits Against Nonprofit Organizations

Individuals as Defendants

Protection Against Personal Liability

Management Companies

Watchdog Agencies

Summary

Index

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