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This is Not About the Trump Foundation

June 28, 2018

A couple of weeks ago I read about the Trump Foundation being sued by the State of New York Attorney General. This is not about Trump but about proper governance of private charitable foundations since they are currently in the news. Here are some things to consider if you are the trustee of a foundation.

  1. While the Internal Revenue Service supplies the rules of managing a private foundation, they need to be registered with the Attorney General of the state they operate in and are also subject to its rules.
  2. Private foundations are not permitted to engage in lobbying or attempting to influence legislation, political activities, from making political contributions or to do anything that curries political favor. Ceding control or coordination of funds or management is included in this category.
  3. Self-dealing is prohibited, as is providing benefits that further an involved person’s self-interests rather than that of the organization.
  4. No payments can inure to the personal benefit of the officers or anyone on the Foundation’s board.
  5. Payments include non-cash payments such as employees of the foundation performing services on activities unrelated to the foundation’s charitable purpose.
  6. At least 5% of the foundation’s assets must be distributed each year to further charitable activities
  7. Tax returns have to be filed annually and will become publicly available. If you want to access any private foundation or charitable organization tax return you can do so at www.guidestar.org.
  8. If the foundation has unrelated business income it will need to file a tax return reporting the transactions and if there are profits, it will be taxed.
  9. Violations can result in penalties and revocation of the organization’s nonprofit status, and barring those responsible from serving as an officer, director or trustee of another nonprofit.
  10. The foundation should have board meetings at least annually or in accordance with its charter or bylaws.
  11. A charity tax letter acknowledging the contribution must be given to every contributor even if the contributor also heads the foundation and is a trustee.
  12. Foundations can legally dissolve and would distribute any remaining funds to a recognized charity. They cannot dissolve while under investigation.

If you are considering starting a private charitable foundation, here is a link to a blog one of my partners wrote that explains them further: https://privatewealthmatters.com/2014/08/22/the-life-cycle-of-a-private-foundation/

Brian Lovett, CPA, JD, partner, assisted in the preparation of this blog. He can be reached at blovett@withum.com

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