The Tax Law of Private Foundations

2021 Cumulative Supplement

Bruce R. Hopkins, Jody Blazek

• Publisher: Wiley
• Year: 2021
• Print ISBN:
  9781119804338
• Edition: 5
• eBook ISBN:
  9781119805533
• Topic: Business
• Subtopic: Nonprofit Organizations & Charities
• Index: Business

The Tax Law of Private Foundations, 2021 Cumulative Supplement, 5th Edition

Make sense of the new regulatory requirements with expert clarification and practical tools for compliance

Private Foundations: Tax Law and Compliance, 5^th Edition provides clarification, expert insight, and helpful instruction for executives and supporting professionals navigating extensive federal tax law requirements. Despite their relatively low numbers, private foundations are subject to complex, burdensome regulations that continue to expand; the recent tax overhaul has compounded this issue, bringing massive changes beyond the usual annual adjustments, and throwing a wrench into the status quo of compliance-as-usual. This book summarizes and clarifies the statutory regulations governing private foundations, offers expert insight into the underlying logic, and provides a host of practical tools that ease the filing process and help ensure compliance with the latest laws.

Detailed explanations are bolstered by checklists, sample documents and letters, practice forms, and real-world examples in order to provide both conceptual and practical guidance for maintaining tax-exempt eligibility and tax compliance. By untangling the complex maze of constantly-evolving requirements, this book offers a much-needed resource to those tasked with ensuring compliance amidst regulatory changes year after year.

• Learn how the recent changes to tax laws affect private foundations and related organizations
• Understand the practical implications of maintaining compliance
• Access critical tools that help streamline the filing process
• Avoid mistakes and oversights with line-by-line instruction

This book is updated annually to provide guidance based on the most recent iteration of the law, but this year's edition is unusually critical; federal law has undergone sweeping changes that will substantially alter filings across the board, and the complex nature of the regulations governing private foundations promises additional confusion as the new laws are applied. Private Foundations: Tax Law and Compliance, 5^th Edition provides insight, clarification, and explanation from the nation's leading authority on tax-exempt organizations to help private foundations maintain compliance amidst the changes.

CHAPTER ONE
Introduction to Private Foundations

1. § 1.1 Private Foundations: Unique Organizations
2. § 1.2 Definition of Private Foundation
3. § 1.4 Private Foundation Law Primer
4. § 1.5 Foundations in Overall Exempt Organizations Context
5. § 1.6 Definition of Charity
6. § 1.7 Operating for Charitable Purposes
7. § 1.9 Private Foundation Sanctions
   1. (a) Sanctions (a Reprise)
   2. (b) Self-Dealing Sanctions as Pigouvian Taxes
   3. (c) Self-Dealing Sanctions: Taxes or Penalties?
   4. (d) Abatement
   5. (e) Potential of Overlapping Taxes
8. § 1.10 Statistical Profile
9. § 1.11 Private Foundations and Law 50 Years Later

§ 1.1 PRIVATE FOUNDATIONS: UNIQUE ORGANIZATIONS

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over 1.5 million¹

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§ 1.2 DEFINITION OF PRIVATE FOUNDATION

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; IRS Revenue Procedure (Rev. Proc.) 2021-5, 2021-1 I.R.B. 250, § 7.03

§ 1.4 PRIVATE FOUNDATION LAW PRIMER

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^22.1IRC Chapter 42 (IRC §§ 4940–4948).

§ 1.5 FOUNDATIONS IN OVERALL EXEMPT ORGANIZATIONS CONTEXT

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§ 1.6 DEFINITION OF CHARITY

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§ 1.7 OPERATING FOR CHARITABLE PURPOSES

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^88.1Reg. § 1.501(c)(3)-1(c)(1).

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A private foundation had its tax-exempt status revoked for failing to engage in any exempt activities over a long period of time (Community Education Foundation v. Commissioner, 112 T.C.M. 637 (2016), appeal dismissed due to lack of representation by legal counsel).

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In general, Tax-Exempt Organizations § 4.4.

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§ 1.9 PRIVATE FOUNDATION SANCTIONS

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PRIVATE FOUNDATION LAW SANCTIONS

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The federal tax rules pertaining to private foundations¹³⁶ are often characterized in summaries as if they are typical laws, in the sense of prescriptions governing human behavior. This is not the case; these rules, comprising portions of the Internal Revenue Code, are tax provisions. Thus, this body of law states that, if a certain course of conduct is engaged in (or, perhaps, not engaged in), imposition of one or more excise taxes will be the (or a) result. For example, there is no rule of federal tax law that states that a private foundation may not engage in an act of self-dealing;¹³⁷ rather, the law is that an act of self-dealing will trigger one or more excise taxes and other sanctions.¹³⁸

(a) Sanctions (a Reprise)

Because of the nature of this statutory tax law structure, a person subject to an excise tax does not merely pay it and continue with the transaction and its consequences, as is the case with nearly all federal tax regimes. This structure weaves a series of spiraling taxes from which the private foundation, and/or disqualified person(s) with respect to it, can emerge only by paying one or more taxes and correcting (undoing) the transaction involved by paying or distributing assets or having the foundation's income and assets confiscated by the IRS.

The private foundation rules collectively stand as sanctions created by Congress for the purpose of curbing what was perceived as a range of abuses being perpetrated through the use of private foundations by those who control or manipulate them. These provisions comprise C...

Table of contents

• Cover
• Table of Contents
• Title Page
• Copyright
• Preface
• Book Citations
• CHAPTER ONE: Introduction to Private Foundations
• CHAPTER TWO: Starting, Funding, and Governing a Private Foundation
• CHAPTER THREE: Types of Private Foundations
• CHAPTER FOUR: Disqualified Persons
• CHAPTER FIVE: Self-Dealing
• CHAPTER SIX: Mandatory Distributions
• CHAPTER SEVEN: Excess Business Holdings
• CHAPTER EIGHT: Jeopardizing Investments
• CHAPTER NINE: Taxable Expenditures
• CHAPTER TEN: Tax on Investment Income
• CHAPTER ELEVEN: Unrelated Business Activity
• CHAPTER TWELVE: Tax Compliance and Administrative Issues
• CHAPTER THIRTEEN: Termination of Foundation Status
• CHAPTER FOURTEEN: Charitable Giving Rules
• CHAPTER FIFTEEN: Private Foundations and Public Charities
• CHAPTER SIXTEEN: Donor-Advised Funds
• CHAPTER SEVENTEEN: Corporate Foundations
• Table of Cases
• Table of IRS Revenue Rulings and Revenue Procedures
• Table of IRS Private Determinations Cited in Text
• Table of IRS Private Letter Rulings, Technical Advice Memoranda, and General Counsel Memoranda
• About the Author
• About the Online Resources
• Cumulative Index
• End User License Agreement