Webinar: 2021 Private Foundation Basics

Certified Pubic Accounting Firm Clark Nuber will be hosting a webinar on 2021 Private Foundation Basics on Tuesday, July 27, from 9 a.m. to 1 p.m. PDT. You can register on Eventbrite (cost: $100; CPE: 4 technical credits).

This seminar is a great opportunity to learn about the fundamentals of private foundations, answer the common questions, and understand what makes them different from other types of charitable entities. The course is designed to provide you with planning opportunities to ensure your private foundation successfully operates within the regulatory boundaries.

The webinar is divided into 4 section:

Primer: Historical background, legal basics, and accounting considerations for private foundations.

Compliance Review: Walk-through of the Form 990-PF and highlight of key sections to review.

High-Level Oversight: Keeping your private foundation safe from the pitfalls of self-dealing, excess business holdings, and taxable expenditures.

Private Foundation Grantmaking Strategies: Strategies for private foundations to reach those with the greatest need, including use of program related investments, grants to individuals, and foreign grantmaking.

Selected Highlights:

Private Foundations (PFs) in General

  • Required to file Form 990-PF annually
  • No “EZ” or “N” option
  • Return is due the 15th day of the 5th month after year end Schedule B is open for public disclosure
  • Pay excise tax on net investment income
  • Annual distribution requirement

Current legislation – Accelerating Charitable Efforts (ACE) Act – PF provisions

  • Compensation to founders and family members would not be qualifying distributions
  • Gifts to donor advised funds would not be qualifying distributions
  • 1.39% net investment excise tax is eliminated if payout is greater than 7%
  • Would create a new category of private foundations – limited duration foundations (<25 years)

Private Foundation Oversight

  • Know the charitable purpose/programs and type of private foundation
  • Know the main provisions of the private foundation tax rules
  • Know who are the disqualified persons or who maintains the listing
  • Know the charitable purpose/programs and type of private foundation

Common Self-Dealing Occurrences (note that (1) there is no such thing as a de minimis act of self-dealing; and (2) a loan of money to a disqualified person to correct a self-dealing transaction would itself be a second act of self-dealing)

  • Personal use of foundation credit card (e.g., Uber/Lyft, hotel services and incidentals on a business trip)
  • Sales or leases to foundation for below market rates
  • Zero interest loans to foundation for investment purposes
  • Hiring of family members of disqualified persons
  • Bifurcating the purchase of gala tickets (foundation pays the charitable portion; disqualified person pays the quid pro quo portion for unaffiliated executives to attend the event)

Best Practices – Grantmaking

  • Maintain grant files for each grantee
  • Verify payment is not to a disqualified person, especially for scholarships to individuals
  • Consider the type of payment to use when making grants
  • For foreign grants: (i) Check OFAC list prior to making grant, (ii) Consider expenditure responsibility or equivalency determination, (iii) Consider which currency to use and foreign currency fluctuations
  • Review grantee’s budget for lobbying expenses (McIntosh rule)
  • Review the grantee’s Form 990 to provide insight into their operations and financial health
  • Understand the tipping rules (Rev. Proc. 2018-32)