Rules, regulations, and legal documents

Should Family Members Write Two Checks for an Event, One for the Charitable Portion, and One for the Non-Deductible Portion?

Posted on December 11, 2014 by Andrew Schulz

Well, this one’s easy, but not for the reason that you think. You should stop that process all together. The IRS has ruled that you can’t split payments that way. If there’s a deductible portion and non-deductible, this process, known as “bifurcation” is not permissible. The IRS has said you can’t write the charitable portion out of the foundation and… Read More

What Happens if You Under-Estimate Excise Taxes?

Posted on December 11, 2014 by Andrew Schulz

In addition to paying the tax on investment income, which is either 2 percent or 1 percent, foundations have to pay quarterly estimated tax payments. Typically, they anticipate what those payments are. If you’ve underpaid it, you need to rectify it, and how you do so really depends on how much you’ve underpaid by. If you’re grossly and intentionally underpaying… Read More

Can a Family Member Personally Contribute to a Foundation Pledge?

Posted on December 11, 2014 by Andrew Schulz

Absolutely. There are no rules about what family members can do to support the foundation’s work. So, if the foundation has pledged $10 million to Duke University to build a new basketball stadium, and that is clearly a binding pledge on the foundation, a family member may call up the school and says, “I was going to do this out… Read More

May donors accept free tickets received due to a foundation grant?

Posted on December 11, 2014 by Andrew Schulz

This is really on the line between personal benefit and legitimate foundation business. If there isn’t a justification for the foundation to make the grant, you really shouldn’t use it for this purpose. For instance, if you are an education organization and this is the only grant you make to an arts organization, you should consider if it furthers your… Read More

Are Nieces and Nephews Considered Disqualified Persons?

Posted on December 11, 2014 by Andrew Schulz

Are nieces and nephews of board members, foundation founders, considered disqualified or are just the direct blood descendants disqualified? Nieces and nephews of board members are not considered to be disqualified persons; however, in the family foundation context, you also have to go back to who the substantial contributors were. For instance, your niece may be a direct bloodline of… Read More

If a Family Member is an Employee of a Non- Profit Funded by the Foundation, Does it Matter How Long the Person Has Worked There?

Posted on December 11, 2014 by Andrew Schulz

If a family member is an employee of a non-profit funded by the foundation, does it make any difference how long the person has worked there? No, it really doesn’t. The only issue is if it appears on its face that the only reason you’re writing the grant is so your son will get hired by the non-profit. That would have… Read More

Can a Foundation Fund a Non-Profit Where a Family Member is Employed?

Posted on December 11, 2014 by Andrew Schulz

Yes, as long as the grant isn’t earmarked for their compensation. However, consider an example where the total operating budget of the non-profit is $250,000, of which $100,000 is their compensation, and you provide a $200,000 grant. You’re really getting into an indirect self- dealing possibility where, as a matter of fact, you are paying their salary and it’s unavoidable… Read More

What Kinds of Financial Expenses Do Not Count Toward the 5% Payout?

Posted on December 11, 2014 by Andrew Schulz

With the exception of expenses for the management and product of income, all charitable expenses – including the cost of preparing the foundation’s 990-PF – count towards the payout. So, whether it’s rent, utilities, travel-related expenses, grants, contracts with consultants, or other such expenses – everything that you spend, other than investment management expenses, count towards the payout. The exception to… Read More

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