Foundations may undergo three types of audits: independent audits (those elected by your foundation); Internal Revenue Service (IRS) audits; and state-level audits. An independent audit happens when a foundation hires an outside auditor to assess its finances and show that it has internal controls and built-in checks and balances. Independent audits ensure that your foundation’s... Read More
Private foundations must follow more stringent rules than public charities, pay an excise tax on net investment income, and pay out an amount equal to 5% of their assets annually. Public charities that are tipped into private foundation status also may lose funding. Many foundations will not give grants to other private foundations, and individual... Read More
Consider offsetting capital losses with capital gains. Over the past decade, the largest taxable component of investment income for most foundations has been realized capital gains. Foundation management should review their portfolio to ascertain if they can take losses to offset any realized gains. Foundations should be aware that any excess capital losses over capital... Read More
Understanding the Excise Tax Although private foundations are exempt from the federal income tax, each private foundation must pay an annual excise tax on its net investment income. Congress imposed this tax in 1969, arguing that the income was necessary to pay for the costs of auditing and monitoring private foundations. Historically, the tax was... Read More
It’s December and your foundation wants to fulfill its payout requirement within the calendar year. What can you do? Ask your local community foundation, association of grantmakers, or giving circles for information about community needs and nonprofits they support. Consult with members of the faith community. Ask your government social services agencies, United Way, or... Read More
Private foundations, or PFs, occasionally consider making investments in vehicles in which one or more of their disqualified persons, or DPs (e.g., officers, directors, substantial contributors) also have invested or also are considering an investment. This article focuses on issues raised for investments in vehicles that are owned and managed by persons unrelated to the... Read More