Top Ten Year-End Foundation Tax Tips

Avoid the federal excise tax by donating publicly traded appreciated stock to a grantee, an underused yet effective tax-planning vehicle.For example, if a foundation maintains 1,000 shares of Company X with a market value of $200 a share ($200,000), but a cost value of $50 a share ($50,000), the foundation would have to pay an... Read More

Tipping the Scales With a Large Grant

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

Three Types of Audits

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

Taxable Expenditures

Taxable expenditures are grants or expenditures made by a private foundation that are either prohibited, or in Internal Revenue Service (IRS)-specified areas without following the strict IRS rules. The following list provides brief descriptions of those expenditures that are completely prohibited; the list after that provides additional requirements to avoid being taxable expenditures. The following... Read More

Tax Filing Methods

A foundation must deposit all depository taxes (e.g., employment tax, excise tax, and unrelated business income tax) electronically using the Electronic Funds Transfer. Generally, such transfers are made using the Electronic Federal Tax Payment System (EFTPS). If the foundation has not yet used EFTPS, enrollment will be required. After the foundation’s information is validated with... Read More

Supporting Organizations

Supporting organizations are 501(c)(3) public charities with a subclassification of 509(a)(3), whose legal structure is formed with a certain relationship with one or more other public charities, the “supported” organization(s). Supporting organizations might be university or hospital foundations; foundations created to support libraries, elementary schools, or other governmental units; or trusts created by individuals to... Read More