Tax Planning and Compliance for Tax-Exempt Organizations, 6th Edition

CHAPTER 19Maintaining Exempt Status

• § 19.1 Checklists

§ 19.1 Checklists

p. 621. Add new exhibits to exhibit list.

EXHIBIT 19.13

Private Foundation Compliance Rules

Description of Federal Tax Rules Applicable to Private Foundations
A private foundation (PF) is given special treatment by the federal income tax code because it is funded by a single donor (or a particular family or small number of persons). The U.S. Congress, in 1969, added provisions to the tax code to prevent the operation of a private foundation for the benefit of its creators and insiders. The rules, in a negative fashion, call those that fund and control the foundation disqualified persons. The disqualified persons and the foundation can be subject to excise tax rules if the rules contained in Chapter 42 of the Internal Revenue Code are violated. The rules are sometimes identified by the code section numbers, 4940 to 4946. This memo briefly describes those code sections and is not intended to fully inform one about the rules, but only to provide enough information to enable one to know when to ask a question.
Self-Dealing—§ 4941
In 1969, Congress felt private foundations were being used as extra pocketbooks for funds not necessarily available to a foundation's related parties from other sources and set out to completely eliminate self-interested financial activity between a privately funded charity and its insiders. A foundation is constrained from having financial transactions with persons ...