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Private foundations are some of the most highly regulated members of the philanthropic community. The rationale for increased scrutiny of private foundations is that they typically derive their support from a single company, family, or individual. In contrast, public charities derive significant support from fundraising or revenues from mission based activities. In this regard, private foundations are not subject to the same degree of public scrutiny as public charities that depend on outside support for their survival. In the absence of intense public scrutiny, Congress feared founders of private foundations might divert or use foundation assets for their own benefit. Accordingly, Congress has subjected private foundations to a series of strict penalty excise taxes imposed at rates up to 200 percent.
These penalty taxes are assessed on acts of “self-dealing,” on the failure to meet minimum payout requirements with respect to distributions to public charities, on retaining “excess holdings” in a business, on investing in ways that Congress feels may jeopardize the charitable interest, on making grants or providing scholarships to individuals, on engaging in prohibited legislative activity, etc. In addition, private foundations must pay a 1-2% tax on investment income as an “audit tax.”
As highly regulated entities, private foundations must manage greater legal complexity and higher risks than their public charity counterparts while simultaneously seeking to maximize their impact. Our goal is to educate our foundation clients so that they can spend their time confidently pursuing their mission rather than worrying about their compliance obligations. Our services include and advice and counsel with respect to the following:
Carter Law Group has experience representing private foundations focusing in the areas of education, religion, healthcare, bioscience, arts, conservation and economic development. Our experience includes working with family foundations as well as independent and corporate foundations.