In response to abuses uncovered by the Filer Commission and reported to the Congress,1 a sanction was added to the Internal Revenue Code (IRC) to limit the manner in which a private foundation (PF) can spend its money to accomplish its exempt purpose. Whereas other types of exempt organizations can engage in some amount of nonexempt activity without losing their exempt status, private foundations have no such leeway and are subject to a tax on any violations if any money is spent for noncharitable or other prohibited purposes.
A private foundation (a foundation or PF) must first meet the organizational and operational tests of IRC §501(c)(3)2 requiring that it operate exclusively—meaning its major focus, but not necessarily 100 percent—for charitable purposes. IRC §4945, however, adds the absolute. Thus, a foundation operates under a higher standard than a public charity: It can conduct absolutely no nonexempt activity. Potential foundation creators and managers need not be discouraged by this fact. The rules are somewhat broader than they sound and once understood, and with procedures in place to review compliance, a PF has some latitude in developing its grant and program activity. Efforts directed at improving matters of broad social and economic impact, such as health care or the environment, have needlessly been forgone by some foundations. Educational and scientific efforts involving such subjects are not necessarily legislative efforts, even if the problems are of a type that government would ultimately be expected to deal with.3
Essentially, IRC §4945 prohibits transactions called taxable expenditures. The private foundation and its disqualified persons (DPs) will incur an excise tax, and the PF may possibly lose its tax-exempt status,4 if any amounts are paid or incurred for the following purposes:5
A private foundation is strictly prohibited from carrying out propaganda or otherwise attempting to influence legislation. This is defined to include any attempt to influence any legislation through:9
The definition of impermissible lobbying for a private foundation is cross-referenced to the regulations applicable to those public charities that elect to lobby.10 Those rules provide a clear framework to distinguish a foundation's educational activity involving public issues that may eventually be or are now the subject of legislation from those activities that are actually impermissible lobbying. There was uncertainty for the many years between the passage of the tax code on which the following rules are based (1976) and the issuance of final regulations in 1990 after several versions were proposed and re-proposed.11 Under the regulations, a lobbying communication is one that refers to specific legislation, defined as follows:
A grassroots lobbying communication is an attempt to influence any legislation by affecting the opinion of the general public or any segment thereof.13 Such a communication must encompass all three of the following elements to constitute impermissible lobbying:
To constitute encouragement of the recipient to take action, also referred to as a call to action, the communication must specifically do the following:14
A private foundation and its founder were deemed liable for excise taxes for costs of producing and broadcasting radio messages attempting to influence legislation.15 The founder, both a disqualified person and manager, approved the expenditures. In addition to the initial penalty tax, the expenditures were not recouped to timely correct the violation, so additional excise taxes were due.16 The messages, plus newspaper advertisements, were deemed direct lobbying because they targeted a state ballot initiative, in which voters are considered the legislative body.17
A communication that refers to a ballot measure “by name or, without naming it, employs terms widely used in the measure or describes the content or effect of the measure is lobbying.”18 The foundation's argument that the communications at issue constituted “nonpartisan analysis, study, or research,”19 and thus were not forms of lobbying, was rejected by the court. The court also found that the messages contained information that was not educational. Facts were distorted and conclusions expressed were based more on strong feelings than on objective evaluations. Inflammatory language and disparaging terms were used. Both the PF (20 percent) and the manager (5 percent) were subject to the §4945 excise tax.
A foundation can spend its money to make an appearance before, or communicate to, any legislative body with respect to a possible decision of such body that might affect the existence of the PF, its powers and duties, its tax-exempt status, or the deduction of contributions to it. This type of activity is referred to as self-defense lobbying.
The existence of the organization is not threatened for this purpose merely by a possible loss of economic support that might affect the scope of a foundation's programs.20 Lobbying in favor of an appropriations bill funding a program under which the PF has received support in the past is not self-defense. Similarly, a PF that provides care for the elderly is lobbying when its executive director appears before the state legislature to favor or oppose a bill authorizing the state to provide nursing care for the aged. Likewise, a PF receiving governmental grants to support its research programs is lobbying when it testifies about the advisability of continuing the program (unless it was asked to testify). It is the economic condition and the resulting scope of the PF's operation, not its underlying existence, that is at issue in these examples.
Examples of legislation that could affect the foundation's existence or its powers, and is thereby a permissible subject of lobbying, might include the following:
Sponsoring discussions or conferences, conducting research, and publishing educational materials about matters of broad social and economic subjects, such as human rights or war and peace, are appropriate and permissible activities for a private foundation. These topics are often the subject matter of legislation, involve public controversy, and raise the possibility of the foundation being treated as conducting prohibited legislative activity. However, a foundation is safe in sponsoring such discussions and studying such issues as long as (1) the activity constitutes engaging in nonpartisan analysis, study, or research, and (2) the results of the work are made available to the general public, a segment of the public, or to governmental bodies, officials, or employees.22
The phrase nonpartisan analysis, study, or research means an independent and objective exposition or study of a particular matter. To be nonpartisan, or impartial, the activity must be considered educational.23 The report can advance a particular position or viewpoint if there is a sufficiently full and fair exposition of the pertinent facts to enable an individual or the public to form an independent opinion or conclusion. A communiqué could say that oil tankers should have double hulls to lessen the possibility of oil spills so long as the information forming the basis for the viewpoint is unbiased. Mere opinion, unsupported by pertinent facts, is not nonpartisan. The regulations contain 12 examples that can be studied.24
The making available test is satisfied when the results of the nonpartisan research or study are distributed in articles, reports, conferences, meetings, discussions, press releases, and other public forums. The communications cannot be directed solely toward those who are interested in one side of the issue. Additionally, subsequent use of the research in grassroots lobbying by a grantee or other organization permitted to lobby may result in a taxable expenditure for the foundation that finances the study. The somewhat complicated rules distinguishing research materials from advocacy communications look to the primary purpose for which the study was conducted to determine whether the research was intended to influence legislation.25
A broadcast or publication series must meet the same standards as printed matter. One of the presentations can contain biased information if another part of the series (broadcast within six months of the initial viewing) contains contrary information or the other side of the argument. If the PF selects the time for presentation of information to coincide with a specific legislative proposal, the expenses of preparing and distributing that part of the study may be treated as lobbying and result in a taxable expenditure.26
The foundation's communications, either directly with members of the public or with the legislators themselves, may not:
A PF can make a grant to a public charity that conducts legislative lobbying, regardless of whether the grant recipient has made the §501(h) election. Importantly, the foundation's money cannot be earmarked for lobbying or electioneering. There must be no agreement, oral or written, that the granting PF can direct the manner in which the funds are expended.28 Also, the PF's grant cannot be more than the amount needed to fund the recipient organization's budget for nonlobbying projects. If, after a grant satisfying these rules is paid, the grant recipient loses its exempt status due to excessive lobbying, the money paid is not a taxable expenditure only if:29
A foundation may want to protect itself from any question that its grant pays for lobbying by specifically requiring that its public charity grantees agree not to do so. For grantees significantly involved in public affairs, the prudent foundation can retain, and is entitled to rely on, financial information supplied by a prospective grantee that reflects the portion of the public charity's budget spent on lobbying.30 A foundation can also document its efforts to ensure that its funds are not spent on lobbying with the grant approval checklist (Exhibit 17.2), with a request for signature on the grant payment transmittal letter (Exhibit 17.4). Such precautions are not, however, required.
Due to the reluctance on the part of some private foundations to support public charities that conduct lobbying activity, the organization Charity Lobbying in the Public Interest31 engaged the law firm of Caplan & Drysdale to prepare a letter addressing a series of questions about such grants. Some of the questions are addressed in this subsection with the following exceptions:
The absolute prohibition against the foundation itself conducting lobbying or electioneering does not extend to conduct of its officials acting on their own behalf. Even though such persons are closely identified with the foundation, their personal actions are not constrained by these rules. The guidelines for determining when a minister active in public affairs represents himself or herself rather than the church should be studied by foundation officials.33
To summarize this important constraint, a private foundation and its managers on its behalf can participate in efforts that involve matters of public policy. Such activities do not constitute legislative intervention in the following situations:
All charitable §501(c)(3) organizations, including foundations, are prohibited from participating or intervening in elections of public officials with the intent to influence the outcome. The phrase participation or intervention in a political campaign is defined and explained in Chapter 23. Certain educational efforts in connection with the electoral process may, however, be permitted. What a foundation is specifically forbidden to do is to attempt to influence the outcome of any specific public election, or to carry on, directly or indirectly, any voter registration drive.34 In the South during the early 1960s, certain foundations financed voter drives aimed specifically at registering blacks to vote, in connection with the foundations' effort to eliminate discrimination. Partly as a result, very specific rules govern a PF's participation in such efforts. A foundation is permitted to make a grant to another organization, including another PF, that itself conducts a voter registration drive if the recipient organization meets the following requirements:35
An advance ruling for approval of the foundation's procedures for conducting a voter registration drive can be requested.36
A private foundation may make grants to individuals for purposes that advance the PF's charitable purposes. Differing levels of documentation, however, are required. The highest level is required for grants in support of individual travel, study, or other similar purposes, followed by grants in aid to the poor, sick, homeless, or victims of disasters. Such grants may be made only under the terms of a written plan that has been preapproved by the Internal Revenue Service (IRS) based on submission of Form 8940. The IRS has issued a Guide Sheet for Advance Approval of Individual Grant Procedures (available on the Internet).
A taxable expenditure results if individual grants are not paid pursuant to an approved plan. Individual grants also cannot be earmarked to be used for political, legislative, or other noncharitable activities.37 Grants to individuals in need of shelter and food, no-strings-attached awards for achievement, and certain other types of grants to individuals may not require a preapproved plan.
A grant to an individual for travel or study, or grants for similar purposes, must also be one of the following three types:
Only grants paid to individuals for these three purposes are subject to the prior plan approval rules. By far the most numerous private rulings issued for exempt organizations address individual grants under this provision. The concepts are illustrated in three scenarios.41 In the first, the grant is not subject to IRS approval, but in the second and third, approval is required.
Scenario 1. A PF organized to promote the art of journalism makes awards to persons whose work represents the best examples of investigative reporting on matters concerning the government. Potential recipients are nominated; they do not apply for the award.42 The awards are granted in recognition of past achievement and are not intended to finance any specific activities of the recipients nor to impose any conditions on the manner in which the award is expended by the recipient. Therefore, because the payments are not to finance study, travel, or a similar purpose, the awards project was not subject to prior approval.
Scenario 2. Assume instead that the annual award recipients are required to take a three-month summer tour to study government at educational institutions. These awards are subject to prior approval because the payment is required to be used for study and travel.
Scenario 3. The facts are the same as in Scenario 1, except that the award must be used to pursue study at an educational institution and qualifies as a scholarship. Again, prior approval is required. A similar conclusion was reached in a ruling concerning grants to science fair winners that required them to use the prizes for their education. The program was a scholarship plan requiring approval.43
Other Purposes. The meaning of “grants for other similar purposes” can be elusive. Importantly, a person receiving the grant must be a member of a charitable class.44 The regulations say that student loans and program-related investments do constitute such grants.45 When the payment is given with the expectation or requirement that the recipient perform specific activities not directly of benefit to the foundation, the grant program requires preapproval. Research grants and payments to allow recipients to compose music or to choreograph a ballet are examples of awards for other purposes when the recipient must perform to earn the award.46
A payment to an indigent individual for the purchase of food or clothing is not paid for an “other similar purpose.”47 Grants and interest-free loans made to persons who incur extraordinary medical expenses or funeral or burial costs or who suffer financial hardship due to medical emergencies, natural disasters, or violent crimes are not grants for other purposes and do not require preapproval. Such grants are awards to relieve suffering, not to finance study, travel, or similar purpose. A PF's proposal to make a grant to an organization to fund sabbaticals, combined with increased compensation for the second-in-command, for the chief executives of public charities was approved.48
No-Strings-Attached Awards for Achievement. Preapproval is not required for a program to award grants to individuals in recognition of past achievement with no conditions on how the awards are expended (no strings attached). A grant paid without intention to finance or specify the future activities of the individual, as illustrated in Scenario 1, is not a other purpose grant. Awards paid to winners of a craft school competition on an unconditional and unrestricted basis were also approved.49 Grants in recognition of literary achievement not given to finance future activity, not imposing any future condition on the recipient, and not paid for travel, study, or other purpose do not require preapproval.50
The criteria for choosing recipients of such awards should be designed to achieve and relate to a charitable purpose. Although the objective and nondiscriminatory standard does not technically apply, it's suitable that the award criteria evidence an intention to benefit a reasonably open class of potential awardees. Publicity making the public aware of the awards evidences impartiality. The criteria should evidence no favoritism toward persons related to the foundation creators, managers, or friends. The Nobel Peace Prize or the MacArthur Lifetime Achievement Awards are good examples of prizes that serve to acknowledge persons who work to advance science, education, culture, health, and other charitable pursuits that benefit all. The awards honor past achievements and do not specify how the monetary award is expended. The PF making such awards should keep records to document its criteria for choices, the charitable purposes it intends to achieve, and evidence of lack of any relationship between the recipient and the foundation's disqualified persons.51
A Model Plan. There are plenty of private letter rulings seeking approval for scholarship plans that contain selection criteria based on scholastic performance and leadership potential. Fewer in number are rulings that seek approval for fellowships and other similar purposes. The following criteria were approved by the IRS for a foundation granting prizes and awards to achieve a specific result, produce a report, or improve or enhance literary, artistic, musical, scientific, or other skill or capacity:52
Importantly, the ruling also confirmed the distinctions between grants for future performance and those for past accomplishments. Prizes and awards the foundation proposed to present for past achievement were not subject to preapproval. A complex and detailed plan to award research grants for medical research, enabling basic medical research in the areas of heart disease, cancer, and AIDS, received IRS approval. The ruling contained explicit requirements that might be considered by PFs applying for IRS approval of their individual award procedures.53
Payments for personal services, such as salaries, consultant fees, and reimbursement of travel and other expenses incurred on behalf of the foundation, for work performed on the foundation's own project(s), are not grants requiring a preapproved plan. A foundation can freely hire persons to assist it in planning, evaluating, and developing projects and program activity by consulting, advising, and participating in conferences organized by the foundation.54 Persons hired to develop model curricula and educational materials, for example, are not grant recipients.55
In 1986, Congress reduced the tax-free portion of scholarships, fellowships, and prizes. All payments other than those paid for tuition, books, and fees are taxable to grant recipients. Certain scholarships and, particularly, teaching fellowships are taxable for another reason: the fact that the recipient is expected to render services in return for receiving the grant. Where there is an exchange of services for pay, the grant is made primarily for the benefit of the granting foundation and the approval rules do not apply. Scholarships paid by a foundation formed to aid worthy college students planning to teach in state public schools were found to have strings attached—services to be rendered for the state. As a condition of the grant, recipients had to indicate that they were willing to teach for two years in state public schools after receiving their degrees. The obligation carried no financial guarantee and was merely a moral obligation of the student, but the IRS nonetheless found that such scholarships were not described in IRC §177(a) and, therefore, prior approval was not required.56 Essentially, the grants were paid in exchange for future services.
Programs to make grants-in-aid to individuals who lack the resources to satisfy their basic human needs do not require advance IRS approval. Before 2000, few foundations made such hardship grants. The regulations contain only one example of persons deserving such support: buying furniture for a poor family. No income or asset standards for measuring poor to determine financial need are provided. A foundation must decide at what level of financial resource a family ceases to be poor. There has been no guidance regarding information that should be obtained and maintained to document the worthiness of recipients.
In response to the outpouring of financial support in aid to the victims of the September 11 World Trade Center disaster, the IRS issued Publication 3833, entitled Disaster Relief: Providing Assistance Through Charitable Organizations,57 applicable to both private and public charities. As described later, this useful guidance makes a distinction between victims of a disaster in immediate need and those needing longer-term aid. The publication states that “providing aid to relieve human suffering that may be caused by a natural or civil disaster to relieve an emergency hardship is charity in its most basic form.” The use of existing organizations, such as churches, was encouraged by saying they “are frequently able to administer relief programs more efficiently and can offer assistance over a long period of time.”58 Seemingly in response to skeptics questioning what would happen to the generous support for September 11 relief efforts, the publication reminds readers that the assets of a charitable organization must only be spent on and are permanently dedicated to accomplishing its mission.
A needy and distressed test must be in place for disaster relief and emergency hardship organizations. A set of objective criteria by which distributions to financially or otherwise distressed individuals is described. Adequate records to support the basis upon which assistance is provided must also be maintained. The publication distinguishes between short-term and long-term assistance and notes that the type of information needed to support assistance may vary depending on the circumstances:59
Individuals do not have to be totally destitute to be needy; they may merely lack the resources to obtain basic necessities. Under established rules, charitable funds cannot be distributed to individuals merely because they are victims of a disaster. Therefore, an organization's decision about how its funds will be distributed must be based on an objective evaluation of the victim's needs at the time the grant is made. [The publication added new standards in a section entitled “Employer-Sponsored Assistance Programs” for defining the charitable class of eligible recipients for aid.]60
The publication makes it clear that a private foundation can help victims in a variety of ways, including aid to individuals and businesses. Aid may be provided in the form of funds, services, or goods to ensure that persons have basic necessities such as food, clothing, and shelter. The type of aid that is appropriate depends on the individual's needs and resources. A program to distribute short-term emergency assistance requires far less documentation, in the way of victims establishing that they need relief assistance, than the distribution of long-term aid. In the face of an immediate disaster—providing a drug rescue and telephone crisis center or recovery to a person lost at sea or trapped by a snow storm—would not require a showing of financial need, as the individual requiring these services is distressed irrespective of the individual's financial condition. However, “they may not require long-term assistance if they have adequate financial resources.”61 The IRS bottom line for this test is that persons who are needy and/or distressed are appropriate recipients of charity.62
Adequate standards for providing long-term aid to the needy still do not exist. At what income level a person or family is deserving and the type of hardships a foundation should address are not specified. A foundation can make such grants-in-aid but has a burden of proving that the recipients are chosen to accomplish a charitable purpose in a nondiscriminatory fashion. The criteria for awarding such grants for food, shelter, and medical care should be designed to award funds only to those who are indeed qualified for charitable assistance or persons also referred to as members of a charitable class. To document the charitable nature of the program, a written policy, including an application form, should be used to describe the basis for the decision to grant aid. Facts such as income levels, cause of the hardship, recommendations of a government agency, or referrals from a church are among the factors that might be used to make the choice.
The need to establish criteria to evidence the charitable nature of such programs was also indicated in the IRS's refusal to approve a program to grant funds to ministers to pay outstanding educational loan balances related to studying for their ministry.63 It is important to note that the proposed grant was not one requiring prior IRS approval because the ministers were not required to perform any specific acts. The factors the IRS found lacking included:
IRS has refused to grant tax-exempt status to an organization that provides financial aid to disadvantaged patients who have a medical need for marijuana, because the use of marijuana is illegal.64
Once a foundation chooses to make grants subject to the approval process, it must adopt a suitable plan. The primary criterion for approval of a plan for making individual grants is that the grants must be awarded on an objective and nondiscriminatory basis. A “racially nondiscriminatory policy as to students” is defined as meaning that the school admits students of any race to all the rights, privileges, programs, and activities generally accorded or made available to students at that school and the school does not discriminate on the basis of race in administration of its educational policies, admissions policies, scholarship and loan programs, and athletic and other school-administered programs.65 The plan must contain the following provisions:66
Class of Potential Grantees. The second criterion in the preceding list requires the group from which the grantees are chosen to be sufficiently broad. A group including all students in a city or all valedictorians in a city or state clearly qualifies. The regulations sanction a plan to grant 20 annual scholarships to members of a certain ethnic minority living within a state.70 However, a group of girls and boys with at least one-quarter Finnish blood living in two particular towns was found to be a discriminatory group and not sufficiently broad.71 Likewise, a plan that gave priority to family members and relatives of a disqualified person was found to be discriminatory.72 Although self-dealing does not technically occur if a grant is made to a niece or nephew of the creator,73 awards to such relatives could be considered to give private inurement to the creator. A program to award scholarships at two named colleges to members of a particular 603-person family group (surname specified) was not a broad enough group.74 The IRS found that the fact that the school made no effort to recruit minority children to balance its ethnicity evidenced discrimination.
Scholarships and Fellowships. A report of the grantee's courses and grades earned in each academic period must be collected at least once annually and verified by the educational institution. If scholarship funds are paid directly to the school and the school agrees to monitor the student's ongoing qualification, such reports are not necessary.75 For grantees whose work does not involve classes but only the preparation of research papers or projects, such as a doctoral thesis, the foundation should receive an annual report approved by the faculty members supervising the grantee, or another school official. Upon completion of a grantee's study, a final report must also be obtained.
Investigation of Diversions. Procedures must be established to investigate when no reports are filed or when reports indicate that funds are being diverted. The foundation will not be treated as making a taxable expenditure if the recipient has not previously misused funds and if the PF takes the steps outlined later in this chapter during its investigation. Additional grant funds must be held until delinquent reports are received, and reasonable steps to recover the funds should be taken.76
Research or Study Grants. At least annually, a report of progress and use of funds is due. A final report describing the grantee's accomplishments and funds expended with respect to the grant must also be made.
Record-Keeping. A foundation making individual grants must maintain and keep available for IRS examination documentation that the recipients are chosen in a nondiscriminatory manner and that proper follow-up is accomplished. The regulations do not specify a required time period.
The following records must be kept:
Income Tax Reporting. A foundation's grant to an individual does not necessarily represent taxable income to the grant recipient. In a circumstance in which the recipient award represents payment for services rendered or a business recruitment or employee retention program, the scholarships payments may be taxable either on Form W-2 or Form 1099.78
The regulations and countless rulings have approved scholarship plans established by a company's foundation for children of the company's employees.79 One issue with such plans is whether they discriminate in favor of the corporate executives or shareholders and thus represent a means of paying additional compensation. Specific guidelines exist and should be carefully studied prior to application for approval of such a plan.80 Similar rules apply to a company foundation's educational loan program.81 The nine primary criteria are as follows:
Essentially, the facts and circumstances should not indicate that the awards represent an additional source of compensation to a significant number of employees and their children who routinely receive the scholarships. Additionally, the plan must be made known, or publicized, to all eligible employees. The IRS did permit a company foundation plan to be amended to include educational grants to employees and children of employees who are victims of a qualified disaster.84
Due to the self-dealing rules, no grants can be paid to children of disqualified persons. The plan must avoid a disproportionate amount of grants to executives' children. Application for approval is the same as for other scholarship plans, although satisfaction of the nine tests just listed must be outlined.
An application for approval of a scholarship plan is submitted on Form 8940. The approval procedure does not contemplate specific approval of particular grant programs but rather approval of a system of standards, procedures, and follow-up designed to result in grants which meet the requirements. Thus, such approval applies to a subsequent grant program if the procedure under which it is conducted do not differ materially from those described in the request to the Commissioner.85 The PF submits its proposed procedures for awarding grants as illustrated in Exhibit 17.1, including the methods of meeting the selection process requirements.86
If within 45 days after submission of the plan, no notification is received that the procedures are unacceptable, the PF can consider the plan approved; silence signifies approval. Written IRS approval is customarily sent to successful applicants, but usually well beyond 45 days. In one instance, scholarship payments made prior to the date on which the PF sought IRS approval were taxable expenditures, not only because of the lack of approval but also because the company had insufficient data to prove that the plan was objective and nondiscriminatory.87 In contrast, payments made after the 45 days have passed and prior to receipt of written approval are not deemed a taxable expenditures. Even if the IRS denies approval or suggests modifications to the plan submitted, the foundation is protected before notice of disapproval by the assumed approval date.88 Newly created foundations can seek approval for a plan in connection with filing Form 1023 by submitting proper and fully disclosed responses on Schedule H. The instructions do not, however, contain the 45-day rule.
“Approval of an organization's exemption application does not in itself constitute approval of the organization's grant-making procedures unless the exemption letter so provides. If the organization has fully disclosed its scholarship grant-making procedures in its application, however, it may nevertheless NOT be subject to the section 4945 excise taxes on taxable expenditures by operation of the 45-day rule. If you believe that the omission of such language from your organization's determination letter was an error on our part, please see Internal Revenue Manual 21.3.8.12.19 for information on how to request a corrected/superseding letter.”89
As a foundation administers a scholarship plan over time, it may wish to change or expand the program. The issue becomes whether the revision is a “material” change in the originally approved system of standards, procedures, and follow-up procedures that requires submission of a request for approval from the IRS. For example, is a change allowing a student five, instead of four, years to complete an undergraduate degree a material change? What if the foundation wishes to award funds for graduate study to its successful undergraduates? What if it wishes to expand the permitted course of study from art history to liberal arts? It is likely that such expansion of benefits to recipients chosen under the approved plan would not be considered material. However, there is no IRS guidance on the issue. The intent of this provision in the tax code focuses on objectivity and lack of discrimination in choosing recipients and an intention to serve an educational or charitable purpose with individual grants. In view of that criterion, the three examples posited here would likely not be material.
EXHIBIT 17.1 Request for IRS Approval of Individual Grant Program
Internal Revenue Service Center Exempt Organization Group P.O. Box 192 Covington, KY 91012-0192 |
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RE: Sample Foundation EIN #44-4444444 Request for Approval of Scholarships |
Dear IRS:
From 1982 to 2002, the Sample Foundation operated a medical research facility and was classified as a public charity pursuant to Internal Revenue Code (IRC) §509(a)(1). During that time a scholarship fund was established in the memory of Dr. XYZ, one of the founders of Sample. For the past 20 years, scholarship grants have been paid annually. As of MMMM, 20XX, Sample discontinued the research facility and was reclassified as a private foundation. Your approval for the scholarship program is hereby sought.
The XYZ Scholarship will further Sample's educational purposes by enabling deserving men and women to complete a medical-related education in the graduate schools of their choice, so that they will be able to serve honorably and effectively in their chosen medical field.
The scholarship will be a “grant” within the meaning of IRC §4945(d)(3) and will satisfy the requirements of IRC §4945(g) in all respects.
The grant will be awarded on an objective and nondiscriminatory basis. The grant will be excluded from gross income under IRC §117(a), to the extent that it is used for tuition, books, and equipment required for educational courses. The purpose of the grant is to promote medical-related education for graduate degree candidates, and the recipient of the grant will be selected from the population of medical school graduate students.
As provided in Life Cycle of a Private Foundation, Advance Approval of Grant-Making Procedures, the grant-making procedures will be as follows:
Grantee class. Any graduate college student seeking a degree in medical-related education may be considered for the scholarship.
Selection criteria. The selection criteria for the scholarship will include, but not be limited to, the student's demonstrated academic ability and desire, character, good citizenship, and economic necessity. A recipient cannot be related to a member of the committee or to any “disqualified persons” in relation to Sample.
Selection committee. The selection committee will be composed of members of the board of directors of Sample. Members of the selection committee will not be in a position to receive private benefit, directly or indirectly, if certain potential grantees are selected over others.
Progress reports. The scholarships will be about $5,000 per semester and can be renewed annually for a maximum of three years, provided that the student is not on academic or disciplinary probation and is making satisfactory progress toward completion of a medical-related degree. A student need not have an “A” average, but should be of a caliber to indicate an ability to profit from and be intellectually equal to work on a graduate level. Progress reports will be obtained and verified with the educational institution each semester. Upon completion of the grantee's study, a final report will be collected from the grantee.
Report follow-up. If no report is filed by the student, or if reports indicate that the funds are not being used in furtherance of the scholarship purpose, a member of the board of directors will investigate the grant. While conducting this investigation, Sample will withhold further payments from the grantee and will take reasonable steps to recover grant funds until it has determined that the funds are being used for their intended exempt purpose.
Record keeping. The foundation will retain all records submitted by the grantees and their educational institutions for four years beyond disbursement of the last payment. Sample will obtain and maintain in its file evidence that no recipient is related to the foundation or to any members of the selection committee.
Sample trusts that the above criteria and purpose for its educational scholarship satisfy the requirements of IRC §4945 and respectfully requests your approval of its procedures.
Under penalties of perjury, I declare that I have examined this request, including accompanying documents, and to the best of my knowledge and belief, the facts presented in support of the request are true, correct, and complete.
Date Sample Officer
A foundation wishing to avoid the administrative burden and cost of applying for approval and disbursing scholarships directly can alternatively fund a grant program at an independent public charity. The foundation may be involved in the process. As long as the foundation has no control over the choice of recipients, it is not considered to have made the grants directly to the individuals.90 There must be no agreement, oral or written, that the PF can dictate the selection of particular individuals. No earmarking is permitted, only suggestions.
The parameters of the grant, such as the study discipline—medicine or law, for example—or qualifications, such as grades or civic achievement, can be stipulated by the foundation, though the class of grantees should be relatively broad. Grants to fund scholarships for children of employees may be considered grants by the company foundation itself, not by the college administering the plan.91 Actually suggesting an individual grantee is permitted, as long as there is an objective manifestation of the public charity's control over the selection process. Maintaining the right to veto a potential recipient is de facto control.92 Likewise, a research grant disbursed by a college was found to be a direct grant when the funding was contingent on supervision by the professor designated by the PF with reserved rights to patents, inventions, and publications arising from the research, and the PF retained authority to approve the professor's project and any of his scientific work.93 The regulations contain useful examples for further study.94
Most private foundations make grants to public charities or those grant recipients specifically excluded from the taxable expenditure list by IRC §4945(d)(4)(A), primarily including §§509(a)(1) and (2).95 This is true partly because so much charitable work is performed by those organizations and private foundations have traditionally used their endowments to fund such institutions. The tax law favors private foundation grants to public charities by making their administration simple and by permitting support of a public charity that conducts lobbying and individual grant programs.
A foundation is, however, permitted to make a grant to any type of entity, exempt or nonexempt, if it properly documents its purposes in making the grant and ensures the transaction with expenditure responsibility agreements.96 The purpose of these rules is to ensure that PF funds are used to benefit the public, not the private interests of their creators. Public charities commonly serve a broad constituency that monitors their responsiveness to public needs and use of their funds for charitable purposes.
The responsibility to ensure that a private foundation's funds are expended for charitable purposes still applies when the foundation makes a grant to a public charity. Completion of the checklist in Exhibit 17.2 is the first step. If the proposed grantee is a supporting organization,97 the grantee is a public charity, but the grant cannot be counted for payout purposes. The certificate in Exhibit 17.3 should be completed. Lastly, a grant agreement with the grantee (Exhibit 17.4) should require that the funds be spent for charitable purposes and request a follow-up report (Exhibit 17.5). Many foundations now publish their grant applications on a website to describe these requirements.
EXHIBIT 17.3 Certificate of Supporting Organization Type
This certification should be obtained by a private foundation to document a supporting organization's status as a Type I, II, or III. | |
NAMF OF SUPPORTING ORGANIZATION | |
ADDRESS | |
CITY, STATE, ZIP | DATE |
Dear Director, Executive Officer, or Financial Officer:
The Pension Protection Act of 2006 (PPA), signed into law on August 17, 2006, contains several provisions that impact charitable organizations. One of the provisions concerns grants made by private foundations to supporting organizations. We have identified your organization as one that is classified as a supporting organization under Internal Revenue Code § 509(a)(3).
All § 501(c)(3) charities are classified as either public charities or private foundations. Some types of charities, such as churches, schools, and hospitals, are classified as public charities because of the nature of their activities. Others qualify as public charities because they meet a “public support test” that indicates they receive support from a broad base or contributors.
A supporting organization qualifies as a public charity because it has a close relationship with another § 501(c)(3) public charity. A supporting organization provides meaningful support—financial, programmatic, or both—and gives some degree of structural and operational control to the public charity it supports.
In general, supporting organizations (SOs) fall into one of three categories, depending on the nature of the relationship between them and the charity being supported.
Previously, private foundations could treat a grant to any types of SO as a qualifying distribution just as they would any other public charity grant. Under the PPA, Type III SOs are essentially treated as private foundations. Grants to certain Type III SOs do not count toward a foundation's mandatory payout requirements. A deficiency in the 5% payout results in a 30% (of the deficiency) a year penalty until grants are paid to eliminate the underdistribution. Plus, expenditure responsibility (ER) procedures, including a written agreement, must be entered into before the grant is paid. Failure to follow ER procedures results in a taxable expenditure for which the penalty is 20% of the grant each year until the ER is in place.
The impediment on foundation grants to Type III SOs does not apply if the SO qualifies as a “functionally integrated” Type III SO.
As noted above, the IRS determination letter and the IRS Business Master File that identifies your organization as a supporting organization does not indicate whether it qualifies as a Type I, II, or III SO. Determining which type of SO your organization is requires a review of the governing documents in view of the specific requirements outlined above.
It may be clear that your organization is a Type I SO. As an example of a Type I supporting organization, the Houston Parks Board is a supporting organization to the City of Houston (the public Charity in this example). The Mayor appoints, with City Council approval, all of the members of the board of directors of the Houston Parks Board.
If your governance structure does not provide that a majority of the members of the board of your SO are appointed or elected by the supported organization, you may want to confer with legal counsel or a tax advisor to determine which type of SO your organization is. If the legal counsel or tax advisor who originally helped obtain your exempt status with the IRS is available, that would be a good place to start. If not, you may want to engage legal counsel or a tax advisor with expertise in the law of tax-exempt organizations to advise you.
It your organization is a Type III SO, additional documentation will be required to determine whether it is a “functionally integrated” Type III SO.
The enclosed form will allow us to comply with IRS Notice 2006-109, Interim Guidance Regarding Supporting Organizations and Donor Advised Funds. Before we can continue processing your grant application for make payment on your previously approved grant], we must receive the enclosed form and the additional documents indicated. The form must be signed by the president or chief executive officer of your organization.
Sincerely,
Foundation Representative
[NAME OF SUPPORTING ORGANIZATION] hereby represents that it qualities as a public charity because it is a supporting organization as defined by § 509(a)(3).
Name of Supported Organization(s)
_____ Type I—“Operated, supervised, or controlled by” one or more publicly supported organizations: A majority of the governing board is elected or appointed by the supported organization(s).
_____ Type II—“Supervised or controlled in connection with” one or more publicly supported organizations: A majority of the governing board consists of individuals who also serve on the governing hoard of the supported organization(s).
_____ Type III—“Operated in connection with” one or more publicly supported organizations: Not a Type I or Type II.
Attach articles of incorporation, bylaws, or other documents that detail the process. Please highlight the article(s) or section(s) of the material that prescribes the process.
If the organization is a Type I or Type II SO, skip section 4 and go to the signature section below.
If the organization is a Type III SO, complete section 4.
_____ A written representation signed by an officer, director, or trustee of each of the supported organizations with which the grantee represents that it is functionally integrated describing the activities of the grantee and confirming that but for the involvement of the grantee engaging in activities to perform the functions of, or to carry out the purposes of, the supported organization, the supported organization would normally be engaged in those activities itself. Such written representation must meet the requirements outlined in Section 3 of IRS Notice 2006-109.
or
_____ A reasoned written opinion of counsel representing the organization concluding that the grantee is a functionally integrated Type III supporting organization.
NAME OF SUPPORTING ORGANIZATION | ||
By: ________________________________ | ||
Signature | ||
___________________________________ | ||
Printed Name | ||
____________________________ | ||
Title or Corporate Office Held | ||
Date: ____________________________________ |
EXHIBIT 17.4 Grant Payment Transmittal Letter
This letter conveys the grant payment check for repeating grant recipients.
GRANTEE ORGANIZATION
ADDRESS
DEAR GRANT RECIPIENT:
We are happy to enclose our check for $_____in payment of a grant for Tnamel project as described in your request dated [date].
As a private foundation, we must document that our grant is expended for a charitable or educational purpose. We must ask that you use our funds exclusively to carry out the project described in your request. You must not use any of our funds to influence legislation, to influence the outcome of any election, or to carry on any voter registration drive.
Please verify that your organization continues to be exempt under Internal Revenue Code §501(c)(3) and is still classified as a public charity pursuant to IRC §509(a)(1), (2), or (3). Kindly send us a copy of your most recent Internal Revenue Service tax determination letter, your financial statements, Form 990, and any annual report for the year in which our grant funds are expended.
Finally, we must ask that any funds not expended for the purposes for which the grant is being made be returned to us. Please indicate your agreement with these conditions by returning a signed copy of this letter.
Thank you.
____________________________________________ | ||
for Sample Foundation | ||
Acknowledged by:____________________ | ||
Date: ___________________ |
EXHIBIT 17.5 Grant Agreement
This letter requests tax status information before a grant is paid.
GRANTEE ORGANIZATION
ADDRESS
DEAR GRANT RECIPIENT:
As a private foundation, Sample Foundation must ascertain that your organization is exempt from income tax under Internal Revenue Code §501(c)(3) and is classified as a public charity under IRC §509(a)(1), (2), or (3).
According to information furnished to us with the proposal, your organization is so qualified. Please inform us only if there has been a change in your tax status since then.
In addition, we must be assured that our grant will be expended for an educational, scientific, literary, or other charitable purpose. We ask that you use our funds exclusively to carry out the project described in the application. Also, we ask you not to use any of our funds to influence legislation, to influence the outcome of any election, or to carry on any voter registration drive.
Finally, we ask that any funds not expended for the purposes for which the grant is being made be returned to us.
Please signify your agreement with these conditions by returning a signed copy of this letter to us.
Thank you.
____________________________________________ | ||
for Sample Foundation | ||
Acknowledged by:____________________ | ||
Date: ___________________ |
In the interest of efficiency and to streamline its operations, a PF asked the IRS if it were acceptable to maintain its grant-making activity records only in electronic form.98 Grant requests, correspondence, and reports to and from grantees would be conveyed electronically. Grant agreements would be signed by both foundation and grantee officials. The state in which the foundation operated permits the use of electronic records and signatures in most contracts and other writings of legal significance. Further, the origination and maintenance of all books and records for tracking investments, charitable activities, and all other matters were kept electronically. The IRS determined that electronic records met the requirements of Reg. §1.6001-1 and are proof of public status for IRC §§4945(a)(4) and 4945(h) with respect to expenditure responsibility.
Good documentation should be maintained by PFs making grants to public charities that conduct lobbying99 and scholarship grants to intermediary entities (other than directly to the student).100
A grant-making private foundation must adopt procedures to document the tax character of grant recipients. Due to significant improvements in irs.gov/charities-non-profits, the information may be available on the IRS website if the grantee's name and federal identification number are known. Continuing to request the letter can be useful to allow a correct search on the new Publication 78, called Tax Exempt Organization Search (Pub 78).
As discussed in §18.1(e) and §18.2(c), any IRC §501(c)(3) organization that failed to file a Form 990, 990-EZ, 990-N, or 990-PF automatically has its exempt status revoked. Many organizations listed in Pub 78 now say their exempt status was revoked. Members of an affiliated group of organizations centralized under the common supervision and control of a parent organization do not individually obtain a determination letter and are not listed in Pub 78. Therefore, to verify their public charity status, the foundation should request documentation that the entity is indeed a member of a group (most issue a certificate), look up the parent organization on Guidestar or Pub 78, and observe whether the front page of the grantee's Form 990 indicates that it is a member of such group.
When an organization is not found in Tax Exempt Organization Search, a toll-free call to 1-877-829-5500 can reach a human being in the Cincinnati determination group who may furnish current information about an organization's status. Many potential grantees are listed in electronic sources as public charities, including IRS Tax Exempt Organization Search, IRS Business Master File, Foundation Source Grant Safe, and Guidestar. Some may have incorrectly prepared Schedule A reflecting adequate public support ratios. A prudent foundation might obtain verification, but unless the entity is controlled doing so is not required.
Indian tribes may also qualify as governmental organizations for expenditure responsibility purposes. The IRS publishes a list of qualifying Indian charities and outlines the procedures whereby tribal organizations can receive a determination-type letter to provide directly to donors. The letter states that the tribe in question is a federally recognized tribal government or subdivision of a tribe.101
Distributions to Supporting Organizations. A nonoperating PF may not count as a qualifying distribution102 an amount paid to a Type III supporting organization (SO) that is not functionally integrated with the organization it supports.103 Similarly, a grant to a Type I or II SO controlled by a disqualified person is not counted as a qualifying distribution. Though those grants are not included for purposes of measuring satisfaction of the payout requirement, they can be paid if an expenditure responsibility agreement is entered into to document the charitable nature of the grant.104 The making of such a grant without such an agreement is treated as a taxable expenditure.
The dilemma is that many SOs have no proof of their type. That information is now sometimes disclosed on the determination letter and on Tax Exempt Organization Search. The IRS Business Master File does distinguish the three categories of public charity by designating an SO with Code 17, but it does not list the SO type. Most troubling, the master list is not kept up to date for changes in classification reported on the annual Form 990, nor has accuracy of public-support test data submitted on Schedule A been verified. To compound the challenge, the list enters some members of a group exemption as SOs despite their public support levels. Consequently, when faced with the need to identify Type III SOs to which grants would not count, for which expenditure responsibility (ER) had to be exercised, a PF may have no IRS validation of status. IRS guidance on facing this issue may be helpful.105
Churches and their integrated auxiliaries and governmental units do not commonly receive recognition of exemption as public charities, although some seek recognition to aid in fund-raising. When a foundation wishes to support such entities, other sources to document the grantee's qualification may be available. Many church groups have certification issued by a national or area association of the member parishes and congregations. For example, Catholic churches, schools, and affiliated auxiliaries are listed in a handsome maroon leather-bound national directory of affiliates. For a church with no such proof, the foundation can gather information directly from the church to determine if the church satisfies the 14-point test for qualification as a church.106
It is troubling to some foundations that wish to support a project of a governmental entity that such an entity has no determination letter evidencing its classification as a public charity. The tax code may ease the concern with two citations:
A U.S. governmental unit is a public charity.107 Further, a foreign government, or any agency or instrumentality thereof, is treated as a §509(a)(1) organization.108 The factors that determine whether a program qualifies as an instrumentality of the government can be found in Chapter 10.109 Verification that a program is a division of the government may require additional steps. A certificate from the local municipality, school district, county, or other authority might be obtained. A governmental unit is a body that possesses at least three capabilities: the power to assess and collect taxes, police powers to enforce the law, and sovereign powers of eminent domain.110
A longstanding rule says that a PF may rely on the grantee's favorable Determination Letter until the IRS publishes notice of a change in status, unless the PF is responsible for or aware of the act or failure to act that resulted in revocation of the grantee's Determination Letter.111 When the grantee organization is not controlled by the foundation—that is, the PF cannot cause it to act or prevent its acts—the PF is not required to investigate the effect of its grant on the recipient's public charity status.112 When the foundation has a relationship with the grantee organization, and certainly if the PF controls the grantee, the foundation has a responsibility to determine whether its grant will cause the recipient organization to lose its public status.
A change of status might include becoming a private rather than a public charity or actually losing tax exemption through a revocation. The monthly updating of Pub 78 means revocation notice is available promptly. Seldom should the grantor PF need to search the Internal Revenue Bulletins to verify revocation. A notice of change in public charity status, however, may not be available.
The situation in which a private foundation grant causes loss of public status is referred to as tipping. When a public entity undergoes a “substantial and material change” in its public charity status, the PF can make the grant if:
Under two circumstances, the grantee must be required to redistribute the grant to allow the PF to report the grant as a qualifying distribution, including a grant to a controlled organization and a private foundation. IRS guidance in 2018 modified, superseded, and consolidated previously issued guidance for grantors and contributors to tax-exempt organizations on deductibility and reliance issues.114 Significantly, information published on IRS databases and published by other sources using the EO BMF Extract may be used until an announcement of the change is published in the Internal Revenue Bulletin.
When determination letters were first issued to Form 1023-EZ filers beginning in June 2014, many thought the determination might not necessarily be reliable. The application did not originally require organizational documents and financial information. After reports of lack of qualification for many nonprofits approved with the original form, the form and its instructions were revised, and can now be relied upon.
Public charities are free to make grants to individuals, to support a newly created but yet-unrecognized organization, to finance lobbying efforts, and to conduct a host of other projects that might not be permissible for a private foundation. Consequently, there is a temptation for a PF to funnel or pass money through a public charity for such a project that the PF itself cannot undertake or for which it does not wish to exercise expenditure responsibility. An earmarked grant to a public charity to do something the PF itself is not permitted to do can result in a taxable expenditure.
A foundation grant to an intermediary organization—also called a fiscal agent—may be treated as a grant by the PF to the ultimate grantee if the foundation has control over the re-grant.115 The rules are similar to the rules applicable to designating scholarship recipients.116 A look-through rule applies when the PF earmarks its grant in an oral or written manner. If the re-grant is to another public charity, there is no problem (unless the grant is earmarked for lobbying or for a individual). If the re-grant is to be made to another PF or for some other purpose described in IRC §4945, a taxable expenditure may occur. When a foundation grants funds to an organization or fiscal agent in this fashion, the grant should be carefully documented.117
A private foundation is entitled to support non-U.S. organizations, but when it does so, it must have enhanced documentation. The IRS has determined that a U.S. charitable organization can provide aid or other benefits to beneficiaries in foreign countries without adversely affecting its own exempt status.118
Among the reasons why a private foundation would involve itself in foreign projects is the rule that disallows income deductions for gifts to foreign charities. When the U.S. charity's board (private or public) has control and discretion over the use of the funds raised, the fact that the funds are contributed to the U.S. charity specifically for projects outside the United States does not render contributions nondeductible.119
There are three alternative ways in which the foreign organization's eligibility to receive a private foundation grant directly can be evidenced:
Whichever of the preceding alternatives applies, a private foundation must obtain, and maintain, information that describes and evidences its grant funding is spent to accomplish a charitable purpose.
Two factors—proof of public charity status and the charitable nature of use of funding—must prove that the disbursement satisfies both the minimum distribution requirements122 and the taxable expenditure rules enumerated at the beginning of this chapter.
A grant to a foreign government and any agency or instrumentality thereof is also treated as a grant to a public charity. Certain international organizations also qualify as public charities, such as the World Health Organization, the United Nations, the International Bank for Reconstruction and Development, the International Monetary Fund, and others designated by the president.123
A foreign organization with more than 15 percent of its gross income from U.S. sources is entitled to seek recognition of tax-exempt status by filing Form 1023.124 In doing so, the foreign organization relieves its potential foundation funders of the burden to obtain information necessary to follow either the equivalency or the expenditure responsibility procedures. The tax treaty between Mexico and the United States, effective in 1994, establishes a protocol under which Mexican charitable organizations can be recognized as public charities for private foundation purposes. The treaty between Canada and the United States provides that Canadian charities are given reciprocal classification under U.S. rules. However, unless the Canadian organization provides proof of its public charity status, it is presumed to be a private charity. Private foundations that are interested in supporting charitable activities in other foreign countries should be alert for similar provisions in income tax treaties affecting the status of such organizations.125
IRS recognition for a foreign organization also provides that organization an exemption from tax on its U.S.-based investment income.126 It is important to note again that a foreign organization that receives recognition as a §501(c)(3) tax-exempt organization still does not qualify to receive charitable donations from U.S. taxpayers.127
A foreign charitable organization that does not have an IRS determination of its public charity status but that is substantially equivalent to, and would in fact qualify as, a public charity if it sought approval may also be treated as a public charity. A private foundation is entitled to make a good-faith determination of the foreign organization's status based on an affidavit from the foreign entity or an opinion of a tax practitioner concluding that the grantee is a qualifying public charity.
The grant agreement with the foreign organization must also contain restrictions requiring that the funding be used for strictly charitable purposes, using language stipulated in §4945 at the beginning of this chapter. The affidavit must be in English and contain the following:128
As a practical matter, these documentation requirements are often difficult to satisfy. Differences in accounting systems, language, cultural patterns, and reporting systems in their own countries can lead to confusion. Though the foreign grantee may readily agree to fulfill the requirements described in the grant agreement, its understanding of the English terms may lead to an unintended result.
To relieve foundations of the burden of obtaining a legal opinion regarding the public status of each of its foreign grantees, an organization called Charities Aid Foundation of American (CAF) exists to serve international grantmakers.129
Seeking the appropriate information described in the preceding subsection from a foreign organization is not simple and is often troublesome due to language, currency, and legal differences. Because of these difficulties, a private foundation will sometimes find it more comfortable to treat such foreign grants as expenditure responsibility grants, to avoid unexpected results. The paperwork may be reduced and the possibility for a taxable expenditure lessened. Regulations entitled “Grants to nonpublic organizations” can be studied to gain clarity on this complex subject.130
The Council on Foundations publishes a guide for international grantmakers.131 Charities Aid Foundation of America, known as CAF America, based in Boston, provides technical service and support to assist corporations, foundations, and individuals support global philanthropy.132 Lastly, the U.S. Treasury Department list of specially designated global terrorists should be reviewed to ensure that potential grantees are not on the list.133
Due to the difficulties, the aforementioned guidance, and the more recent issues involving terrorist activities, many foundations now choose to exercise expenditure responsibility over grants to foreign organizations following procedures outlined in the next subsection.
To ensure accountability for grants and program-related investments by private foundations, record-keeping requirements are more stringent when a grant is made to one of the following:
Grants to such organizations are not prohibited, BUT they must be made to accomplish a charitable purpose—a foundation is not the “insurer of the activities of grantee.” The design of the expenditure responsibility procedures is intended to cause the PF to exert all reasonable efforts and establish adequate procedures to:137
Non-(c)(3) Organizations. As one example of the latitude available, a PF may make a grant to a social club if the grant is specifically dedicated to charitable purposes. A grant to a social fraternity's §501(c)(2) title-holding organization to build a study room in the chapter house was approved. The facility was to contain exclusively educational equipment and furniture, with computers linked to the university's mainframe. The university sanctioned the grant by certifying in writing that the room benefits the school by supplementing its resources, alleviating overcrowding in its library and study areas, and providing additional computer terminals. The fraternity agreed to return any grant funds not used for construction of the study space. No period was stipulated for this guarantee, but the foundation required that it be able to inspect the room annually.138
Another example was an “urban enterprise association” established to operate a recycling facility to provide jobs for a city's unemployed people.139 The PF's grant, in addition to commercial loans, provided start-up funds for the project. The project's purpose was to train workers and find them permanent employment. A public charity partner planned to turn the facility into a viable self-sustaining business, the net income of which would go to the public charity. Note that the regulations permit a grant to be made to a nonexempt business if the charitable purposes, or program-relatedness,140 of the activity are clearly evident and documented. The grantee organization must, however, agree to maintain the grant funds in a separate fund dedicated to the charitable purposes of the grant.141
A PF's charitable mission was to conduct Internet-based education and training to support teachers and students nationwide free of charge. A for-profit company that was a substantial contributor to the foundation also conducted similar activities. Based on a complicated set of facts, the IRS approved of a proposal for the two entities to work cooperatively in providing educational services. The ruling found no self-dealing stemming from the foundation's recognition of the company employees' volunteer efforts.142
Governmental Unit . The general rule of §4945(d), referenced in the introduction to this chapter, stipulates that a taxable expenditure does not result in a grant to an organization defined in paragraph (1), (2), or (3) of §509(a)(1). One must go to IRC §509(a)(1) to find that a public charity for this purpose includes an organization described in IRC §170(b)(1)(A) (other than in clauses (vii) and (viii)). One must then go to IRC §170(b)(1)(A)(v) to find that a governmental unit is on the list declared by §509(a)(1) to be a public charity. Thus, the language of the code follows a circuitous route that makes it difficult to find out that expenditure responsibility need not be exercised for a grant to a governmental unit. This fact is, however, clearly stipulated in the regulations, which say that a domestic or foreign government is also a public charity.143
PFs that carefully follow the steps prescribed in §17.4(b) to obtain proof of public charity status, to identify organizations eligible to receive grant funding, do not find governmental units in the former Pub 78, now called Tax Exempt Organization Search. Compounding the difficulty in determining whether a governmental unit is equivalent to a public charity, so that expenditure responsibility is not required, is the fact that there is no standard methodology for proving that an entity is indeed a governmental unit. Most would not question the classification of a state, county, or city as a division of the government. Others might wonder about a school district, a park authority, a utility district, or other quasi-municipal entity that does not possess all the attributes and powers of a government. This issue is carefully considered in §10.2. The IRS observed that the U.S. State Department was a governmental unit for this purpose.144
Grant Intermediaries. A private foundation grant to a public charity that re-grants or supports a secondary grantee presents issues similar to those that arise when a foundation funds an individual grant program at a college and makes suggestions about recipients. The challenge is to identify the grantee: is it the college or the individual?145 The question also arises when the foundation makes a payment to a public charity and the money is re-granted to a secondary grantee that is not a public charity.146 Such a grant is not regarded as a grant to the secondary grantee that requires expenditure responsibility, if the primary grantee has control over the re-granting.
The accounting rules describe the requisite power of the primary grantee as a variance power. Financial Accounting Standards Board Opinion #136 says, “[W]hen acting as an agent, trustee or intermediary,” the reporting entity (primary grantee) does not recognize revenue.147 The primary grantee must have discretion and control over the funds; there should be no agreement, written or oral, by which the foundation can cause the selection of the secondary grantee. The grant is not regarded as a grant by the PF to the secondary grantee, even though the PF has reason to believe that certain organizations will derive benefits from the grant, if the primary grantee makes the selection completely independently of the PF.148 In other words, the primary grantee is not an intermediary.
Non-Functionally Integrated Supporting Organization. This fourth grantee category requiring expenditure responsibility was added to the tax code in August 2006, effective immediately upon presidential signing of the bill. Some foundations were caught by surprise and found they had incurred a taxable expenditure because they failed to exercise expenditure responsibility for such a grant. Such a foundation, if it completes the required agreement after the fact to correct the failure and files Form 4720 to report the failure, may be forgiven a penalty. Exhibit 17.12 shown later in the chapter contains a sample request for abatement.
To exercise expenditure responsibility, a foundation must take very specific steps, using the control checklist in Exhibit 17.6. All eight specific requirements listed in Exhibit 17.6 must be followed. The first step in exercising expenditure responsibility is to investigate the grantee organization and its proposed project by performing a pre-grant inquiry to gather the information shown in Exhibit 17.7. A pre-grant inquiry is a limited investigation directed at obtaining enough information to give a reasonable person assurance that the grantee will use the grant for the proper purposes.149
The inquiry should concern itself with matters such as these:
The scope of the inquiry is expected to be tailored to the particular grantee's situation, the period over which the grant is to be paid, the nature of the project, and the PF's prior experience with the grantee.150 Two examples of successful inquiries follow:151
EXHIBIT 17.6 Expenditure Responsibility Control Checklist
SAMPLE FOUNDATION | |||
Do Not Proceed to Next Step Until Answers Are Yes! | |||
Date | Initial | ||
Step 1. | Pre-grant inquiry completed. | ____________ | ____________ |
Step 2. | Establish proper terms for grant or program-related investment. | ____________ | ____________ |
Step 3. | Expenditure responsibility contract signed. | ____________ | ____________ |
Step 4. | Grant timetable prepared. | ____________ | ____________ |
Step 5. | Form 990-PF attachment prepared and submitted (Reg. §53.4945-5(d)). | ____________ | ____________ |
Step 6. | Delinquent reports or diversions investigated. | ____________ | ____________ |
Step 7. | Withhold payments if diversions occur. | ____________ | ____________ |
Step 8. | Segregate documents in a manner to ensure that they are saved for four years. | ____________ | ____________ |
Approved by: ____________ | Date: ________________ |
EXHIBIT 17.7 Pre-Grant Inquiry Checklist
SAMPLE FOUNDATION | ||
If the grantee has received prior expenditure responsibility grants from the PF and has satisfied the reporting requirements, a pre-grant inquiry is not necessary. Likewise, for a grant to a split-interest trust that is required by its instrument to make payments to a specified public charity, a less extensive inquiry may be suitable. It is imperative that Exhibit 17.6 be used to monitor the information gathered that forms the basis for the grant decision based on the pre-grant inquiry.
An appropriate officer, director, or trustee of the grant recipient must sign a written commitment of the sort displayed in Exhibits 17.8 and 17.9 that, in addition to stating the charitable purposes to be accomplished, obligates the grantee to do the following:153
The agreement should clearly state the purpose for the grant. When making a grant to an organization that is not a §501(c)(3), the private foundation must require the grantee to establish its status, and maintain all grant funds in a separate fund dedicated to the charitable purposes for which the grant is made.
Program-Related Investments. In addition to the previously listed required information, the recipient of program-related investment funds must also agree to do the following:154
Program-related investments often provide financing for projects of a business nature, such as real estate development or scientific research. Funds expended by such projects might not necessarily be considered charitable expenditures if the foundation paid the expenses itself. Therefore, the expenditure responsibility agreement for such investments does not have to contain a requirement that the grantee not use the funds to engage in a noncharitable purpose, though the PF's reason for making the investment should be to accomplish a charitable purpose.
Foreign Grants. An agreement with a foreign entity should phrase the restrictions in appropriate terms under foreign law or custom. Though not specifically required, an affidavit or opinion of a tax practitioner stating that the agreement is valid under the foreign laws is “sufficient.”155 Translation of the agreement into applicable languages may be appropriate. Making the choice to exercise expenditure responsibility rather than seek an equivalency opinion for foreign grantees should be made in view of the latest guidance on this issue.156
A private foundation that makes an expenditure responsibility grant is not held responsible for the actual accomplishment of the purposes of such a grant, but is required to follow the steps listed in Exhibit 17.6 to document its efforts to monitor its written requirement that the funds be expended for charitable purposes.157 Details must be provided for each grant for which any amount or any report is outstanding at any time during the taxable year in the foundation's annual Form 990-PF, as illustrated in Exhibit 17.10. See Exhibit 17.11 for grantee reports that contain such information.
The foundation must require the grantee to submit an annual report of the sort shown in Exhibit 17.11 to document its expenditures and accomplishments each year under the expenditure responsibility agreement.
In monitoring such grants, the foundation may rely on reports and records furnished by grantees and statements of grantee officials. The grantor need not conduct any independent verification of such reports unless it has reason to doubt their accuracy or reliability.158 The grantee should report on the use of the grant funds, reflecting the nature of the expenditures—salaries, travel, supplies, and so on. For a general support grant, an annual financial report or Form 990-PF (or 990) may be sufficient. In addition to financial information, the report should state that the grantee complies with the terms of the grant and describe the progress made by the grantee toward achieving the purposes for which the grant was made. The reports are to be made at the end of the grantee's fiscal year for each year the grant is outstanding and should be received within a reasonable time after the close of the year. For multiyear grants, a final report summarizing all expenditures should be submitted.159
EXHIBIT 17.8 Expenditure Responsibility Agreement—Version 1
SAMPLE FOUNDATION
Name of Grantee Organization
Address
Dear _____:
_____(Name of Grantor) is pleased to inform you that its Board of Directors has approved a grant of $_____ to the _____ (Name of Grantee) pursuant to the grant application dated _____.
Since your organization and ours are private foundations, we must enter into an expenditure responsibility agreement. We do not plan to claim this grant as a qualifying distribution to enable you to so count the expenditure of our funding pursuant to Reg. §53.4942(a)-3(c).
Use of Funds
Our grant must be expended for charitable, scientific, literary, or educational purposes as defined under Internal Revenue Code §501(c)(3), and more specifically for _____(Description of purpose of grant, title if any, or general support of the grantee). ANY FUNDS NOT SO EXPENDED MUST BE RETURNED TO _____ (Grantor). Funds may not be used to influence legislation or the outcome of any election, to carry on a voter registration drive, or to make grants to individuals for travel or study.
Annual Report
(Grantee) will provide a narrative and financial report to us by _____ (Date). The narrative portion should include a copy of publications, catalogs, and other materials describing the accomplishments of the program or project. The financial report must be attested to by an outside accountant and must contain details of expenditures, such as salaries, travel, supplies, and the like.
Although grant funds need not be physically separated, records of receipts and expenditures under the grant, as well as copies of the report furnished to us, should be kept available for our inspection until _____ (four years from grant).
Payment Terms
Payments under the grant will be made on the following dates, after receipt of a signed copy of this agreement:
____________________ | ____________________ |
____________________ | ____________________ |
(Date) | (Amount) |
Sign and Return
If this agreement meets with your approval, kindly sign it and return one copy to us. On behalf of _________ (Grantor), I extend good wishes for the success of this endeavor.
Acknowledged by:
_____________________ | _____________________ |
For Sample Foundation | For Grantee Organization |
_____________________ | _____________________ |
Date | Date |
__________________________________________ |
EXHIBIT 17.9 Expenditure Responsibility Agreement—Version 2
Terms of Grant:
Acknowledged by:
_____________________ | _____________________ |
For Sample Foundation | For Grantee Organization |
_____________________ | _____________________ |
Date | Date |
__________________________________________ |
EXHIBIT 17.10 Report to IRS on Form 990-PF
SAMPLE FOUNDATION | EIN 44-4444444 |
Attachment to Form 990-PF | |
Part VII-A, Question 5c on page 5 | |
EXPENDITURE RESPONSIBILITY STATEMENT FOR THE YEAR 20XX | |
Pursuant to IRC Regulation §53.4945-5(d)(2), the SAMPLE FOUNDATION provides the following information: | |
(i) Grantee: | The Anna Jane Smith Memorial Library 1444 Smith Terrace Anytown, USA 44444 |
(ii) Amount of Grants: | December 28, 20xx $100,000 (endowment) December 23, 20xx $100,000 (general support) |
(iii) Purpose of Grants: | Endowment or general support for the Anna Jane Smith Memorial Library, an education foundation operating a library free and open to the general public in Anytown, in amounts listed above. |
(iv) and (vi) Reports: | The Anna Jane Smith Memorial Library submitted full and complete reports of its expenditure of December 20xx operating support grant on November 21, 20xx. The Anna Jane Smith Memorial Library also submitted a report on the 2001 endowment grant on November 21, 20xx. The endowment report reflected that the grant was properly added to the Library's endowment, the income from which is devoted exclusively to its educational programs. |
(v) Diversions: | To the knowledge of the grantor, no funds have been diverted to any activity other than the activity for which the grant was originally made. |
(vii) Verification: | The grantor has no reason to doubt the accuracy or reliability of the report from the grantee; therefore, no independent verification of the report was made. |
EXHIBIT 17.11 Grantee Report
The Anna Jane Smith Memorial Library 1444 Smith Terrace Anytown, USA 44444 |
|
Ms. Jane Sample, Treasurer SAMPLE FOUNDATION 101 First Main Plaza Anytown, USA 44444 |
|
RE: Annual Report #1 of grant funds expended under Expenditure Responsibility Agreement |
Dear Ms. Sample:
On behalf of the Anna Jane Smith Memorial Library, I want to again say how grateful our library is for the significant support we receive from your foundation. The minds of Anytown's children are challenged and expanded by the enrichment your funds allow. The specific purpose of this letter is to report in accordance with our expenditure responsibility agreement dated December 23, 20xx.
Your annual support gift of $200,000 was expended during our fiscal year ending June 30, 20xx, for the library's educational programs. As reflected in our audited financial statements furnished to you with our endowment grant report, total expenditures this year were $429,000. We spent $204,000 on lending library activities, $56,000 for purchasing new books and publications, $72,000 for a school outreach program, and $97,000 on administration and fund raising. Your annual gift and others from our community defrayed all but $92,000 of the total expenditures, meaning that we were able to set aside $24,000 as a reserve for the future.
Additionally, as required by our agreement, all of the income earned on your endowment gift was either currently expended for the library's educational programs or reserved to be spent for such purpose in the future. No portion of the gift was expended for a noncharitable purpose; particularly, no amounts were expended to carry on propaganda or otherwise to attempt to influence legislation, to attempt to influence an election, or to make a grant to an individual. We maintain detailed documentation evidencing the nature of our expenditures and would welcome your inspection of the records if you so desire.
Thank you again for your financial support. If any additional information is required, please let us know.
______________________________ | |
November 21, 20xx | Mary Kay Anderson Chief Financial Officer |
The Anna Jane Smith Memorial Library 1444 Smith Terrace Anytown, USA 44444 |
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Ms. Jane Sample, Treasurer SAMPLE FOUNDATION 101 First Main Plaza Anytown, USA 44444 |
|
RE: Annual Report #2 under Endowment Expenditure Responsibility Agreement |
Dear Ms. Sample:
On behalf of the Anna Jane Smith Memorial Library, I want to first say how grateful our library is for the significant support we receive from your foundation. The minds of Anytown's children are challenged and expanded by the enrichment your funds allow. The purpose of this letter is to again report in accordance with our expenditure responsibility agreement dated December 28, 20xx.
Your generous endowment gift of $100,000 was added to the Anna Jane Smith Memorial Library Endowment Fund to be conserved and prudently invested so as to produce income to support our educational programs. The balance of the endowment as of June 30, 20xx, was $920,000. During our fiscal year then ended, current income of $119,000 was realized on the endowment. Out of this income, $92,000 was expended for library operations and $24,000 was set aside in the temporarily restricted funds to ensure support of operations in any future years in which current yield might be lower. A copy of our audited financial statements is enclosed for a full report of our financial activity.
As required by our agreement, all of the income earned on your endowment gift was either currently expended for the library's educational programs or reserved to be spent for such charitable purposes in the future. None of the endowment fund or its income was expended for a noncharitable purpose; particularly, no amounts were expended to carry on propaganda or otherwise to attempt to influence legislation, to attempt to influence an election, or to make a grant to an individual. We maintain documentation evidencing the nature of our expenditures and welcome your inspection of the records, if you so desire.
Thank you again for your financial support. If any additional information is required, please let us know.
______________________________ | |
November 21, 20xx | Mary Kay Anderson Chief Financial Officer |
Endowment Grants. A grant of endowment funds or funds for the purchase of capital equipment or other capital purposes must be monitored for the year of the grant and for the two following years. The use of the principal and income (if any) from the grant funds is to be reported.160 Such grants are generally outstanding for 990-PF purposes for three years. Only if it is reasonably apparent before the end of the second succeeding year that the funds have been used for the purpose granted can the reports be suspended.
Program-Related Investments. A grantee report must be received for each year during which the investment is in existence. The Charles Stewart Mott Foundation found out the hard way that program-related investments must be reported for the life of the loan or as long as the investment is held (in its case, 12 years).161 The Mott Foundation had relied on the three-year endowment reporting requirement. A program-related investment (PRI) is treated as a grant for purposes of determining whether expenditure responsibility has to be exercised in connection with the disbursement.162 Thus, a PRI placed with a public charity does not require that ER agreements be made.
Private Foundation Successor Organizations. A private foundation that distributes part of its assets to another private foundation that is not controlled by the same persons in a termination distribution163 has a duty to exercise expenditure responsibility indefinitely until all of its assets are distributed.164 The responsibility ceases when the foundation gives away all of its assets.
Grantee Accounting Records. A private foundation grantee classified as a charity under §501(c)(3) need not segregate funds or maintain separate bank accounts or books for the grant unless the grantor foundation requires it to do so. If the funds are not specifically segregated, grants received within a year are deemed to be expended before grants received in a succeeding year. Expenditures made during the year are allocated among all such grants.
A grantee that is not a §501(c)(3) organization, however, must segregate and maintain, so long as grant funds remain unexpended, the grant in a separate fund dedicated to the charitable purposes of the grant.165 For all grantees, records evidencing the manner in which the funds are expended must be maintained for at least four years after completion of the use of the funds.
For each year during which a private foundation has an “outstanding” expenditure responsibility grant, information about each grant must be submitted as an attachment to Form 990-PF. The report is due in the year the grant is made and for as many years as the grant is outstanding, and monitoring is required.166 An example of the report required to be attached to Form 990-PF appears in Exhibit 17.11. No specific form is provided, but the regulations specify that the following data must be submitted:167
The IRS has strictly enforced the expenditure responsibility reporting requirement. Before 1984, reporting the information on an amended return did not correct the taxable expenditure.168 Stiff penalties were upheld against a group of three commonly controlled organizations in the Hans S. Mannheimer Charitable Trust.169 Their Form 990-PF contained no report. Under the pre-1984 rules, the foundation unsuccessfully argued that all of its internal documents, meeting transcriptions, and actual observations of the activities amounted to the exercise of expenditure responsibility. Despite the facts and the foundation's argument that its failure to report was due to unintentional oversight, the penalty assessment was upheld. Effective beginning in 1984, a mistake of this sort might be corrected without a penalty.170
The foundation must retain supporting documentation for information reported in its Form 990-PF at its principal office: a copy of the agreement for each expenditure responsibility grant, all reports received from grantees, and documentation for any investigation the foundation conducted either during the pre-grant inquiry period or regarding potential diversion of the funds.
Rules similar to those governing scholarship fund diversions apply to expenditure responsibility grant fund diversions. The grant is not considered to be a taxable expenditure even though the grantor foundation finds that any or all of the funds were used for improper purposes if the grantor PF does the following:
If a grantee fails to make reports, a taxable expenditure will result unless the PF:
If the grantor foundation is treated as having made a taxable expenditure because it failed to take any of the required steps in the preceding list, the penalty will be imposed on the initial grant. If additional funds are granted after it discovers the problem, the penalty is imposed on all payments.
The term taxable expenditure includes any amount paid or incurred for a noncharitable purpose.174 The IRS has provided a list of expenditures that will not be classified as noncharitable, even though they are neither grants nor project expenditures. The list includes the following:
Conversely, the following expenses are taxable expenditures:
In a reversal of its approval of a company foundation employee relief program, the IRS provided a comprehensive review of the private foundation sanctions that can result when a foundation is found to have made a noncharitable expenditure. A careful discussion of the interaction among §§4941, 4942, and 4945 can be found in the ruling.180
An excise tax of 20 percent of the amount of any taxable expenditure is imposed on the private foundation making such an expenditure. A 5 percent tax is payable by any foundation manager who willfully agreed to the expenditure, knowing that it was such an expenditure, up to a maximum of $10,000. These taxes may possibly be abated, as discussed at the end of this section.
To be subject to the tax, the manager must intentionally agree to the expenditure, knowing that it is taxable. Knowing does not necessarily mean having reason to know. Such manager must have agreed to make the expenditure willfully and without reasonable cause, such as reliance on the written advice of outside or inside counsel. A private foundation failed in its request that the IRS abate a first-tier excise tax for making a taxable expenditure because the foundation was unable to convince the agency that it acted with reasonable cause, inasmuch as it did not seek professional advice before making problematic grants. Only those managers in a position to decide what expenditures are paid and approve such disbursements are subject to the tax.181
If the taxable expenditure is not corrected before the date of mailing a notice of deficiency or the date on which the initial tax is assessed, known as the taxable period, an additional tax of 100 percent of the expenditure is imposed on the foundation.182 The knowing managers are jointly and severally liable for an additional tax of 50 percent, up to a maximum of $20,000.
Correcting the taxable expenditure is accomplished when the PF takes whatever corrective steps the IRS recommends, including the following:183
If the taxable expenditure was caused by inadequate reporting by grantees, receipt of the appropriate reports is a correction. For failure to obtain advance approval for a scholarship or fellowship grant program, obtaining approval for grant-making procedures is a correction.
EXHIBIT 17.12 Sample Attachment to Form 4720
SAMPLE FOUNDATION | EIN 44-4444444 |
Attachment to Form 4720 | |
For Calendar Year 2020 |
STATEMENT regarding CORRECTION OF TAXABLE EXPENDITURE
In submitting its Form 990-PF for the calendar year ending December 31, 2020, the SAMPLE FOUNDATION (Sample) inadvertently failed to submit information regarding an expenditure responsibility grant. This failure is corrected in this return by making a complete report of the seven required items properly included as an attachment to Part VII-B, Statement Regarding Activities for which Form 4720 may be Required, of this year's Form 990-PF.
Sample, during 2018, made an endowment grant to ABC FOUNDATION (ABC), a private foundation. The required expenditure responsibility agreement was executed in a timely fashion and the grant information reported in Sample's 2018 Form 990-PF. Additionally, ABC reported that the endowment and its income were dedicated to charitable purposes as its agreement with Sample required. Sample duly submitted the seven points of information on its 2018 Form 990-PF. ABC further made a second year's report for the 2019 fiscal year.
A taxable expenditure occurred, however, when Sample failed to include a statement of the required information on its 2020 Form 990-PF. Sample had made expenditure responsibility grants in past years, but had not previously made an endowment grant that required multiple-year reporting. Sample's controller who prepared the return failed to include the report because he was following the pattern established for non-endowment grants. Sample's grant department had engaged outside counselors to prepare the agreement regarding the grant. They were advised Sample needed to receive and submit to the IRS two years of monitoring reports and also to report the grant in the year in which it was made. The controller was not furnished a copy of the counselors' letter describing this requirement.
Pursuant to Internal Revenue Code §4962, Sample respectfully requests that the first-tier §4945 penalty for failure to report, or initial tax of $15,000, be abated because the failure was due to reasonable causes and without willful neglect. The mistake was discovered by Sample's executive director when she was reviewing the 2020 Form 990-PF prior to submitting it to me for signature. The inclusion of the proper report in this 2020 return effectively corrects the failure to report. Therefore, Sample submits it is entitled to an abatement of the tax because it meets the requirements of §4962 and the instructions to Form 4720.
I swear that this information is true and correct and that the foundation's failure to make the third year's report of ABC's endowment grant was inadvertent, accidental, and without intention or knowledge on my part or on the part of any of Sample's other officers.
_____________________________________ | |
A. B. Sample, President |
The IRS has the discretionary authority to abate the first- and second-tier tax where the PF establishes that the violation was due to reasonable cause, was not due to willful neglect, and a timely correction is made. Exhibit 17.12 contains a suggested letter to attach to Form 4720 to seek abatement of the penalty tax. The letter admits that the expenditure responsibility steps were not properly followed but informs the IRS that the foundation took steps to make the required corrections and may be entitled to forgiveness for the violation. The rules for excusing the foundation and its managers and the possible abatement of the tax are the same as those outlined in §16.4(c).
Exhibits A17.1A, A17.1B, A17.1C, and A17.2 are examples of emergency and hardship assistance grant applications. As a consultant to Foundation Source, an online private foundation administrative service company, I have assisted their senior vice president for legal affairs, Jeff Haskell, to develop checklists and guidance for their Web-based foundations. They have graciously agreed to allow inclusion of these examples, which were developed with the approval of the IRS.
Exhibit A17.2 is a Church Substantiation Form created by Foundation Source.183
The attached form was developed by Foundation Source to provide a mechanism to provide rapid relief while remaining in compliance with IRS regulations regarding disaster relief to individuals. Although we have tried to streamline the process, we want to underscore that it is important that the form be filled out carefully and with forethought. It is recommended that the foundation's board formally adopt its emergency assistance grant program and memorialize the board action (e.g., with minutes). The grant program should benefit victims of current and future emergencies. This form represents our interpretation of applicable IRS rules and guidance, and should not be construed as legal advice.
A foundation's decision about how its funds will be distributed must be based on an objective evaluation of the victim's needs at the time the grant is made. Under established rules, charitable funds cannot be distributed to individuals merely because they are victims of a disaster. According to IRS Publication 3833, a private foundation providing emergency assistance must make a specific assessment that a recipient of aid is financially or otherwise in need. Accordingly, the grant amount will vary depending on the applicant's level of need. Individuals do not have to be totally destitute to be eligible to receive emergency assistance; they may merely lack the resources to obtain basic necessities.
The IRS requires that a granting foundation record, among other things, the grant recipient's need for assistance at the time of the grant; the objective criteria applied to assess need; the process by which grant recipients were selected; and the name, address, and amount distributed to each grant recipient. The IRS requires a granting foundation to make its annual return open to public inspection and disclose a grant recipient's identity and address, the grant amount, and a description of the grant purpose. However, the IRS does not require the foundation to track how the grant recipient spent the funds. In fact, there are no restrictions on the grant recipient's use of grant funds.
Foundation Source's Application for Emergency Assistance has been designed to meet the IRS's record‐keeping and needs assessment requirements:
Finally, the IRS requires that grant recipients be selected from an open‐ended group of individuals known as a “broad charitable class.” This group must be large enough to ensure that the number of members comprising the class is not fixed. For this reason, the foundation should develop a means to identify persons in need of assistance beyond the board's immediate sphere of social contacts. This may be accomplished by obtaining referrals from clergymen, local charities, community organizations and social workers, reading newspaper and magazine articles, and establishing other channels.
Purpose | One‐time grant of up to $5,000 for individuals and families who require assistance due to disaster or emergency hardship, such as a flood, fire, tornado, violent crime, sudden death, physical abuse, or trauma. |
Eligibility requirements | Individuals and families temporarily unable to be self‐sufficient as a result of a sudden and severe emergency. This includes persons in need of short‐term counseling because of trauma experienced as a result of a disaster, crime, or emergency. |
Application deadline | Due to the immediacy of this form of assistance, this application must be submitted within six weeks of the date of the emergency. |
How to apply | Sections 1–4 should be filled out by the applicant. The completed form should be returned to the person who gave it to you. |
Sections 5–6 should be completed by the Foundation. |
Last Name: __________________First Name: _________________ Middle Initial: _____________
Home Address: _____________________________________ Apartment No. __________________
City: ________________ State: _______________ Zip: ______________ Phone: ________________
List the full name, date of birth, relationship, and the last four digits of the social security number of each person living in your household, including yourself, as reported on your tax return. Attach additional sheet(s) if necessary.
Your full name (first, middle, last): | Date of Birth | Last 4 Digits of S.S.# | |
_____ / _____ / _____ | |||
Full name of the 2nd person in your household (first, middle, last): | Date of Birth | Last 4 Digits of S.S.# | |
_____ / _____ / _____ | |||
Relationship to you: | |||
Full name of the 3rd person in your household (first, middle, last): | Date of Birth | Last 4 Digits of S.S.# | |
_____ / _____ / _____ | |||
Relationship to you: | |||
Full name of the 4th person in your household (first, middle, last): | Date of Birth | Last 4 Digits of S.S.# | |
_____ / _____ / _____ | |||
Relationship to you: | |||
Full name of the 5th person in your household (first, middle, last): | Date of Birth | Last 4 Digits of S.S.# | |
_____ / _____ / _____ | |||
Relationship to you: | |||
Full name of the 6th person in your household (first, middle, last): | Date of Birth | Last 4 Digits of S.S.# | |
_____ / _____ / _____ | |||
Relationship to you: |
Name of Applicant: ____________________________
Approximate Date of Emergency: _____________________________________________
Complete column A of the attached Needs Assessment Form and briefly describe the nature of the emergency below:
I affirm that I meet the eligibility requirements for emergency assistance described above and that all the information I have provided to qualify for such assistance is complete, correct, and true to the best of my knowledge. Any losses I may have suffered in connection with this emergency have not been covered to date by insurance, funds available through governmental or other agencies, federal or state relief funds, or readily available personal financial resources. I understand that I may be denied assistance if any of the above is false, and that I may be required to repay any assistance that I receive based on false or incomplete information.
Upon request, I agree to provide the Foundation or its Administrator with evidence of the information I have given on this application. I understand that this application becomes the property of the Foundation when submitted.
I understand that the Foundation's annual return is open to public inspection and that, if I receive a grant, the Foundation will be required by federal tax law to disclose on its annual return my identity and address, the grant amount, and a description of the grant purpose. I understand that, if I receive a grant, the Foundation will report on its annual return the address I provided above unless I provide my business address below to be used in place of my home address.
Business Address: __________________________________________________ |
Street Address, City, State, ZIP |
SIGN HERE > ___________________ DATE > ______________________ |
Stop here – you have completed your part of this application.
Return this completed application to the person who gave it to you.
FACTORS SUPPORTING REQUEST FOR EMERGENCY RELIEF | COLUMN A | COLUMN B |
FOR COMPLETION BY APPLICANT ONLY Please check all factors that apply: | FOR COMPLETION BY FOUNDATION ONLY Please check all factors that apply: | |
The applicant has no “safety net,” such as nearby family or friends, who can offer assistance | ||
The applicant lacks the basic resources necessary to cope with the hardships created by this emergency | ||
The applicant has a large number of dependents | ||
The applicant (or a member of the household) is gravely ill and requires medical attention | ||
The applicant (or a member of the household) is physically disabled or handicapped | ||
The applicant (or a member of the household) is emotionally traumatized/psychologically fragile | ||
The applicant (or a member of the household) is of advanced age |
Other (FOR COMPLETION BY APPLICANT ONLY):
BRIEFLY DESCRIBE ANY OTHER SPECIAL FACTORS SUPPORTING YOUR REQUEST FOR EMERGENCY RELIEF: _______________________________________________________
Other (FOR COMPLETION BY FOUNDATION ONLY):
BRIEFLY DESCRIBE ANY OTHER SPECIAL FACTORS THAT INFLUENCED THE FOUNDATION'S DECISION TO PROVIDE EMERGENCY RELIEF: _________________________________
To Be Completed by Foundation
Name of Applicant: ___________________________________
How did the Foundation become aware of this applicant's need for emergency assistance?
Applicants for emergency assistance should be referred by a person or organization not affiliated with the granting Foundation. Please check all boxes that apply:
Clergy Counselor Employer Health Care Professional
News/Media Nonprofit Psychologist Social Worker
Other _____________________________________________
Name of referral source ________________________________________________
Address ___________________________________________________________
City _____________________________ State _____________________________ ZIP _________
Phone No. _________________________________________________________
Please complete column B of the attached Needs Assessment Form to indicate the factors that influenced the Foundation to provide emergency assistance to this particular applicant and/or household based on the applicant's description of need and input provided by the above referral source(s).
Amount of Emergency Assistance Grant
The Foundation may give an individual or household a maximum of $5,000 in a single lump sum or in smaller periodic installments within three months of the date of the emergency. Please indicate below the total amount of assistance the Foundation would like to approve as well as the amount of the initial grant. The initial grant can be in any amount up to the $5,000 maximum.
Total Grant Approved $ ___________ Initial Grant Amount $ ____________
Name of Applicant: ___________________________________
Once the applicant's eligibility for assistance has been confirmed, the initial grant will be processed and the grant check will be sent to you for delivery to the applicant. Subsequent grants to the applicant can be initiated from the Foundation's website or by calling Foundation Source at 800‐839‐1754 within three months of the date of the emergency.
______________________
Initials of Authorized Person |
I agree to deliver to the applicant of this form the grant check provided to me by Foundation Source. I agree to deliver the check promptly upon receipt, and, in any case, not later than the last day of the Foundation's taxable year in which I receive the grant check. I understand that Foundation Source relies upon proper delivery on or before this deadline, and that Foundation Source will have no liability whatsoever in the event that such delivery is not made on a timely basis. |
______________________
Initials of Authorized Person |
As an authorized person of the Foundation, I declare that no substantial contributor to the Foundation, nor any of the Foundation's officers, directors, and/or trustees and members of their respective families or households, will benefit, either directly or indirectly, from the making of this gift. I further declare that this gift is unrestricted and that the Foundation has not required the applicant to use the proceeds of this gift for travel, study, or similar purposes. Finally, I declare that the proceeds of this gift will not be used to influence legislation or the outcome of any specific public election, to finance voter registration drives, or to satisfy the charitable pledges or obligations of any person or organization other than the Foundation. |
Name of Foundation _______________________________________________________________
Please Print | |
Name of Authorized Person __________________________________________________________
Please Print | |
SIGN HERE > _____________________________ DATE > _________________________ |
Please mail or fax this completed application to:
Faxing this application will enable us to process it without delay, but please be sure to mail us the original signed document for the Foundation's records.
If you have any questions about how to fill out this application, please call Foundation Source at 800‐839‐1754.
ABOUT FOUNDATION SOURCE
Foundation Source is the nation's largest provider of comprehensive support services for private foundations. Our complete outsourced solution includes foundation creation (as needed), administrative support, active compliance monitoring, philanthropic advisory, tax and legal expertise, and online foundation management tools.
Now in our second decade, Foundation Source provides its services to more than 1,400 family, corporate, and professionally staffed foundations, of all sizes, nationwide. We work in partnership with wealth management firms, law firms, accounting firms, and family offices as well as directly with individuals and families. Foundation Source is headquartered in Fairfield, Connecticut.
Have a question? Call 800.839.0054 or send us an email at [email protected].
55 Walls Drive, Fairfield, CT 06824
T 800.839.0054
F 800.839.1764
The purpose of this application is to facilitate financial assistance for low‐income households suffering financial hardship. The IRS requires that grant recipients be selected from an open‐ended group of individuals known as a “broad charitable class.” This group must be large enough to ensure that the number of members comprising the class is not fixed. For this reason, the foundation should develop a means to identify persons beyond the board's immediate sphere of social contacts. This may be accomplished by obtaining referrals from clergymen, local charities, community organizations and social workers, reading newspaper and magazine articles, and establishing other channels.
It is recommended that the foundation's board document its decision to render hardship assistance using the criteria and information obtained through this application, which has been designed to meet the IRS's record‐keeping and needs assessment requirements. Therefore, while we have tried to streamline the application, we want to underscore that it is important that it be filled out carefully and with forethought. This application should not be construed as legal advice.
The IRS requires that a granting foundation record the grant recipient's need for assistance at the time of the grant, and the name, address, and amount distributed to each grant recipient. Accordingly, this information is requested solely to assist the foundation in documenting and assessing the applicant's need for assistance.
Sections 1 – 5, to be completed by the applicant, request the applicant's contact information as well as details regarding household income and net worth. The applicant is also asked to explain the need for hardship assistance and how he or she intends to spend the grant funds.
The applicant acknowledges that a granting foundation is required to make its annual return open to public inspection and that the granting foundation may be required by IRS rules to disclose his or her identity, address, the grant amount, and the grant purpose.
If the applicant is awarded a grant, the Foundation may decide to pay all or a portion of such award directly to a third party creditor to whom the applicant has a liability, such as a utility company, landlord, or healthcare provider. In that case, the Foundation will provide the applicant with a Check Editing Authorization Form to be completed for each payee. Please note that checks made payable to third parties cannot be designated for travel, study, or similar purposes, as grants made for such purposes normally require advance IRS approval.
Sections 6A and 6B, to be completed, as applicable, by a referral source, confirms the need for assistance by an unrelated party.
The IRS requires that a granting foundation record the objective criteria applied to assess an applicant's financial distress and the process by which a grant recipient is selected. Accordingly, the grant amount is expected to vary depending on the applicant's level of need.
Section 7, to be completed by the Foundation, explains how the applicant was selected over other applicants and how the board became aware of the need for assistance. This section also establishes that no substantial contributor to the Foundation, nor any of the Foundation's officers and/or directors and members of their respective families or households, will benefit, directly or indirectly, from the making of the grant.
Purpose | To provide financial assistance for low‐income individuals and families, which may, for example, be applied towards the following types of expenses:
|
Eligibility Requirements | A household is eligible for assistance if it has a net worth of less than $70,000 (total value of savings, real estate, and other assets less credit card debt, mortgage, and other loans) and meets the applicable low income criteria below:
|
How to Apply | Sections 1–5 should be filled out by the applicant. Section 6 should be filled out by a professional who is familiar with the applicant's needs. See that section for details. The completed application, along with the required referral, should be returned to the person who gave it to you. Section 7 should be completed by the Foundation. If the applicant is awarded a grant, the Foundation may decide to pay all or a portion of the grant directly to a creditor such as a utility company or landlord. In that case, the Foundation will provide a Check Editing Authorization Form to be completed for each payee (optional). |
Section 1 – General Applicant Information
Last Name: ____________ First Name: ___________ Middle Initial: _________________
Home Address: ______________________________ Apartment No. ________________
City: ________________________ State: _______ Zip: _______ Phone: _____________
Email: ____________________
List the full name, date of birth, relationship, and the last four digits of the social security number of each person living in your household, including yourself, as reported on your tax return. Attach additional sheet(s) if necessary.
Your full name (first, middle, last): | Date of Birth | Last 4 Digits of S.S.# | Annual Income | |
_____ / _____ / _____ | $ | |||
Full name of the 2nd person in your household (first, middle, last): | Date of Birth | Last 4 Digits of S.S.# | Annual Income | |
Relationship to you: | _____ / _____ / _____ | $ | ||
Full name of the 3rd person in your household (first, middle, last): | Date of Birth | Last 4 Digits of S.S.# | Annual Income | |
Relationship to you: | _____ / _____ / _____ | $ | ||
Full name of the 4th person in your household (first, middle, last): | Date of Birth | Last 4 Digits of S.S.# | Annual Income | |
Relationship to you: | _____ / _____ / _____ | $ | ||
Full name of the 5th person in your household (first, middle, last): | Date of Birth | Last 4 Digits of S.S.# | Annual Income | |
Relationship to you: | _____ / _____ / _____ | $ | ||
TOTAL ANNUAL INCOME | $ |
When filling out the chart below, please provide the total assets and loans/debts of all members of the applicant's household.
ASSETS | LOANS |
Savings | Credit Card Debt |
$ | $ |
IRA(s) | Car Loans |
$ | $ |
Value of Real Estate | Mortgage |
$ | $ |
Other Assets (Cars, etc.) | Other Loans (Student Loans, etc.) |
$ | $ |
Total Assets | Total Loans/Debts |
$ | $ |
NET WORTH (TOTAL ASSETS – TOTAL LOANS/DEBTS) $ |
4A. MEDICAL EXPENSES
If any box in this section is checked, a doctor or health care provider must complete Section 6A to confirm the need for hardship assistance due to the medical condition of one or more members of the applicant's household.
MEDICAL
4B. NON‐MEDICAL EXPENSES
If any box in this section is checked, a clergyman, social worker, school representative, government agent or an official from a social assistance program or public charity must complete Section 6B to confirm the need for hardship assistance.
LIVING
HOUSING
EDUCATIONAL
Describe the hardship that brought about the need for assistance:
If you have urgent bills that you are unable to pay, please describe the nature of the bill and the amount due in each case:
I affirm that my household qualifies for hardship assistance based on the income and asset criteria specified above and, further, I affirm that my household's current income and asset levels require these additional funds to meet the needs described in Section 4. | |
______________ Initials of Applicant |
I affirm that all the information I have provided above to qualify for hardship assistance is complete, correct, and true to the best of my knowledge. I understand that I may be denied assistance if any of the above is false, and that I may be required to repay any assistance that I receive based on false or incomplete information.
Upon request, I agree to provide the Foundation or its administrator with evidence of the information I have provided on this application. I understand that this application becomes the property of the Foundation when submitted.
I understand that the Foundation's annual return is open to public inspection and that, if I receive a grant, the Foundation may be required by federal tax law to disclose on its annual return my identity and address, the grant amount, and a description of the grant purpose. I understand that, if I receive a grant, the Foundation will report on its annual return the address I provided above unless I provide my business address below to be used in place of my home address.
Business Address: _________________________________________________
Street Address, City, State, ZIP
SIGN HERE > ______________________ DATE > __________________
Stop here ‐ you have completed your part of this application.
If you sought assistance for medical expenses, make certain that Section 6A is completed by the treating physician or health care provider. If you sought assistance for non‐medical expenses, make certain that Section 6B is completed by a clergyman, social worker, school representative, government agent, or an official from a social assistance program or public charity that is familiar with your needs. This application will be rejected if the required referral is not completed and signed.
If you are awarded a grant, the Foundation may decide to pay all or a portion of the grant award directly to a creditor such as a utility company or landlord. In that case, the Foundation will provide you with a Check Editing Authorization Form for you to complete for each payee.
This referral form must be completed and signed by the physician or health care provider treating the applicant and/or a member of the applicant's household. Please return this completed form to the applicant.
Patient's name ___________________________________________________________
Health care provider's name __________________________________________________
Area of specialty & title _____________________________________________________
Facility's name (if applicable) _________________________________________________
Address _________________________________________ City ___________________
State __________ Zip __________ Email ______________________________________
How long have you been treating the patient? _____ Date of last examination _____
How many contacts have you had with the patient in the last six months? ________
Describe the patient's significant medical problems:
Describe treatment and response:
Additional comments:
I affirm that all the information I have provided above to assist the named applicant in qualifying for hardship assistance is complete, correct, and true to the best of my knowledge.
SIGN HERE > _________________________________ DATE > ___________________
Health Care Provider's Signature
This referral form must be completed by a clergyman, social worker, school representative, government agent, or an official from a social assistance program or a public charity familiar with the needs of the applicant and/or members of the applicant's household. Please return this completed form to the applicant.
Referring person's name ___________________________________________________
Define your relationship with the applicant:
Please check the box that applies:
Please provide your title: ___________________________
Your organization's name (if applicable) _________________ Phone ____________________
Address ____________________________________________ City ________________
State __________ Zip __________ Email ______________________________________
How long have you known the applicant and/or the members of his or her household? ______________________________________________________________________
How many contacts have you had with the applicant and/or members of his or her household in the last six months? ___________________________________________
Based on your familiarity with the applicant's circumstances, what key factors support the applicant's need for hardship assistance?
I affirm that all the information I have provided above to assist the named applicant in qualifying for hardship assistance is complete, correct, and true to the best of my knowledge.
SIGN HERE > ____________________________DATE >_____________________
Referring Person's Signature
How did the Foundation become aware of this applicant's need for hardship assistance?
Please check all boxes that apply:
Through a clergyman or religious institution Through a social worker or government agency
Through a social assistance program Through a public/community charity
Through other means (briefly describe) __________________________________
Please indicate the factors that influenced the Foundation to provide hardship assistance to this particular applicant and/or household based on the applicant's description of need and input provided by the above referral source(s):
Please check all boxes that apply:
This applicant has no “safety net,” such as nearby family or friends, who can offer assistance.
This applicant has a large number of dependents.
This applicant (or a member of the household) is gravely ill and requires medical attention.
This applicant (or a member of the household) is physically disabled or handicapped.
This applicant (or a member of the household) is emotionally traumatized/psychologically fragile.
This applicant (or a member of the household) is of advanced age.
Other: _______________________________________________________________
Amount of Hardship Grant
The Foundation may give an individual or household a maximum of $5,000 in any 12‐month period, which may be paid to the applicant, to creditors on behalf of the applicant, or to a combination of the two. Please indicate below the total amount of assistance that the Foundation has approved for the applicant. | |||
Check here if any portion of the grant funds should be made payable and sent directly to one or more creditors on the applicant's behalf. Please attach a completed Check Editing Authorization Form for each creditor. | Total portion of grant funds to be made payable to one or more third party creditor(s): | ||
$ _________________________ | |||
Check here if any portion of the grant funds should be made payable directly to the applicant. Delivery options (please check one)
|
Portion of grant funds to be made payable to applicant: | ||
$ _________________________ | |||
TOTAL GRANT APPROVED | |||
$ _________________________ |
By signing below, I certify that I am authorized to sign this application on behalf of the below named foundation. As such, I declare that no substantial contributor to the Foundation, nor any of the Foundation's officers, directors, and/or trustees and members of their respective families or households, will benefit, either directly or indirectly, from the making of this gift. I further declare that the Foundation has not required the applicant to use the proceeds of this gift for travel, study, or similar purposes. I also declare that the proceeds of this gift will not be used to influence legislation or the outcome of any specific public election or to finance voter registration drives. Moreover, I declare that the proceeds of this gift will not be used to satisfy the charitable pledge or obligation of any “disqualified person” with respect to the Foundation, as that term is defined in Section 4946 of the Internal Revenue Code.
Finally, if I have instructed Foundation Source above to send the grant check to me for delivery, I further agree to deliver such check to the applicant promptly upon receipt, and no later than the last day of the Foundation's tax year in which I receive the check. In this event, I understand that the Foundation relies upon delivery on or before this deadline for tax reporting purposes, and Foundation Source will have no liability whatsoever in the event that such delivery is not made on a timely basis.
Name of Foundation ____________________________________________________
Please Print
Name of Authorized Person_____________________ Title:_______________________
Please Print
SIGN HERE > _______________________ DATE > _________________________
Please mail this completed application to Foundation Source at 55 Walls Drive, 3rd Floor, Fairfield, CT 06824, fax it to us at 800‐839‐1764, or email to your Private Client Advisor.
Faxing or emailing this application will enable us to process it without delay, but please be sure to mail us the original signed document for the Foundation's records. If you have any questions about how to fill out this application, please call Foundation Source at 800‐839‐1754 or contact your Private Client Advisor.
ABOUT FOUNDATION SOURCE
Foundation Source is the nation's largest provider of comprehensive support services for private foundations. Our complete outsourced solution includes foundation creation (as needed), administrative support, active compliance monitoring, philanthropic advisory, tax and legal expertise, and online foundation management tools.
Now in our second decade, Foundation Source provides its services to more than 1,500 family, corporate, and professionally staffed foundations, of all sizes, nationwide. We work in partnership with wealth management firms, law firms, accounting firms, and family offices as well as directly with individuals and families. Foundation Source is headquartered in Fairfield, Connecticut.
Have a question? Call 800.839.0054 or send us an email at [email protected].
55 Walls Drive, Fairfield, CT 06824
T 800.839.0054
F 800.839.1764
EXHIBIT A17.1C Hardship Assistance Application (Moderate‐Income Households)
Purpose | Financial assistance for moderate‐income individuals and families in need as a result of job loss, temporary displacement or extraordinary medical need
|
Who qualifies for a resistance? | Only one grant per household in any 12 month period
|
How to apply |
|
Last Name _________________ First Name _____________ Middle Initial ___________
Home Address ____________________________________ Apartment No __________
City _________________________ State _______ Zip ________ Phone ____________
List the name, age, relationship, annual income and social security number of each person, including yourself, living in your household.
Your name | Age | Social Security Number | Annual Income | |
$ | ||||
Name of 2nd person in your household | Age | Social Security Number | Annual Income | |
Relationship to you | $ | |||
Name of 3rd person in your household | Age | Social Security Number | Annual Income | |
Relationship to you | $ | |||
Name of 4th person in your household | Age | Social Security Number | Annual Income | |
Relationship to you | $ | |||
Name of 5th person in your household | Age | Social Security Number | Annual Income | |
Relationship to you | $ | |||
Name of 6th person in your household | Age | Social Security Number | Annual Income | |
Relationship to you | $ | |||
TOTAL ANNUAL INCOME | $ |
ASSETS | LOANS/DEBTS |
Savings $ |
Credit card debt $ |
IRA (s) $ |
Car loans $ |
Value of a house that you own $ |
Mortgage $ |
Other assets (cars, etc.) $ |
Other loans (student loans, etc.) $ |
Total assets $ |
Total loans/debts $ |
NET WORTH (TOTAL ASSETS ‐ TOTAL LOANS/DEBTS) | $ |
TOTAL MONTHLY HOUSEHOLD LIVING EXPENSES | List here your household's monthly expenses. Do not include charitable or voluntary retirement contributions. |
Housing and utilities * $ |
|
Food, clothing and miscellaneous ** $ |
|
Transportation *** | *Housing and utilities. This is the total of your rent or mortgage payment. Add the average monthly household expenses for property taxes, home owner's or renter's insurance, maintenance, dues, fees and utilities. |
Health care $ |
|
Utilities include gas, electricity, water, fuel, oil, other fuels, trash collection and telephone. | |
Child/dependent care $ |
|
Tuition and related educational expenses $ |
**Food clothing and miscellaneous. This is the total of clothing, food, housekeeping supplies and personal care products for all household members for one month. |
Credit card payments $ |
|
Other debts/loans (student loans, etc.) $ |
***Transportation. This is the total of lease of purchase payments, vehicle insurance, registration fees, normal maintenance, fuel, public transportation, parking and tolls for one month. |
Court ordered payments $ |
|
Other expenses $ |
|
TOTAL MONTHLY HOUSEHOLD LIVING EXPENSES |
5A. MEDICAL EXPENSES | 5B. NON‐MEDICAL EXPENSES |
If you check any of the boxes in this section, you must have a doctor or health care provider complete Section 7A to confirm your medical condition. | If you check any of the boxes in this section, you must have a clergyman, social worker, government agent or an official from a social assistance program or public charity complete Section 7B to confirm your need for hardship assistance |
MEDICAL | NON‐MEDICAL |
Medical Equipment/Hardware | Rent/Mortgage |
Medical Visit/Procedures | Health Insurance Premiums (COBRA Payments) |
Dental Visit/Procedures | Vocational Job Counseling/Training |
Prescription Drugs | |
Home Health Care (Aide/Nurse) | |
Therapy (Occupational/Physical/Speech) | |
Psychiatric Care/Counseling | |
Substance Abuse Rehabilitation/Counseling |
Describe the hardship that brought about your need for assistance:
____________________________ Initials of Applicant |
I affirm that I qualify for hardship assistance based on the income and assets criteria specified above and, further, I affirm that my current income and asset levels require these additional funds to meet the needs described in Section 5. |
I affirm that all the information I have given above in order to qualify for hardship assistance is complete, correct and true to the best of my knowledge. I understand that I may be denied assistance if any iof the above is false, and that I may be required to repay any assistance that I get based on false or incomplete information. Upon request, I agree to provide the granting foundation or its Administrator with evidence of the information I have given on this application. I understand that this application becomes the property of the granting foundation when submitted. |
Stop here ‐ you have completed your part of this application.
If you sought assistance for medical expenses, make certain that Section 7A is completed by the treating physician or health care provider. If you sought assistance for non‐medical expenses, make certain that Section 7B is completed by a clergyman, social worker, government agent or an official from a social assistance program or public charity that is familiar with your needs. This application will be rejected if the required referral is not completed and signed.
Return this completed application to the person who gave it to you.
This referral form must be completed and signed by the physician or health care provider treating the applicant and/or a member of the applicant's household.
The patient has requested financial assistance from a private foundation. In order for the patient to qualify for assistance, we need to verify the patient's medical condition. Please return this completed form to the patient.
Patient's name _______________________________________________
Health care provider's name __________________________________
Area of speciality & title ___________________________________________
Facility's name (if applicable) ___________________________________________
Address ________________________________________________________________
City, state and zip ________________________________________________________
Phone __________________________________________________________________
How long have you been treating the patient? ______________ Date of last examination ____________________________________________________________________
How many contacts have you had with the patient in the last six months? _____________________________
Describe the patient's significant medical problems:
Describe treatment and response
Additional comments
I affirm that all the information I have given above in order to assist the named applicant qualify for hardship assistance is complete, correct and true to the best of my knowledge.
This referral form must be completed by a clergyman, social worker, government agent or an official from a social assistance program or a public charity familiar with the needs of the applicant and/or members of the applicant's household.
The applicant has requested financial assistance from a private foundation. In order for the applicant to qualify for assistance, we need to verify the extraordinary circumstances supporting the applicant's claim. Please return this completed form to the applicant.
Applicant's name ______________________________________
Referring person's name ______________________________________
Define your relationship with applicant
Please check the box that applies
Clergyman
Your title _____________________________________________________________
Social worker
Your title _____________________________________________________________
Government agent
Your title _____________________________________________________________
Official from a social assistance program or a public charity
Your title _____________________________________________________________
Your organization's name (if applicable) _________________ Phone ___________________
Address ________________________________________________________________
City, state and zip ________________________________________________________
How long have you known the applicant and/or the members of his or her household? ________________________________________________________________________
How many contacts have you had with the applicant and/or members of his or her household in the last six months? ___________________________________________
Based on you familiarity with the applicant's circumstances, what key factors support the applicant's claim for hardship assistance?
I affirm that all the information I have given above in order to assist the named applicant qualify for hardship assistance is complete, correct and true to the best of my knowledge.
What factors influenced you to provide hardship assistance to this particular individual and/or household?
Please check all boxes that apply
This individual has no “safety net,” such as nearby family or friends, who can offer assistance.
This individual has a large number of dependents
This individual (or a member of the household) is gravely ill and requires medical attention
This individual (or a member of the household) is physically disabled or handicapped
This individual (or a member of the household) is emotionally traumatized/ psychologically fragile
This individual (or a member of the household) is of advanced age
Briefly describe any other factors that influenced your decision to provide hardship assistance:
How did this applicant's needs came to your attention?
Please check all boxes that apply
Through a clergyman or religious institution | Through a social worker or government agency |
Through a social assistance program | Through a public/community charity |
Through other means (briefly describe) | ______________________________________ |
Amount of Hardship Grant
You may give an individual or household a maximum of $5,000 in any 12‐month period in a single lump sum or smaller periodic installments. Please indicate the total amount of assistance you would like to approve for the applicant for the next 12 months as well as the amount of the initial grant. The initial grant can be in any amount up to the $5,000 maximum
Total Grant Approved $______________ Initial Grant Amount $______________
Once the applicant's eligibility for assistance has been confirmed, we will create an account for the applicant within your foundation. Any initial grant will be processed immediately and sent to you for delivery to the applicant. Subsequent grants to the applicant can be initiated from your foundation web site or by calling Foundation Source Client Services at 800‐839‐1754. Over the next 12 months, you may make grants to the applicant as often as you wish until the applicant's account within your foundation has been entirely depleted.
________________________ Initials of President |
I agree to deliver to the applicant of this form the grant check provided to me by Foundation Source I agree to deliver the check promptly upon receipt, and, in any case, not later than the last day of the foundation's taxable year in which I receive the grant check. I understand that Foundation Source relies upon proper delivery on or before this deadline, and that Foundation Source will have no liability whatsoever in the event that such delivery is not made on a timely basis. |
________________________ Initials of President |
As President of the foundation, I declare that no substantial contributor to the foundation, now any of the foundation's officers and/or directors and members of their respective families or households, will benefit, either directly or indirectly, from the making of this gift. I further declare that this gift is unrestricted and that the foundation has not required the applicant to use the proceeds of this gift for travel, study, or similar purposes. Finally, I declare that the proceeds of this gift will not be used to influence legislation, to finance voter registration drives, or to satisfy the charitable pledges or obligations of any person or organization |
Name of Foundation | _____________________________________________________ |
Please Print | |
Name of President | __________________________________________________ |
Please Print |
Please mail this completed application to Foundation Source at 55 Walls Drive, 3rd Floor, Fairfield, CT 06824, or fax it to us at (800) 839‐1764.
Faxing this application will enable us to process it without delay, but please be sure to mail us the original document for the foundation's records. If you have any questions about how to fill out this application, please call Foundation Source Client Services at (800) 839‐1754.
Name of Organization: ____________________________________________________
EIN: ____________________________________ Website Address: ________________
Mailing Address: ________________________________________________________
____________________________________________________________________
Contact Person: ____________________________________ Phone: ____________
Yes | No |
5a. Does your organizing document specify that your organization's assets must be distributed for charitable purposes upon dissolution?
Yes | No |
If yes, skip to question #6. Otherwise, please answer 5b immediately below.
5b. The above requirement is also satisfied if your organization was incorporated in Arkansas, California, Louisiana, Massachusetts, Minnesota, Missouri, Ohio, or Oklahoma. Is your organization a corporation formed in one of the listed states?
Yes | No |
Yes | No |
Yes | No |
Yes. The address is: ____________________________________________________
No. State where the services are held and how the site is selected:
New Testament | Old Testament |
Qur'an | Other: _____________ |
The organization does not have a written creed or statement of faith |
Catechism | Talmudic Law/Halacha | Hadith/Sunnah |
Other (please describe): _____________________________________________ | ||
The organization does not have a formal code of doctrine and conduct. |
Yes | No |
Yes | No |
Yes | No |
Yes | No |
Yes | No |
Board of Directors | Board of Trustees | |
Deacon Board | Other: | _____________________ |
The organization does not have a distinct supervisory structure. |
The undersigned represents that he or she has the authority to sign this application on behalf of the above organization, that the information above is true and accurate in all respects, and that Foundation Source will be notified if any of the organizational or operational information contained herein changes or if the organization is officially recognized by the IRS as tax-exempt.
Signature: _________________________________ Date: ____________________________
Print Name: _________________________________ Title: ___________________________
3.142.171.253