CHAPTER SIX
Mandatory Distributions
§ 6.2 ASSETS USED TO CALCULATE MINIMUM INVESTMENT RETURN
(c) Exempt Function Assets
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§ 6.5 QUALIFYING DISTRIBUTIONS
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to a Type III supporting organization that is not a functionally integrated Type III supporting organization,111.1 or to a Type I supporting organization.111.2 a Type II supporting organization,111.3 or functionally integrated Type III supporting organization111.4 if a disqualified person with respect to the private foundation controls the organization or a supporting organization with respect to it (or if the IRS determines by regulations that a distribution to the organization otherwise is inappropriate),
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A qualifying distribution may be made by a private foundation to a foreign organization, that does not have a determination that it qualifies under the U.S. public charity rules, if the grant is made pursuant to a good-faith determination that it so qualifies based on current written advice received from a qualified tax practioner.114.1
(a) Direct Grants
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*p. 299, note 120. Delete sentence and substitute:
Nonetheless, unless the grantee is an exempt operating foundation (see § 3.1A), the grantor private foundation must exercise expenditure responsibility over the grant (see §§ 9.4A, 9.6).
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Compliance with this pass-through (out-of-corpus) distribution rule is nicely illustrated in Priv. Ltr. Rul. 201719004. Also Priv. Ltr. Rul. 201437014 (involving a situation where a private foundation made start-up and ongoing grants to a private operating foundation, which it controlled).
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A grantee organization may elect to treat as a current distribution out of corpus any amount distributed in a prior tax year which was treated as a distribution out of corpus,130.1 provided that the amount has not been availed of for any other purpose (such as a carryover or a redistribution), the corpus distribution occurred within the preceding five years, and the amount is not subsequently availed of for any other purpose.130.2
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135.1
E.g., Priv. Ltr. Rul. 201335020.
(e) Set-Asides
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- A plan for an “innovative and dynamic educational” website that will focus on “critical scientific global issues, including global warming, climate control and effects on the planet and global economics; population control, overpopulation and future diminishment of resources and relation to extinction of species; and nuclear disarmament and controlling proliferation of weapons of mass destruction.”186.1 The IRS was advised that development of this website is a “substantial project” that will require “resources and staff time over the course of many years.”
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As another illustration, the IRS found good cause for a significant extension of time for paying funds under a set-aside, in connection with a student-debt-reduction program for science, technology, engineering, and mathematics workers who agreed to live and work for 10 years in a state.194.1
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Request for advance approval of this type of set-aside, though not required, can be submitted on Form 8940, Request for Miscellaneous Determination, included in new materials for p. 682. The fee is $1,000.
§ 6.7 SATISFYING THE DISTRIBUTION TEST
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Since a deficiency in the required mandatory payout is commonly discovered when the Form 990-PF is being prepared after the end of the year, the penalty for underdistribution is often doubled, or 60 percent.
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When a private foundation needs to make additional distributions to correct a prior year under-distribution, it is important not to include the correction amount in its tallies to evaluate satisfaction of the current year amounts paid out. Not only the currently required amount, but also the additional correction amount must be paid out to correct the prior year deficiency.