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Abstract: 

Many private foundations carry out their exempt purposes by making grants to other organizations. A grant that is made to an unrelated public charity is treated as a qualifying distribution for purposes of IRC §4942. However, a contribution to a non-operating private foundation generally does not constitute a qualifying distribution. In addition, unless the grant-making foundation exercises expenditure responsibility, the grant will be treated as a taxable expenditure under IRC §4945. As a result, a grant-making foundation has reason to be concerned about whether a grantee organization is classified as a public charity, and whether the grant-maker can rely on that status. Further, for an individual philanthropist, the amount that may be claimed as a charitable contribution deduction for contributions of certain types of property, and the percentage limitations that may affect the amount that is deductible currently or carried forward turns on whether the donee is a public charity or private foundation. This article discusses both long-standing and newly issued guidance regarding how to determine an organization’s public charity status.

Keywords: Different Bases for Public Charity Status; Determination Letters; IRS Databases; Group Exemption Letters; Catch-All Safe Harbors; Aggregate Support Safe Harbors; Safe Harbor for Unusual Grants; Rev. Proc. 2018-32

Affiliations:  1: Clark Hill Strasburger.