Private Foundations — Taxable Expenditures (Sec. 4945) (Portfolio 474)

The Bloomberg Tax Portfolio No. 474, Private Foundations — Taxable Expenditures (Sec. 4945), discusses in detail the restrictions placed upon the activities of private foundations under §4945. Enacted by the Tax Reform Act of 1969, §4945 imposes an excise tax upon “taxable expenditures” of a private foundation, defined by §4945(d) as including five separate categories of expenditures.

The Portfolio discusses the background of §4945 and outlines the elements of each category of “taxable expenditure.” Taxable expenditures are amounts paid: (1) to attempt to influence legislation; (2) to influence the outcome of a public election or to carry on most voter registration drives; (3) as a grant, with exceptions, to an individual for travel or study; (4) as a grant to certain organizations; and (5) for any noncharitable purpose. The Portfolio also provides guidance in problem areas, including changes made by the Pension Protection Act of 2006, discusses exceptions to the §4945 restrictions, and provides a technical analysis of the first and second-tier excise taxes imposed on foundations and foundation managers for the making of taxable expenditures.

The Worksheets include sample documents to which reference is made in the Portfolio.

For a discussion of the other excise taxes imposed on private foundations, see 470 T.M., Private Foundations — Self-Dealing (Section 4941); 473 T.M., Private Foundations — Excess Business Holdings; 468 T.M., Private Foundations — Section 4940 and Section 4944; and 880 T.M., Private Foundations — Distributions (Sec. 4942). For a discussion of the definition of private foundations and the distinction between private foundations and public charities, see 456 T.M., Private Foundations and Public Charities — Definition and Classification.

This Portfolio should be cited as Sanders, Roady and Berry, 474 T.M., Private Foundations — Taxable Expenditures (Sec. 4945).