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| home > policy/legislation > through 2006 > comments from the charitable community > oppose senate provision increasing the tax base
Senate Tax Reconciliation Eliminates Grantmaking of Private Foundations to Supporting Organizations Jan. 19, 2006 Background Private foundations currently face limited obstacles should they wish to offer a grant to any type of supporting organization. Supporting organizations are nonprofit entities that are a subsection of an existing nonprofit organization (i.e. the Police Widow’s Fund). In addition, many endowment funds are set up as Type I supporting organizations of a public charity, and as a result of the provision in S. 2020, private foundations could no longer make grants to university and/or hospital foundations organized as supporting organizations. Oppose the Provision Effecting Private Foundation Grantmaking to Supporting Organizations in the Senate Bill According to Section 345 of the Senate bill, a non-operating private foundation may not treat any amount paid to a supporting organization as a qualifying distribution under Section 4942 of the tax code. In addition, this amount would be treated as a taxable expenditure under Section 4945 of the tax code. Section 345 Would Eliminate the Ability of Private Foundations to Make Many Grants In addition to the endowments and other supporting organizations, many humanitarian charities – such as those established within the police and fire departments for those lost in the line of duty – are set up as supporting organizations and there has not been any alleged abuse to justify limiting private foundations in their ability to give to these organizations. Furthermore, these proposals would preclude the ability to terminate a private foundation by distributing its assets evenly to Type I and Type II supporting organizations. It is the Alliance for Charitable Reform’s belief that these practices should be encouraged, not discouraged. The Alliance for Charitable Reform does not believe with these provisions and believes that they should be eliminated before final passage; however, at a minimum, these provisions should be revised to apply only grants made to supporting organizations controlled directly or indirectly by disqualified persons with respect to the private foundation. |
