EFTA00598261.pdf

Advising Private Foundations httyllwww.journalofaccountancy.comnssues72008/Apr/AdvisingPriv... OF Mona% sa RED It I • stamen I AICPA Iowa I Mai ACCOUNTANCY HOW CURRENT ISSUE MM. BROwSE TCPICS ABOUT SUBSCRIBE ADVERTISE mome > AIM 2008 > Attivriag Private f oundalions ACAlft vevr t , PI I Fair Value rt. PER..,;YAL t V.1YC t PLA.....IND Measurements Workshop Advising Private Foundations Despite their administrative and regulatory complexity, these philanthropic sehicles ire titling oft. Feb 26 - Feb 27. 2009 BY BROR P PICALuVIER ARO MOTO R. YODER • 20Ef AICPA Boardroom In the arsenal of estate penning. private lcuidatons have traditionally raged among the lag gun New York City Nth their retina lomtalty and fulenwve tax natts, they have been considered the prover..., of the Recommended CPt truly wealthy - people with S1 Son a mere to ckspose of charitably. The belief that lesser largesse coact be bolter served by donor-advised funds and cedar types of support ng Credit up to 16 organizations (see '71-e Rai Tr..ty Are Differert.' Jam. April 04_ page 32) is charging -. Click Here arre"olgt The Pension Protection Act (PPA) of 2036 has artailed many of the tax and Other advantages enoyed by those two alternative philanthropic reticles Today, small family fouldations with assets under SI radon make tp nearly 60% of all foundatons One factor drivng the growth is the KEEP UP ON ulpreCedeMed Pander Of wealth 10 the post-boomer generation that has begun and s likely to TIE LATEST IN Atkrk_kt ;Nor accelerate in coming yeas. Often. these small fouxlatons ate admnistered by Caney Members. who rarefy have expertise regarding the complex tax regulations nolved Journal of Accountancy Few al these reasons. eesetopng a niche practice n private kundations poses growth posstlxibes for CPA firms. according to I-bey M Partne. CP-gape-met with BKO LIP, one of the 10 largest CPA and advisory frets n the U.S.. where her areas of expertise ndude advising private fandations. CPA firms are increasirgty lkay to be acNising founded benefactors of family landabons. CPAs can be a vakabie restate for mouthing compliance with the many lax laws I or en tao.ci snaps AYE Ilasubre wren tree* to errata kuldations Aerareress of the nuances of pivate fardahon laws is especially rnportant now. given the ',creased scrubny of all tax-ere pt agars:atom by Congress and the IRS. Advisers can help prevent inadvertent but costly wolation of the tax laws pecukar to private laudations. Key issues for benefactors considenng a private foundation include: • GOmparisora to other options (donor-achtsed find or supporting orbanualion) • Praha:MOOS on self-dean) • Excise taxes on net investment Income • Taxes on undatnbuted Weenie • Taxable expendthees and experdture responsibility • Jeopardized investmerls and excess business Widnes Private foundations operate exclusively fa relogida Charitable, %Gentile or Similar anklets as described in IRC § 501(cx3) are are exempt from insane tax but commonly pay excise taxes on net investment ncome at, sometimes, as penalties. They are usually tweed by a single COOlfibfACIf. URI', as a farmty or aspiration rather than by We general public, as wan a ethic chanty They may ether directly COInatt exempt actives (operating fandations) or make grants and distnbutons canisters with their exempt steaks (ron-Operating ECtinatIODS). NtrI00:16 private COODbalen often DEPP011 Other tax-exempt chartable Orbalnal/011S. a private fardaton is not what tax law calls a 'supporbrg organization.' A sweating organization exclusively benefits. is controlled by. or operates in 0>vieeirco with a pittic charily toneeeiess. CPAs shottd be familiar with Its far types of six:poring organizations (see Exhibit I for resources) when wham; private foundation. Grants made to a Type Ill nOhlenClionally integrated supporting Or9OREVREDO regime additional 130.11EStfallte and reporting re:pigments. In addition grans to this type of supporting organization we rot irrJuded in quakfying astnIxtions for puposes of meetrg the distribution IeblEferheri$ (EXHIBIT 1 MISSING) PialvATE FOUNDATION VS DONOR-ADVISED FUND CPAs shotkl assist hinders in deleffIthIllf) t a private foundation is the test chartable vencle for ther needs One alternative to estabhhing a private foundation is to establish a dcriceachised laid viol, a sponsoring organization Donors make teat:Cabana to sponsoring publiC Charities. These fuels we separately accounted for and associated with a named donor The donor then has a reasonable eveclaton d berg able to Exhise the spa-sang organaaton as to the dembuon of tnese funds The donors role must be whiscry and the sponsorng aganizaticn must exercise 14 control and kanance powers over the donated funds Ior2 12/16/2008 11:47 AM EFTA00598261