Focus on Foundations: The Dangers of Charitable Events, Tickets and Pledges - Revisited

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Focus on Foundations: The Dangers of Charitable Events, Tickets and Pledges - Revisited
November 29, 2006
From the December 2006 Riker Danzig Tax and Trusts & Estates UPDATE.
Area(s) of Practice:
Estate Planning & Administration, Tax Law

Our Focus on Foundations article in our March 2004 UPDATE admonished private foundations not to pay for charitable event tickets for individual attendees. That article prompted many inquiries from our private foundation clients.

The most troubling question related to situations where foundations wished to have outside trustees, directors, or officers, some of whom may be serving without compensation, attend charitable events on behalf of the foundation.

Private Letter Ruling 9021066 still stands for the proposition that even cost-sharing (where the foundation pays the tax- deductible portion, and the individual pays the non-deductible portion) constitutes inappropriate self-dealing. Thus the "best practices" policy is still to have the attendees pay for their own tickets (or for foundation substantial contributors to buy the tickets individually and then give them to the desired attendees).

Nevertheless, Professors Bruce Hopkins and Jody Blazek, in their highly-regarded treatise, Private Foundations (Second Edition, 2003, John Wiley & Sons, Inc., § 5.8), opine that if the attendee really would prefer not to attend the event, it is probably not self-dealing for the foundation to provide him or her with a ticket.

Thus, we would like to introduce a new concept, called the "groan" rule: If the trustee, director, etc., groans when the foundation tells him or her to attend the event on behalf of the foundation, then the foundation can probably safely pay for the ticket.