Advocacy and Lobbying

Value of Philanthropy

MatthewCain — Fri, 23 May 2025 17:11:48 +0000

Value of Philanthropy MatthewCain Fri, 05/23/2025 - 13:11

Value of Philanthropy

Download these one-pagers to help show the value of philanthropy in communities across the country.

These documents highlight the value of philanthropy in specific states:

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Permissible Exempt Purposes Under 501(c)(3)

brandon.cox@cof.org — Tue, 20 May 2025 15:21:10 +0000

Permissible Exempt Purposes Under 501(c)(3) brandon.cox@cof.org Tue, 05/20/2025 - 11:21

Permissible Exempt Purposes Under 501(c)(3)

This page outlines the range of purposes that qualify an organization for tax exemption under section 501(c)(3) of the Internal Revenue Code. It explains how the IRS and courts interpret key terms — especially "charitable" — and how those interpretations shape eligibility.

Permissible Exempt Purposes Under 501(c)(3)

The Tax Code under section 501(c)(3) provides tax exemption for organizations that are organized and operated exclusively for certain purposes: charitable, religious, educational, scientific, literary, testing for public safety, fostering national or international amateur sports competition, and preventing cruelty to children or animals.

The specific meanings of those terms are further clarified in the Treasury Regulations, with much of the focus on the definition of the word charitable. The term charitable is used in its generally accepted legal sense and includes relief of the poor, the distressed, or the underprivileged; advancement of religion; advancement of education or science; erecting or maintaining public buildings, monuments, or works; lessening the burdens of government; and promotion of social welfare (lessening neighborhood tensions, eliminating prejudice and discrimination, defending human and civil rights secured by law, and combating community deterioration and juvenile delinquency).

These concepts are further expanded upon and defined through numerous IRS rulings and court decisions going back decades. The Tax Court of the United States found“ charity in its narrow sense includes only gratuities bestowed upon the needy or for the relief of suffering—in its broader meaning, charity is not so limited but also embraces any benevolent or philanthropic objective not prohibited by law or public policy which tends to advance the well-doing and wellbeing of man.”

Relief of the poor, the distressed, or the underprivileged
Advancement of religion
Advancement of education or science
Erecting or maintaining public buildings, monuments, or works
Lessening the burdens of government
Promotion of social welfare

Charitability of Climate-Related Activities
Charitability of Diversity, Equity and Inclusion (DEI) Activities
Charitability of International Grantmaking

Relief of the poor, the distressed, or the underprivileged

Assistance to individuals who are needy, meaning that they lack the necessities of life, involving physical, mental, or emotional well-being, because of poverty or temporary distress. This can include assistance to low-income individuals and those suffering from temporary hardship or who are the victims of a disaster. It can also include assistance to the elderly, sick, or disabled persons. The individual recipients of assistance must be members of a charitable class, and selection of recipients must be made pursuant to an objective, nondiscriminatory basis related to the purposes for which the assistance is being provided.

Advancement of religion

Because of the First Amendment, the government cannot establish a narrow definition of religion. Generally, the IRS will look at 1) whether the particular beliefs of the organization are truly and sincerely held, and 2) whether the practices and rituals associated with those beliefs are legal and consistent with public policy (i.e., no exemption for sects practicing ritual illegal drug use). The public policy test also resulted in a loss of exemption for Bob Jones University due to its prohibition on interracial relationships between students, even though it claimed that policy was based on sincerely held religious beliefs.

Advancement of education or science

Often furthered through educational scholarships to help individuals obtain an education or through grants to organizations that advance the arts, humanities, and sciences. Although courts and the IRS have clearly established that a school with racially discriminatory admissions policies cannot qualify for tax-exempt status, the IRS has also ruled that “[a] policy of a school that favors racial minority groups with respect to admissions, facilities and programs, and financial assistance will not constitute discrimination on the basis of race when the purpose and effect is to promote the establishment and maintenance of that school's racially nondiscriminatory policy as to students.”

Erecting or maintaining public buildings, monuments, or works

Providing parks and recreational facilities is not a charitable activity in and of itself. It is charitable only if it provides a community-wide benefit. Organizations whose activities are exclusionary or discriminatory will not be deemed to be operating in the public interest and do not qualify for tax exemption. This function is almost always used in conjunction with lessening the burdens of government, suggesting that these public buildings, monuments, or works are understood to be government-owned facilities. It is unlikely to be the sole justification for exemption, absent some connection to government.

Conservation organizations could potentially fall under this justification as long as their efforts in conserving environmentally significant lands benefit the entire community. Activities directed at combating climate change have been approved under the same rationale as conservation organizations, and similarly, their activities must provide a “direct environmental benefit to the public” rather than environmental benefits that are “incidental and tangential.”

Lessening the burdens of government

There needs to be some objective manifestation by the governmental unit that it considers activities of the organization to be its burden. This is not generally a justification that an organization can simply claim for itself without any involvement on the part of the governmental unit. The organization must demonstrate that a governmental unit considers the organization to be acting on the government’s behalf, thereby actually freeing up government assets that would otherwise have to be devoted to that particular activity. The fact that an organization is engaged in an activity that is sometimes undertaken by the government is insufficient to establish the governmental burden.

This category of activities includes:

Lessening neighborhood tensions
Eliminating prejudice and discrimination
Defending human and civil rights secured by law, and
Combatting community deterioration and juvenile delinquency.

Rulings on these charitable justifications have resulted in approvals for organizations focused on nondiscrimination in housing availability, equal access to job opportunities, stimulating economic development in high density urban areas by low-income minority and disadvantaged groups, and preventing physical blight in economically depressed neighborhoods. It is worth noting that many of these IRS rulings date from the mid-1960s through the early 1980s.

Charitability of Climate-Related Activities

Many charitable organizations, including grantmaking organizations, are engaging in climate-related work as part of their charitable mission. For some, their “climate-related work” includes conservation, reduction of greenhouse gas emissions, transition to “clean” or less polluting energy sources, ameliorating harm caused by climate/energy-related accidents (ex., oil spills), among other activities. While the Tax Code does not explicitly name “climate” as a charitable activity, many organizations have found ways to include this work with their charitable missions.

Most of the guidance around environmental activities was issued in the late 1960s and early to mid-1970s. Over the past fifty years, significant developments have occurred in scientific research and understanding of climate change. Many charitable organizations tie their climate-related activities and goals to other charitable purposes, like education. In addition, some climate-related grantmaking has extrapolated private letter rulings and exemption denials or hired legal counsel to guide their work.

Over the past 30 years, the IRS has granted tax-exempt status to many organizations working on climate change and fossil fuel reduction, particularly when tied to education or conservation. The IRS approved organizations that engage in the following:

An organization formed to buy and maintain forest land as a “sanctuary for wild birds and animals” and would make it open to the public for educational purposes;
An organization formed to “preserve and improve a lake used extensively as a public recreational facility” (the charitable activity being cleaning the water in the lake and allowing for recreational use of the lake);
An organization formed to preserve the natural environment by “buying ‘ecologically significant undeveloped land’ and maintaining the land” (the charitable activity being preserving the land for future generations so they can access the natural environment).

However, an exemption is often denied when the private benefit is too significant or the public benefit is too limited.

In addition, under Section 170(h)(4)(A), a contribution that is made for any one of the following four conservation purposes qualifies for a charitable deduction: “(i) the preservation of land areas for outdoor recreation by, or the education of, the general public; (ii) the protection of a relatively natural habitat of fish, wildlife, or plants, or similar ecosystem; (iii) the preservation of open space (including farmland and forest land) where such preservation is-- (I) for the scenic enjoyment of the general public, or (II) pursuant to a clearly delineated federal, state, or local governmental conservation policy, and will yield a significant public benefit, or (iv) the preservation of an historically important area or a certified historic structure.”

Charitability of Diversity, Equity and Inclusion (DEI) Activities

Eliminating prejudice and discrimination is one of the activities described in the definition of "charitable" in the Treasury Regulations interpreting Section 501(c)(3) of the Tax Code. Accordingly, in granting tax exemptions to organizations engaged in these activities, the IRS has supported efforts to lessen prejudice and discrimination or provide support to underrepresented individuals or groups.

In addition, regulations relating to private foundation scholarships still include an example that approves a program that solely provides funding to members of a certain ethnic minority (Treas. Reg. § 53.4945-4(b)(5) Example 2).

The IRS has offered specific guidance to specific organizations that qualify as charitable and tax-exempt, including organizations with the missions listed below (note that much of this guidance dates to the 1960s and 1970s but continues to be highlighted in recent IRS publications):

Investigates causes of community tension, discrimination, physical deterioration, and juvenile delinquency, disseminates its findings, and attempts to educate the public.
Investigates the existence of discrimination and seeks compliance with applicable laws.
Studies employment conditions and informs the public on the advantages of non-discriminatory hiring.
Promotes racial integration in housing by educating the public about integrated housing
Educates the public about integrated housing and constructs new housing to reduce racial and ethnic imbalances.
Seeks to eliminate discrimination against minorities seeking employment in construction by recruiting, educating, and counseling workers.
Provides support to businesses in low-income, minority communities for the relief of poverty, the elimination of prejudice, the lessening of neighborhood tensions, and the combating of community deterioration in certain economically depressed areas, even though its program of financial assistance and other aid may go towards businesses that themselves may not qualify as charitable.

Charitability of International Grantmaking

Foreign Grantmaking Generally

The Tax Code and regulations that govern charitable contributions and the activities and purposes of tax-exempt organizations fully support the ability of U.S.-based exempt organizations to make charitable grants to foreign charities and other entities. The list of charitable purposes enumerated under section 501(c)(3) and section 170(c)(2)(B) does not distinguish between charitable activities or beneficiaries located within the US and those located in foreign countries.

While charitable contributions cannot be deducted for direct contributions to foreign organizations, the regulations under section 170 make it clear that a charitable deduction is allowed for contributions made to domestic charities “even though all, or some portion, of the funds of the organization may be used in foreign countries for charitable or educational purposes.”

IRS guidance regarding the deductibility of such contributions has focused on whether the US entity has sufficient discretion and control over the contribution, and, in the case of private foundations, whether certain procedures are in place to ensure the grant funds are used for exclusively charitable purposes.

Discretion and Control

Two examples of situations where a domestic organization demonstrates sufficient discretion and control over a charitable contribution that is ultimately used to fund activities carried out in a foreign country are:

The domestic organization is the “real beneficiary” of the contribution, but the domestic organization subsequently makes grants to a foreign charity for purposes that it has reviewed and determined to be in furtherance of its own exempt purposes. The grants are funded by the domestic organization’s general funds, and although that organization may generally solicit from the public, no specific funds are raised for the foreign grants.
A domestic charity solicits for a specific project of a foreign counterpart organization, but the domestic charity’s board has taken steps to review the project before approving any funding and continues monitoring the grantee’s use of all grant funds to ensure adherence to the domestic charity’s goals. Although the funds are earmarked for a foreign project, the domestic charity demonstrates sufficient control before solicitation, such that the domestic organization still has control and discretion over the use of the contributions.

Regulatory Provisions

Additional regulations address foreign grantmaking and provide less burdensome procedures in some circumstances.

Equivalency Determinations: If a private foundation makes a good faith determination that a foreign grantee organization is equivalent to a U.S. public charity then expenditure responsibility is not required. The regulations provide a safe harbor for the good-faith determination if the organization received written advice from a qualified tax practitioner that shows that the organization would likely qualify as a public charity or operating foundation.
Grants to a foreign governments or international organizations: A grant to a foreign government or its agencies, or to an international organization designated as such by Executive Order, may be treated by the grantor as a grant made to a public charity even if the grantee is not described in section 501(c)(3).

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One, Big, Beautiful Bill Frequently Asked Questions

kayla.roberson@cof.org — Mon, 19 May 2025 14:35:13 +0000

One, Big, Beautiful Bill Frequently Asked Questions kayla.roberson… Mon, 05/19/2025 - 10:35

One, Big, Beautiful Bill Frequently Asked Questions

As the One, Big, Beautiful bill containing the many Republican priorities moves through Congress under the reconciliation process, this page aims to answer frequently asked questions regarding the bill's key provisions impacting the philanthropic sector and charitable giving.

This page will be updated regularly as the legislation moves through the legislative process. View a full summary of the bill. For the most up to date information, join our Public Policy Action Network and sign up for Washington Snapshot to receive regular policy updates and stay engaged.

Last Updated on May 19, 2025.

Related Organizations

Assets of related organizations are aggregated with the assets of a private foundation for purposes of determining the applicable excise tax rate. Under the proposed legislation, a related organization is an organization (a) that controls or is controlled by the private foundation or (b) is controlled by one or more persons that also control the private foundation. This could apply to a large variety of tax-exempt and non-tax-exempt entities.

Corporations and Corporate Foundations:

The general assets of corporations which have affiliated private foundations are unlikely to be included in a private foundation’s asset calculation. Unless the related organization is controlled by the private foundation in question, only assets of the related organization which are “intended or available for the use or benefit” of the private foundation will be aggregated under this provision. Most private corporate foundations do not control the company that established them, and the company’s general assets are not likely to be considered intended or available for use by the private foundation unless or until the company contributes any of its assets to the private foundation.

Public Charities, Community Foundations, and Donor-Advised Funds:

It is unlikely that a community foundation or other public charity—even those which have received support from a private foundation—would be considered a related organization of a private foundation unless the public charity and private foundation are controlled by the same people. The mere presence of a board member of a private foundation on the board of a community foundation should not mean that it is a related organization. There would likely need to be significant overlap of the organizations’ boards so that the private foundation board members constitute a majority of the community foundation’s board and effectively control its actions.
Assets in donor-advised funds that were established and/or advised by private foundations would not likely be aggregated with the private foundation’s assets because donor-advised funds are not legally controlled by the private foundation. Rather, the assets held in donor-advised funds are the legal property of the sponsoring public charity and under the control of that public charity.

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Estimated Increases in Taxes on Net Investment Income for US-Based 501(c)(3) Private Foundations

council-webteam — Thu, 15 May 2025 20:08:34 +0000

Estimated Increases in Taxes on Net Investment Income for US-Based 501(c)(3) Private Foundations council-webteam Thu, 05/15/2025 - 16:08

Estimated Increases in Taxes on Net Investment Income for US-Based 501(c)(3) Private Foundations

Data Provided by Candid

Increasing taxes on private foundations means fewer dollars to charitable organizations, from food pantries to disaster relief groups. The below data from Candid shows that in almost every state, private foundations will have to pay millions more in taxes, crippling their ability to respond to the crises of today and tomorrow. As federal funding decreases and needs in communities continue to grow, Congress should be making it easier for private donors to support community needs, not harder.

Note: Important disclaimers and explanations of this data are below the table.

By State

State	# of Private Foundations	Current Reported Taxes ($)	Estimated Future Taxes ($)	Estimated Tax Increase ($)
AL	1,390	$2,483,251.00	$3,458,720.76	$975,469.76
AK	144	$914,618.00	$2,668,778.60	$1,754,160.60
AZ	1,634	$4,977,518.00	$9,958,475.23	$4,980,957.23
AR	610	$10,939,751.00	$50,243,969.51	$39,304,218.51
CA	12,450	$180,039,620.00	$782,874,357.91	$602,834,737.91
CO	2,251	$15,791,495.00	$40,076,328.49	$24,284,833.49
CT	1,826	$11,322,465.00	$26,985,761.51	$15,663,296.51
DC	605	$5,998,856.00	$15,405,992.81	$9,407,136.81
DE	2,656	$19,499,360.00	$36,639,301.37	$17,139,941.37
FL	9,079	$34,082,193.00	$69,841,647.02	$35,759,454.02
GA	2,611	$14,794,300.00	$39,283,917.83	$24,489,617.83
HI	618	$1,658,240.00	$2,629,425.00	$971,185.00
ID	549	$1,933,793.00	$3,870,775.55	$1,936,982.55
IL	5,754	$46,501,751.00	$148,474,771.57	$101,973,020.57
IN	1,696	$36,125,993.00	$221,969,677.64	$185,843,684.64
IA	1,172	$4,131,942.00	$6,962,041.65	$2,830,099.65
KS	1,048	$4,136,129.00	$8,511,741.98	$4,375,612.98
KY	995	$3,599,213.00	$7,045,955.23	$3,446,742.23
LA	971	$2,642,015.00	$4,483,111.17	$1,841,096.17
ME	551	$2,345,888.00	$4,494,986.44	$2,149,098.44
MD	2,174	$16,238,909.00	$45,075,268.40	$28,836,359.40
MA	3,963	$28,982,285.00	$63,022,547.22	$34,040,262.22
MI	2,966	$24,197,911.00	$84,061,412.27	$59,863,501.27
MN	1,755	$14,690,199.00	$38,283,770.14	$23,593,571.14
MS	464	$1,120,459.00	$1,776,874.00	$656,415.00
MO	2,320	$14,604,878.00	$38,978,939.67	$24,374,061.67
MT	495	$1,511,471.00	$3,020,224.28	$1,508,753.28
NE	726	$12,788,499.00	$40,260,579.37	$27,472,080.37
NV	2,782	$7,591,439.00	$14,093,458.48	$6,502,019.48
NH	645	$1,760,768.00	$1,960,903.00	$200,135.00
NJ	3,971	$26,059,467.00	$121,526,004.87	$95,466,537.87
NM	468	$1,332,347.00	$2,691,627.66	$1,359,280.66
NY	12,115	$152,553,207.00	$613,572,437.80	$461,019,230.80
NC	2,267	$16,560,130.00	$68,694,576.61	$52,134,446.61
ND	187	$747,739.00	$1,152,059.01	$404,320.01
OH	4,281	$16,994,108.00	$34,329,226.04	$17,335,118.04
OK	1,220	$7,866,860.00	$19,110,662.73	$11,243,802.73
OR	1,044	$14,664,759.00	$86,159,080.90	$71,494,321.90
PA	6,244	$34,782,925.00	$85,410,600.70	$50,627,675.70
RI	441	$1,378,715.00	$2,422,951.74	$1,044,236.74
SC	1,057	$2,639,852.00	$5,595,319.20	$2,955,467.20
SD	285	$818,505.00	$1,294,322.16	$475,817.16
TN	1,534	$8,170,669.00	$17,835,589.42	$9,664,920.42
TX	9,811	$71,058,143.00	$225,234,529.02	$154,176,386.02
UT	1,217	$4,078,084.00	$10,957,783.41	$6,879,699.41
VT	341	$670,765.00	$846,226.00	$175,461.00
VA	2,532	$12,126,752.00	$26,165,416.68	$14,038,664.68
WA	1,929	$113,622,682.00	$756,506,086.96	$642,883,404.96
WV	460	$1,192,118.00	$1,483,960.00	$291,842.00
WI	2,886	$13,425,044.00	$30,207,848.66	$16,782,804.66
WY	412	$1,560,957.00	$2,268,042.34	$707,085.34
Total	121,602	$1,029,709,037.00	$3,929,878,066.04	$2,900,169,029.04

Data Source

Candid created this file, that contains the most recently reported net investment income tax figures from US-based 501(c)(3) private foundations by state and proposed tax brackets (based on reported fair market value assets), plus estimates for taxes based on the proposed levels and the difference between the current and proposed dollars.

How should this data be interpreted?

At the national level:

Were the proposed tax rates in place for the fiscal years in the filings we are using for our analyses, US-based 501(c)(3) private foundations would see their taxes increase from around $1.03 billion to $3.93 billion, an increase of about $2.90 billion dollars.

At the state level:

Please refer to the “state” column to look up how this impacts a specific state. Here is an narrative example for the State of California: Were the proposed tax rates in place for the fiscal years in the filings we are using for our analyses, California based 501(c)(3) private foundations would see their taxes increase from $180 million to $783 million, an increase of about $603 million dollars.

Methodology

This analysis is based on the most recent available filings from active U.S. based 501c3 990-PF filers. Candid first confirmed that the foundations are still currently active (listed on any IRS Business Master File in calendar year 2024) and then included data from their most recent tax file since 2020. Within this dataset, 85% of the filings come from fiscal year end 2023 (the most recent year of comprehensive data). However, to allow for data lag issues due to differences in fiscal year ends and tax extensions, filing information was also used from 2020, 2021, 2022, or 2024 if that was an organization's most recent available information.
Estimates are calculated using the following formula:

(Current Taxes [990-PF Part V Line 5] ÷ 0.0139 [current tax rate]) × [new proposed tax rate based on assets; 0.0139, 0.0278, 0.050, or 0.100]

Calculated estimates are based on the tax brackets proposed in the “One, Beautiful Bill.”

Please note that foundation counts are based on number of available 990-PFs. Additionally, estimated increases are based on current available information, not projections. Figures are net investment income taxes only, not the total taxes owed by private foundations; other taxes may apply.

Have questions about this data?

For questions, please contact partnerships@candid.org.

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Briefing on the Tax Bill: Post Ways & Means Mark-up

daniela.rodriguez@cof.org — Mon, 12 May 2025 19:22:30 +0000

Briefing on the Tax Bill: Post Ways & Means Mark-up daniela.rodrig… Mon, 05/12/2025 - 15:22

Webinar

Briefing on the Tax Bill: Post Ways & Means Mark-up

This webinar covers key aspects of the proposed bill, a review of what happens next, and how you can use your voice to speak up for the charitable sector. Content of this webinar was recorded on May 15, 2025.

Please note that the content of this webinar was recorded on May 15, 2025, and is subject to change. Please see the Latest Updates & Resources Page for the most current information.

The House Committee on Ways and Means formally announced last week that it will mark up its tax package on Tuesday, May 13 and Wednesday, May 14. Review our detailed summary of the tax bill, highlighting provisions that impact the charitable sector. The House Committee on Ways and Means is set to begin its markup on May 13, and we'll keep that page updated with any new developments. This webinar covers key aspects of the proposed bill, a review of what happens next, and how you can use your voice to speak up for the charitable sector.

Speakers

Jenn Holcomb

Vice President, Government Affairs and Legal Resources

Council on Foundations

Shimmy Stein

Government Affairs Specialist

S-3 Group

Ben McDearmon

Director, Legal Resources

Council on Foundations

Nidale Zouhir

Senior Manager, Government Affairs

Council on Foundations

Eddie Shimkus

Senior Manager, Government Affairs

Council on Foundations

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Tell Your Members of Congress to Protect Philanthropy

MatthewCain — Mon, 12 May 2025 02:20:58 +0000

Tell Your Members of Congress to Protect Philanthropy MatthewCain Sun, 05/11/2025 - 22:20

Tell Your Members of Congress to Protect Philanthropy

Voice concerns with provisions in the tax bill that would hurt grantmaking.

Find your member of Congress and their contact information

We're asking you to reach out to your Member of Congress to voice concerns with provisions in the tax bill that could impact philanthropy. You may only have a couple of minutes to make your point as staff will be receiving similar requests and information from other groups impacted by the bill and they will also be preparing for the mark-up. It's important to convey your message clearly and plainly, highlighting what a reduction in grantmaking to nonprofits looks like for the foundation and for the community you serve.

Note: We believe this constitutes permissible self-defense communication for private foundations. Check out our Legal Resources Team’s analysis.

If you’re having a longer conversation, consider using these talking points.

Draft Private Foundation Script

Hi, my name is [name], and I am the CEO of the [foundation name] in [city/town, state].

It's promising to see that the Senate bill doesn't include the increased private foundation excise tax. I’m calling to urge Rep./Sen. [Congressperson last name] to make sure the increased tax on private foundations stays out of the final reconciliation package.

Increasing the tax by as much as 619% will significantly reduce the charitable resources going to local nonprofits. At a time when federal funding is uncertain and the needs in our community are growing, foundations like mine are providing critical investments.

Now is not the time to take charitable dollars away from [city/town/region]. It is essential Congress does not restrict this important community resource.

Stand up for charitable nonprofits and oppose this provision.

Draft Community Foundation and Other Grantmakers Script

Hi, my name is [name], and I am the CEO of [foundation name] in [city/town, state].

It's promising to see that the Senate bill doesn't include the increased private foundation excise tax. I’m calling to urge Rep./Sen. [Congressperson last name] to make sure the increased tax on private foundations stays out of the final reconciliation package.

Increasing this tax on private foundations by as much as 619% will put more pressure on already-stretched nonprofits like mine. We are grantmakers ourselves, and we know firsthand how important philanthropy is, particularly as federal funds are reduced. Nonprofits here in [city/town] provide critical services. Our local private foundations are crucial partners. Taking charitable dollars away from them means fewer dollars reach nonprofits and our whole community will suffer.

Now is not the time to take charitable dollars out of our community.

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Self-Defense Communications Regarding the Section 4940 Excise Tax on Net Investment Income

NicoleBronzan — Mon, 12 May 2025 01:52:59 +0000

Self-Defense Communications Regarding the Section 4940 Excise Tax on Net Investment Income NicoleBronzan Sun, 05/11/2025 - 21:52

Self-Defense Communications Regarding the Section 4940 Excise Tax on Net Investment Income

Self-Defense Exception: A legislative proposal to modify the private foundation excise tax on net investment income under IRC section 4940 would qualify as a self-defense issue, because it affects a private foundation’s duties. Private foundations may therefore communicate with the legislature, its committees and subcommittees, or individual members or their staff, as well as representatives of the executive branch who are involved in the legislative process, without having those actions result in a taxable expenditure.

Additional Information: Internal Revenue Code section 4945(e) provides, in part, that that the term “taxable expenditure” means any amount paid or incurred by a private foundation for “any attempt to influence legislation through communication with any member or employee of a legislative body, or with any other government official or employee who may participate in the formulation of the legislation.” However it also provides that the term “taxable expenditure” does not include “any amount paid or incurred in connection with an appearance before, or communication to, any legislative body with respect to a possible decision of such body which might affect the existence of the private foundation, its powers and duties, its tax-exempt status, or the deductibility of contributions to such foundation.” The activities permitted under this exception are commonly referred to as “self-defense communications.”

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April 2025 Congressional Recess Packet

MatthewCain — Mon, 17 Mar 2025 16:30:24 +0000

April 2025 Congressional Recess Packet MatthewCain Mon, 03/17/2025 - 12:30

April 2025 Congressional Recess Packet

Meeting with members of Congress and their team during district work periods are an important time to share more about your foundation’s work and how partnerships with local, charitable organizations to meet community needs. These resources will help you prepare for meetings during this year's April State & District Work Period (April 14-25, 2025).

Helpful materials for as you set up your meetings:

Requesting a Meeting with Your Senator and Representative:
- PDF template
- Editable Word document (DOCX)
Planning Your Meeting
- PDF template
- Editable Word document (DOCX)

Legislative Resources:

Guidelines for Council members around lobbying and advocacy:

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Self-Defense Communication Rules for Public Charities

remy.barnwell@cof.org — Sun, 16 Mar 2025 02:10:42 +0000

Self-Defense Communication Rules for Public Charities remy.barnwell@… Sat, 03/15/2025 - 22:10

Self-Defense Communication Rules for Public Charities

Community Foundations and other public charities may engage in an insubstantial amount of lobbying as part of normal operations. But what are the rules around engaging in self-defense?

Internal Revenue Code Section 4911(d)(2)(C) provides public charities with an exception to the definition of lobbying for appearances before or communication to any legislative body about decisions which might affect the organization’s operations. The accompanying Treasury Regulations clarify that self-defense communication that falls within this exception is not considered direct lobbying and does not need to be tracked as a lobbying expenditure under the 501(h) expenditure test. This exception is generally the same as the exception that applies to private foundations under 4945(e). The definition of self-defense communications can be broken down as:

Appearance before or
Communication to
Any legislative body
About a decision which might affect:
1. The existence of the foundation;
2. The foundation’s powers or duties;
3. Its tax-exempt status; or
4. The deduction of contributions to the foundation

For a foundation’s activities to fall within the bounds of self-defense, all four parts must be present. Namely (1) communication or appearance (2) to any legislative body (3) about a decision which might affect (4) the foundation’s existence; powers or duties; tax-exempt status; or the deduction of contributions to the foundation. As with the private foundation rule, the self-defense communications exception only covers direct communications with legislators and does not apply to communications that encourage the general public to take action (grassroots lobbying).

Note that the self-defense exception applies specifically to public charities that have taken the 501(h) election. Non-electing public charities may therefore need to include communications with legislators that might otherwise fall under this exception in their total reported lobbying activity. However, assuming a non-electing public charity does not engage in any other significant additional lobbying activity, it’s unlikely that occasional communications in favor or against specific legislation that affects the charity’s existence, powers or duties, tax-exempt status, or the deductibility of contributions made to it would cause the charity to fail the “insubstantial part” test.

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Self-Defense Communications Exception for Private Foundations

MatthewCain — Tue, 03 Dec 2024 06:02:32 +0000

Self-Defense Communications Exception for Private Foundations MatthewCain Tue, 12/03/2024 - 01:02

Self-Defense Communications Exception for Private Foundations

Internal Revenue Code § 4945(e) allows private foundations to appear or communicate with a legislative body concerning a decision of that body that might affect the existence of the foundation, its powers and duties, its tax-exempt status, or the deductibility of contributions to it.

What exactly does this mean?

When the exception applies, it allows a private foundation to communicate— through e-mail, phone, letters, or in-person visits—with an entire legislative body (such as Congress or a state legislature), its committees or subcommittees, individual legislators, members of their staffs, or representatives of the executive branch who are involved in the legislative process, to oppose or support specific legislation. It also allows the foundation to spend money to support or oppose the specific legislation, and these expenses will not be taxable expenditures.

When does legislation impact a foundation’s existence, powers and duties, tax-exempt status, or the deductibility of charitable contributions?

While the answer will depend on the content of each specific bill, the regulations at § 53.4945-2(d)(3) provide some useful examples including:

1) a proposed bill that would require private foundations to make certain amendments to their governing documents, and

2) legislation that would result in the loss of tax-exempt status for a private foundation engaging in certain transactions with related parties.

In addition to these examples, legislation that would expand, reduce, or eliminate the available charitable deduction for certain contributions to a private foundation would qualify for self-defense communications.

What is not included under the self-defense exception?

Appropriations bills, even if directly affecting the funding of a foundation, are generally not considered legislation that would impact the existence, powers and duties, tax-exempt status or the deductibility of charitable contributions.

The self-defense exception also only applies to direct communications with a legislative body or its committees, individual legislators and their staffs, or executive branch representatives engaged in the legislative process. It does not cover grassroots lobbying, which means that a private foundation may not attempt to influence the general public to take action in support of or against specific legislation, even if that legislation might affect the existence of the foundation, its powers and duties, its tax-exempt status, or the deductibility of contributions to it.

For more details and examples of these permissible advocacy activities, we encourage you to turn to the Treasury Regulations at § 53.4945-2, or IRS Publication 5590.

More Information

Free for Council members and available for purchase for nonmembers, download the complete A Guide to Advocacy, Lobbying & Election-Related Activity: Navigating the Rules.

Members can also download a memo prepared by lawyers from Lowenstein Sandler, Summary of the Self-Defense Communications Exception.

The information in the document is not exhaustive and should not take the place of formal legal advice from counsel.

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