Tax reforms impact on private foundations donor advised funds

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January 2018

Overview

Private foundations assessing the impact of the tax reform legislation (HR1) signed into law by President Trump December 22 should look beyond the private foundation-specific proposals that were not included and assess the impact of provisions affecting all tax-exempt organizations.

For some private foundations, the list of key items may include:

- the new excise tax on organizations with highly compensated employees
- segmentation of unrelated business taxable income (UBTI)
- changes to employer provisions for qualified transportation fringe benefits.

Separately, the IRS recently issued Notice 2017-73, requesting comments on and providing interim guidance regarding certain issues involving donor advised funds (DAFs). Notably, the Notice seeks comments regarding how private foundations use DAFs in support of their charitable purposes and whether grants made to DAFs by private foundations should be treated as qualifying distributions absent an agreement by the DAF sponsoring organization to distribute the funds (or to transfer the funds to its general fund) within a certain timeframe.

Foundation managers engaging in planning discussions should take a broad view when considering the impact that the tax reform provisions included in HR1 may have on their organizations. Additionally, Notice 2017-73 should be considered when using DAFs as stand-alone charitable giving vehicles or in conjunction with private foundation grantmaking activities.

The takeaway

Foundation managers engaging in planning discussions should take a broad view when considering the impact that the tax reform provisions included in HR1 may have on their organizations. Additionally, Notice 2017-73 should be considered when using DAFs as stand-alone charitable giving vehicles or in conjunction with private foundation grantmaking activities.

Contact us

Kelley McLaughlin

US Tax Marketing Leader, PwC US

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