Private Foundation Pitfalls: Self-Dealing, Taxable Expenditures, and More

Author: Clark Nuber, Sarah Huang, Celia Davis

Enacted over 50 years ago, private foundations have a unique set of rules that have remained relatively unchanged despite the ever-evolving world we live in. Non-compliance with these private foundation rules have steep monetary penalties for the foundation and potentially the individuals involved in the transaction. Join us for an overview and discussion of common traps for private foundations and learn strategies to avoid them going forward.

Publication Date: September 2025

Designed For
CPAs, CFOs, auditors, bookkeepers, staff accountants, board members, and others working with not-for-profit entities.

Topics Covered

• History and Overview of Private Foundations
• Identifying Disqualified Persons
• Avoiding Self-Dealing Transactions
• Self-Dealing Case Studies and Best Practices
• Meeting the Annual Distribution Requirement
• Taxable Expenditures Traps
• Private Foundation Investment Considerations
• Form 4720 Filing Tips

Learning Objectives

• Identify all disqualified persons of the foundation and put measures in place to prevent self-dealing transactions
• Recognize when an investment or expenditure may trigger unfavorable tax consequences for a private foundation
• Describe what actions are involved for correction when a pitfall transaction occurs
• Identify the maximum percentage of voting power and value a private foundation can hold in a corporation without creating excess business holdings under the safe harbor rule
• Identify the IRC Code Section that governs the rules related to jeopardizing investments for private foundations
• Identify the percentage that represents the second-tier excise tax imposed on a disqualified person

Level
Basic

Instructional Method
Self-Study

NASBA Field of Study
Taxes (2 hours)

Program Prerequisites
None

Advance Preparation
None