2237 Private Foundations

Document purpose

To accommodate the needs of private foundations who wish to make gifts or grants to the University. To identify and address relevant legal and tax issues associated with private foundations.


February, 2020


May, 2022

Responsible Office





Private foundations may wish to contribute to the University by making a grant or gift. Often the donor or a member of the donor’s family serves as the manager of the private foundation.  In other cases, the private foundation is managed by a professional staff. 

Some private foundation grants require submission of a Grant Eligibility Application before a grant is made to the University. It is the responsibility of the Vice President of Finance and Treasurer to sign all such applications. If a copy of the University’s IRS 501(c)(3) determination letter is required to be attached to the Application, it may be obtained through the Tax Office or the Office of Gifts Accounting & Administration.  


All grants or gifts from a private foundation to the University must be made for purposes that are consistent with the University’s mission and do not serve personal interests. For example, a Foundation gift for the specific benefit of a designated person (e.g. a physician, care provider, student, faculty member or volunteer) is prohibited. 


Private foundation gifts or grants may be received by the University subject to certain terms, restrictions or conditions as set forth in the grant or gift agreement. Examples include gifts or grants made to a particular school, or for a particular purpose, or a contribution made over multiple years, or a gift or grant requiring annual general reporting.  

Some agreements contain even more specific conditions or reporting, and, in such cases, it is very important to determine whether the contribution offered in the agreement is a grant or a gift.  This is determined in accordance with University policy (following IRS and state law rules) and is based on the particular conditions of the contribution. In general, agreements carrying an explicit quid pro quo between the foundation and the University (subjecting the University to specific obligations to be fulfilled) are typically considered grants.  Direct, unconditional donations, or donations with conditions that do not require ongoing fulfillment by the University are typically considered gifts.  For further information on how to make this determination, see Financial Policy 2213 Grants v. Gifts. 


Gifts or grants can be accepted for University projects that are carried on in other countries. However, a gift or grant from a US-based private foundation cannot be made to any non-US University entity or affiliate. 


Based on federal tax law, a gift or grant from a private foundation cannot result in benefits, goods, or services to any person considered a “disqualified person.”  In general, a “disqualified person” is a foundation manager, trustee, substantial contributors to the foundation, and the families of both of these.  The receipt of prohibited benefits by a disqualified person is known as “self-dealing.” 

Prohibited benefits generally can include tickets, memberships, event tickets, meals, sponsorships, registration fees, preferred parking, preferred seating, discounted merchandise or other preferential treatment from the UniversityAcceptance of these benefits by a disqualified person can subject the private foundation and the disqualified person to significant tax penalties. The University has established specific guidelines for events and memberships, which are two of the more common kinds of personal benefits that give rise to questions from the University’s donors.  The guidelines are as follows: 


It is not permissible for a private foundation to make a gift or grant to fund all or any portion of the purchase price of an event table or ticket when the table/ticket purchase, if made by an individual, would be comprised of both a tax-deductible portion and a non-tax deductible (personal benefit) portion. This is true even if the disqualified person pays for the “personal benefit” portion of the purchase price (the IRS views this as impermissible bifurcation).

There is an exception to this treatment if a private foundation manager, trustee, substantial contributor, or officer is attending the event and will perform a reasonable and necessary business function for the private foundation at the event. Some examples of a business function include the receipt of an award on behalf of the private foundation, or the monitoring of the use of funds that the private foundation provided to the University. Without documentation of a business function, the act of attending the event does not qualify as a permitted exception and the benefit received by the disqualified person may be considered an act of self-dealing subject to tax penalties. Spouses are not included in this exception. 


Under federal tax law, grants from private foundations should not be used to fund a membership for any disqualified person, unless it can be established that the membership is reasonable and necessary in order for the disqualified person to carry out foundation business.  Because it is unlikely that a membership could serve such a reasonable and necessary purpose, the University recommends, in general, that funds offered by a private foundation to pay for individual or family memberships be declined. 


Under federal tax law, private foundation gifts or grants cannot be used to satisfy all or any portion of a personal pledge or other financial obligation of any other party. 

A foundation itself may make a binding pledge to the University, or a donor may execute a non-binding gift intention with the University and then the donor may recommend a gift from a private foundation with the same terms and conditions as the gift intention, subject to the private foundation’s approval requirements.