House Bill Would Remove Private Foundation Safeguards

A bill passed by the House to exempt donations to groups that engage in political and lobbying activities from the federal gift tax would also allow wealthy people to avoid safeguards placed on private foundations, a tax lawyer writes in The Hill.

If passed in its current form, wealthy individuals would be able to transfer funds to a social-welfare organization with the same mission as their private foundation. Individuals who do this would not be subject to the minimum annual payout for private foundations and the prohibition on lobbying and political activity, among other things.

The author suggests closing the loophole by requiring social-welfare organizations “that fail to pass a public-support test, similar to the one used for distinguishing public charities from private foundations, to the same safeguards applicable to private foundations.”