Self-Dealing: A Topical Resource List

Self-dealing by foundations, or financial transactions with "disqualified persons," is prohibited for foundations. The following resources help grantmakers wade through the legal terrain, provide definitions of "disqualified persons," and describe how a foundation can avoid trouble including exceptions to the rule.

Beggs, Sara and Andy Carroll (ed.) How to Avoid Self-Dealing. Washington, DC: Association of Small Foundations, 2008. 30 p. (Primer Series).

Describes the rules that prohibit foundations from participating in transactions with foundation insiders, or "disqualified persons." The guide explains the range of prohibited activities, discusses exceptions to the prohibitions, and provides suggestions for protecting your foundation.

Born, Jason (ed.) Investment Issues for Family Funds. Washington, DC: National Center for Family Philanthropy. 1999. xi, 169 p.

Published as volume 2 of the "National Center Journal." Includes a chapter entitled "Avoiding Conflicts of Interest and Self-Dealing." Includes bibliographic references and glossary of investment terms.

Bryson, Ellen and Andrew Schulz. Top 10 Ways Corporate Foundations Get into Trouble. Washington, DC: Council on Foundations. 2004. 21 p.

Brief guidelines for board members of corporate foundations, specifically related to certain aspects of law: self-dealing, disqualified persons, conflict of interest, quid pro quo grants, employee pledges and matching gifts, tickets to fundraising events, sharing resources, grants to individuals, scholarships, grants to organizations that are not charities, and international grantmaking.

Bryson, Ellen and John A. Edie. Top 10 Ways Family Foundations Get into Trouble. Washington, DC: Council on Foundations. 2002. 21 p.

Guidebook helps family foundations recognize common legal mistakes by providing basic rules and questions to consider. Topics covered include self-dealing, personal family pledges, attending fundraisers, board compensation, grants to individuals, expenditure responsibility, and international grantmaking. With bibliographical references.

Bryson, Ellen. Top 10 Ways Independent Foundations Get into Trouble. Washington, DC: Council on Foundations. 2003. 21 p.

Concise advice about self-dealing, executive compensation, conflicts of interest, and other issues.

Edie, John A. Corporate Giving and the Law: Steering Clear of Trouble. 3rd ed. Washington, DC: Council on Foundations. 2002. vii, 49 p.

Written primarily for corporate giving officers, this handbook identifies legal and regulatory problem areas. Provides a brief explanation of basic rules and recommends additional sources for more in-depth examination. As the tax code makes private company foundations operate by a stricter set of rules than direct corporate giving programs, there is a greater emphasis on company foundations. Includes chapters on company foundations versus corporate giving programs, rules for charitable deductions, state and federal requirements, self-dealing, domestic grants, international grants, and the use of legal counsel. With bibliography.

Hopkins, Bruce R. and Jody Blazek. The Legal Answer Book for Private Foundations. New York, NY: John Wiley & Sons. 2002. xxxii, 352 p.

Provides quick answers in a FAQ format for officers, lawyers, and accountants of private foundations. The major topics covered include basic definitions, self-dealing, payout requirements, business holdings, investments, taxable expenditures, unrelated business activities, disclosure rules, and termination, among others. Legal citations are given. Indexed.

Hopkins, Bruce R. and Jody Blazek. Private Foundations: Tax Law and Compliance. 2nd ed. Hoboken, NJ: John Wiley & Sons. 2003. xx, 628 p.

Intended as a desk reference for lawyers, accountants, and tax practitioners, covers federal tax laws related to self-dealing, disqualified persons, the establishment of private foundations, mandatory distributions, excess business holdings, investments, taxable expenditures, tax on investment income, unrelated business tax, tax compliance and administrative issues, termination, charitable giving rules, and the distinction between private foundations and public charities, and donor-advised funds. Appendices include sources of the law, Internal Revenue Code sections, table of cases, table of IRS revenue rulings, and an index.

Nober, Jane C. Company Foundations and the Self-Dealing Rules. 3rd ed. Washington, DC: Council on Foundations. 2002. 63 p.

Examines the federal tax law prohibitions on self-dealing as they apply to the operations and relationships between a business entity and its related foundation. Explains the inherent problem of self-dealing and provides a summary of some of the applicable general tax law concepts, in addition to methods for aligning foundation grantmaking with the corporate mission. Nober also supplies a summary of the tax penalties for violating the regulations.

"Scrutiny, Criticism Amount to: Trouble in Foundationland." Corporate Philanthropy Report vol. 19 (February 2004) p. 3.

The article reports on a recent gathering at the Hudson Institute’s Bradley Center for Philanthropy and Civic Renewal where leaders in the field discussed the increased concern about alleged self-dealing and unreasonable compensation by foundation executives.

Sobczak, Carol A. "Acts of Self-Dealing: Are You a Disqualified Person?" Trusts & Estates vol. 137 (October 1998) p. 27, 30, 32, 34.

Examines the term "disqualified person" in relation to the self-dealing rules of the Tax Reform Act of 1969.