Vanderbilt Law Review


Thomas R. Allen

First Page



If Professor Sacks is correct in his cyclical view of the public concern over charitable foundations, the present period must surely be classed as one of maximum turbulence. At the moment both houses of Congress have had presented to them proposals for levying new restrictions on charitable foundations through the tax law, a flood of law review comments has appeared, and at the state level new legislation, partly directed to control of charitable foundations, has been proposed, and in some cases adopted...As this paper is concerned primarily with sanctions, only those proposals in the Treasury Report for which no sanctions are specified will be treated. These are five in number: 1. Private foundations would be prohibited from dealing with any substantial contributor (including corporation officials), any officer, director, or trustee of the foundation, or any party closely related to them, except to pay reasonable compensation for necessary services and to make incidental purchases of supplies. 2. A private, non-operating foundation (as defined in section 170(g) (2) (B)) would be required to distribute the full amount of its current net income by the end of the year following the year in which such income was earned. Or, if such foundation's income falls below a prescribed percentage of the value of its holdings, the foundation would be required to contribute the difference out of its corpus. Two recommended exceptions would allow the foundation (1) to accumulate income to the extent it had in a specified prior period expended amounts in excess of its income, and (2) to accumulate income for a specified period if necessary to the accomplishment of a charitable purpose.

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