A.2. First Tier Tax on Foundation Managers

(1) If a private foundation has made a taxable expenditure, a manager of a private

foundation is subject to a 5% tax:

a. If the manager agrees to make such expenditure; and

b. If the manager knows that such expenditure is a taxable expenditure;

c. Provided such agreement is willful and is not due to reasonable cause. See

Section 4945(a)(2) (as amended by the PPA 2006 Pub. L. No. 109-280) and Treas. Reg. 53.4945-1(a)(2).

(2) With respect to any one taxable expenditure, the maximum amount of the tax

imposed by Section 4945(a)(2) shall not exceed $10,000. See Section 4945(c)(2).

(3) The first tier tax applies only to those foundation managers who are authorized to

approve, or to recommend approval of, the making of expenditures by the private foundation. It also applies to those foundation managers who are members of a group, such as its board of directors or trustees, that are authorized to make such expenditures. See Treas. Reg. 53.4945-1(a)(2). For the definition of "foundation manager," see Section 4946(b). Courts have held foundation managers liable for

57

the tax in Thorne v. Commissioner, 99 T.C. 67 (1992), Madden v. Commissioner, T.C. Memo 1997-395, and Parks v. Commissioner, 145 T.C. 278 (2015), aff'd sub nom., Parks Foundation v. Commissioner, 717 F. App’x 712 (9th Cir. 2017).