A.9. Decisions Affecting the Powers and Duties of a Private Foundation

(1) Under Section 4945(e), a private foundation may appear or communicate with a

legislative body about a decision of that body that might affect the existence of the foundation, its powers and duties, its tax-exempt status, or the deductibility of contributions to it (the "self-defense" exception). See Treas. Reg. 53.49452(d)(3)(i). Hence, a private foundation may communicate with an entire legislative body, its committees or subcommittees, or individual legislators, members of their staffs or representatives of the executive branch who are involved in the legislative process to express its opposition or support to particular legislation (or legislative decisions) that affects the powers of the private foundation. However, the private foundation may not communicate with the general public with respect to that legislation. The private foundation may make expenditures in order to initiate legislation if such legislation concern matters which might affect its existence, powers and duties, tax-exempt status, or deductibility of contributions. Therefore, under this "self-defense" exception, funds expended for such purpose are not considered as attempting to influence legislation and not taxable expenditures.

(2) The following examples illustrate this exception. (For more examples, see Treas.

Reg. 53.4945-2(d)(3)(ii).)

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a. A bill is being considered by Congress which would, if enacted, restrict the

power of a private foundation to engage in transactions with certain related persons. Under the proposed bill a private foundation would lose its exemption from taxation if it engages in such transactions. W, a private foundation, writes to the congressional committee considering the bill, arguing that the enactment of such a bill would not be advisable, and subsequently appears before such committee to make its arguments. In addition, W requests that the congressional committee consider modification of the 2% de minimis rule of Section 4943(c)(2)(C). Expenditures paid or incurred with respect to such submissions do not constitute taxable expenditures since they are made with respect to a possible decision of Congress which might affect the existence of the private foundation, its powers and duties, its taxexempt status, or the deduction of contributions to such foundation.

b. A State legislature is considering the annual appropriations bill. Z, a private

foundation which has performed contract research for the State, appears before the appropriations committee in order to attempt to persuade the committee of the advisability of continuing the program. Expenditures paid or incurred with respect to such appearance are not made with respect to possible decisions of the State legislature which might affect the existence of the private foundation, its powers and duties, its tax-exempt status, or the deduction of contributions to such foundation, but rather merely affect the scope of the private foundation’s future activities.