B.3. Correction of Taxable Expenditures and Second Tier Taxes

(1) The purpose of correction is to permit a private foundation and its managers to

take all reasonable steps to return the foundation to the position it was in before it made the taxable expenditure. It also permits the private foundation and its managers to avoid the imposition of the severe second tier taxes of Section 4945(b).

(2) To correct a taxable expenditure, a private foundation must recover funds and,

when funds cannot be fully recovered, must take additional corrective action to prevent future violations. In cases where the grantee or grantor has failed to satisfy the reporting requirements, correction will ordinarily involve obtaining or making the required reports.