D.11. Reporting — Publication 5590

(1) Section 4945(h)(3) requires the grantor private foundation exercising expenditure

responsibility to submit annual reports to the IRS on all grants made. The reports must be submitted on or with the Form 990-PF, Return of Private Foundation or Section 4947(a)(1) Trust Treated as a Private Foundation. See Treas. Reg. 53.4945-5(d)(1). The grantor private foundation may satisfy its filing requirements with respect to any grant made to a grantee organization by submitting the report received from the grantee organization.

(2) The report must include the following information:

a. The name and address of the grantee;

b. The date, amount, and purpose of each grant;

c. The amounts spent by the grantee organization (based on the most recent

report received from the grantee organization);

d. Whether the grantee private foundation has diverted any portion of the funds

(or the income therefrom if it is an endowment grant) from the purpose of the grant (to the knowledge of the grantor);

e. The dates of any reports received from the grantee; and

f. If the grantor private foundation has been required, pursuant to Treas. Reg. 53.4945-5(c)(1), to verify the grantee organization’s reports, the date and results of any such verification must be submitted. See Treas. Reg. 53.49455(d)(2).

(3) If a grantor private foundation awarded a grant to a private foundation exempt

under Section 501(a) for capital endowment, equipment, or other capital purposes, the grantor foundation need only submit reports for taxable years for which it required reports from the grantee organization. See Treas. Regs. 53.4945-5(c)(2) and 53.4945-5(d)(1).

(4) An example of a failure of a grantor private foundation to comply with the

reporting requirements is illustrated in Charles Stewart Mott Foundation v. United States, 938 F. 2d 58 (6th Cir. 1991). In this case, the private foundation made a 12-year interest-free loan grant for program-related investment purposes to be distributed in equal amounts over 12 years to a non-Section 501(c)(3) organization. The grantor private foundation failed to file an annual report on the loan grant for years 6 and 7 in violation of Treas. Reg. 53.4945-5(b)(4)(ii). The Sixth Circuit held that private foundation’s distributions made to the recipient under the loan grant for years 6 and 7 are taxable expenditures. It concluded that, under the expenditure responsibility requirement of Section 4945(h)(3), the grantor private foundation must file an annual report for every year of the duration

of the loan grant. Also, because the recipient was not a private foundation, the grantor private foundation did not qualify for the exception in Treas. Regs. 53.4945-5(c)(2) and 53.4945-5(d)(1) to the annual reporting requirement. See also Rev. Rul. 77-213, 1977-1 C.B. 357 and Hans S. Mannheimer Charitable Trust v. Commissioner, 93 T.C. 35 (1989).