D.16. Grantee Organization’s Failure to Submit Reports

(1) If a grantee organization fails to submit an adequate report to the grantor private

foundation in accordance with Section 4945(h)(2), such failure may cause the grant to be a taxable expenditure. However, if the grantor private foundation takes the corrective actions described in (2) below, the grant will not be a taxable expenditure by reason of a grantee organization’s failure to submit adequate reports.

(2) The grantor private foundation must take the following corrective actions:

a. It must withhold all future payments under the grant or any other grant to the

same grantee organization until the delinquent report is submitted; and

b. It must make a reasonable effort to obtain the missing report from the

grantee.

(3) If these steps are taken and if the grantor private foundation has otherwise

complied with Section 4945(h), the grant will not be treated as a taxable expenditure. See Treas. Reg. 53.4945-5(e)(2).