E. Expenditures for Noncharitable Purposes Section 4945(d)(5)

(1) Section 4945(d)(5) provides that the definition of "taxable expenditure" includes

any amount paid or incurred by a private foundation for any purpose other than one described in Section 170(c)(2)(B) (this provision serves as a "catch-all" prohibition).

(2) Section 170(c)(2)(B) purposes include:

a. Religious, charitable, scientific, literary, or educational purposes, or

b. To foster national or international amateur sports competition (but only if no

part of its activities involves the provision of athletic facilities or equipment), or

c. For the prevention of cruelty to children or animals.

(3) Thus, any expenditure for a purpose which is not described in Section

170(c)(2)(B) is a taxable expenditure. See Treas. Reg. 53.4945-6(a). Unlike Section 501(c)(3), which requires expenditures for nonexempt purposes to be more than insubstantial before loss of exemption occurs, Section 4945(d)(5) imposes liability for excise tax under Section 4945(a) on any expenditures for nonexempt purposes, whether substantial or not. Thus, a private foundation could be liable for tax under Section 4945(d)(5) for engaging in an activity which did not further an exempt purpose and yet retain its exempt status under Section 501(c)(3) because the activity was insubstantial.