E.4. Grants to Noncharitable Organizations

(1) Since a private foundation cannot make an expenditure for a purpose other than

a purpose described in Section 170(c)(2)(B), a private foundation may not make a grant to an organization other than an organization described in Section 501(c)(3). There are two exceptions to this rule:

a. If the grant itself constitutes a direct charitable act or the making of a Section

4944(c) program-related investment, then it is for a purpose described in Section 170(c)(2)(B) and, hence, not a taxable expenditure. Treas. Reg. 53.4945-6(c)(1)(i); and

b. The grantor private foundation is reasonably assured that the grant will be

used exclusively for purposes described in Section 170(c)(2)(B). Reasonable assurance means the grantee organization agrees to comply with the requirements of Section 4945(d) and the expenditure responsibility requirements of Section 4945(h) and Treas. Reg. 53.4945-5; and to maintain the grant funds in a separate fund described in Section 170(c)(2)(B). In appropriate cases, the grantor may instead make an equivalency determination that a foreign grantee is described in Section 501(c)(3) and is a qualifying public charity. See Treas. Reg. 53.4945-6(c)(2).

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