What Advisors Need to Know About Charitable Planning Before The End of The Year – Key Takeaways

Key Takeaways for Advisors

• Charitable Purpose Is Non-Negotiable
  Grants to FPOs must serve an IRS-recognized charitable purpose—not just what feels charitable to the donor.
• FPO = Vehicle, Not Beneficiary
  The for-profit entity is simply the instrument to deliver the charitable program. The benefit must flow to the charitable class, not the business.
• Private Benefit Rules Apply
  Any benefit to private parties must be incidental:
  – Qualitative Test: Unavoidable and necessary to achieve the charitable goal.
  – Quantitative Test: Public benefit must outweigh private benefit, which must be minimized.
• Document Everything
  Clearly state the charitable purpose, identify intended beneficiaries, justify why an FPO is the best choice, and show pricing is reasonable.
• Choose the Right Instrument
  Grants, loans, or equity investments each have compliance implications. Grants provide the greatest private benefit because—unlike a loan or an investment—grants don’t have to be repaid. Because foundations should always try to minimize private benefit, make sure that a grant is the best choice for achieving the charitable goal.

Other Important Points To Consider for Year-End Charitable Planning:

• Foreign Grants Are Allowed
  Use equivalency determination or expenditure responsibility to ensure compliance when funding overseas charities.
• Corporate Foundations Require Extra Care
  Keep company benefits incidental. Avoid self-dealing traps like leasing space, splitting event ticket costs, or satisfying pledges.
• Real Estate in Foundations Brings Complexity
  Understand payout requirements, valuation rules, liquidity concerns, liability risks, and insider restrictions before accepting property donations.
• Watch for Insider Transactions
  Self-dealing rules prohibit leases, sales, or services with insiders—even at favorable terms. Penalties can be severe.

Plan Ahead for This Year’s Tax Changes

At the beginning of this year, the OBBBA introduced a 0.5% AGI floor for itemized charitable deductions and limits benefits for high-income taxpayers.

Next Steps for Advisors:

• Review clients’ philanthropic goals and identify opportunities for strategic giving in 2026.
• Discuss compliance considerations for FPO grants and real estate contributions.
• Consider private foundations and/or donor-advised funds for clients seeking flexibility and tax efficiency.

To learn more about these key takeaways and other important insights, check out the full conversation here.