Many companies establish a corporate foundation to further their philanthropic objectives because of this vehicle’s distinct advantages. Corporate foundations can foster increased brand recognition, customer loyalty and goodwill, and improved employee morale. They enable consistent levels of giving in years both lean and flush by building up reserves when company profits are high. Moreover, corporate foundations can engage in charitable activities such as scholarship programs, hardship and emergency grants to individuals, and international giving that would not be tax deductible as charitable donations or charitable expenditures if handled directly by the company.
Unfortunately, corporate foundations don’t always receive the attention and expertise they need to stay in compliance. Many are managed by individuals who have other jobs within the company. It is also not uncommon for a company’s founder and key executives to have important or leading roles in the corporate foundation. No matter how dedicated, competent, or visionary these managers might be, their primary focus is on the company. As such, they may find it challenging to keep up with IRS regulations and are therefore less likely to spot potential compliance issues before they become difficult to unwind.