Question: Why do Council on Foundations membership materials and invoices state that if my foundation and corporate giving program share a membership, dues must be paid by the corporation? Is this true for other memberships as well?
Answer: IRS self-dealing rules prohibit private foundations (including company foundations) from entering into a range of financial transactions with disqualified persons, including transactions that provide a tangible economic benefit to a disqualified person.
Since a corporation is virtually always a substantial contributor to the foundation it sponsors, it is considered a disqualified person. For that reason, if the foundation and a corporate giving program share a membership in an organization where both could receive tangible benefits, such as the Council, the foundation cannot make the dues payment.
Instead, the Council states that where a corporate giving program and corporate foundation have a joint membership in the Council, the corporation should pay the membership dues. Having the corporation pay the dues avoids any potential self-dealing issues and allows both the foundation and the corporation to receive membership benefits.
Many membership organizations do not offer joint memberships. In that case, each entity (such as the foundation or the corporate giving program) can pay for its own membership since self-dealing is not a concern. If the foundation has its own membership, paying membership dues is not problematic since benefits flow only to the foundation.