Question

May a company receive recognition for a grant made by the company foundation?

Answer

Yes, so long as the company only receives public recognition and not an advertising opportunity.

The self-dealing rules prohibit a company foundation from making grants that result in a tangible or economic benefit to a disqualified person, such as the sponsoring company. The Internal Revenue Service (IRS) has consistently held that public recognition is a permissible "incidental and tenuous benefit." This means that foundation grants can result in public recognition of the sponsoring company; the company's name may appear on a contributors' list in an event program or on a building plaque without the foundation running afoul of the self-dealing rules.

In contrast to public recognition, advertisements for the company's products or services provide tangible and economic benefits to the company. Foundation grants that yield advertisements could be deemed self-dealing. Where a company foundation sponsors an athletic event, for example, a return benefit package that includes distribution of the company’s products to participants would likely be considered advertising. Because there is no bright line distinction between public recognition and advertising, any recognition that extends beyond naming the corporation needs to be examined closely by a foundation and its counsel.

Practical Considerations. When a company foundation makes a grant, the question often arises of who should be listed as the contributor – the foundation, the company or both? While it is accurate to give credit to the company for a contribution by the foundation (after all, the company gave the money to the foundation), it may be preferable to only list the foundation. By solely listing the foundation as contributor, the status of the foundation as an independent entity is reemphasized. This approach also reduces the likelihood that a listing might be construed as advertising for the company.

More detailed information on this subject is available in Company Foundations and the Self-Dealing Rules by Jane Nober.