Blog: Amplify

Corporate Foundations & Funding Talent Pipelines: An Act of Self-Dealing

Providing grants to colleges and universities is a central function of many corporate foundations. Company foundations are often asked to provide support to educational institutions that train potential employees. And as a recent inquiry to Legal Affairs demonstrates, as long as the foundation’s support does not materially aid the company in recruiting or training workers, grants may be made to educational institutions without fear of engaging in any self-dealing prohibitions.     

In this scenario, a corporate foundation’s board was seeking to change the foundation’s funding priorities. In particular, the board was looking to focus on funding job skills training that would lead to employment, specifically funding a program at various trade schools and community colleges where the company, a goods manufacturer, had relationships. An intention of the program was to introduce students to corporate retailers for possible future employment.

The Council’s legal team advised the foundation that it may fund such a program, but recruitment of graduates must be made available to the sponsoring company’s competitors as well. This is because the IRS is weary of corporate foundations granting charitable dollars to build a farm system of talent the company could tap in the future.

The legal team’s guidance was based on an IRS Revenue Ruling that approved a similar corporate foundation funding project to a trade school but did so mainly on the condition, among others, that “a number of other manufacturers, including competitors of the sponsoring corporation were able to recruit graduates of the program.”

Therefore, there cannot be any corporate opportunity as a result of any of the grants. As such, the foundation may fund the programs so long as its corporate sponsor’s competitors, too, were able to recruit graduates of the program for possible future employment. 

For more information on this or any other tricky legal matters, please contact the Council’s Legal Affairs Team at

Bryan J. Del Rosario is Staff Counsel at the Council on Foundations.

Access to the Council’s legal team is a valuable member benefit. Council attorneys are available to discuss your legal questions and to provide legal information by telephone, email and through our various publications and newsletters. This information is intended for educational purposes and does not create an attorney-client relationship. The information is not a substitute for expert legal, tax or other professional advice tailored to your specific circumstances, and may not be relied upon for the purposes of avoiding any penalties that may be imposed under the Internal Revenue Code.

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