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Treasury Regulations · 26 CFR

§ 53.4945-6. Expenditures for noncharitable purposes.

In effect eCFR current as of October 15, 2026

Regulation text, no changes From the eCFR, current as of October 15, 2026. The eCFR is an authoritative but unofficial editorial compilation of the Code of Federal Regulations; the official text is the annual CFR on govinfo. Compare it with this section on ecfr.gov (external site) or the official annual CFR on govinfo (external site).

Regulation under 26 U.S.C. § 4945

Cite as 26 CFR § 53.4945-6

At a glance

Read from the text and its source citation. Not part of the regulation.

Status
In the current eCFR
Issued
October 31, 1972 by T.D. 7215
Last amended
December 21, 1972 by T.D. 7233
Issued under
26 U.S.C. § 4945
Length
867 words · about 4 min to read
Defines
3 terms
Cross-references
cites 8 Code sections and 3 regulations; cited by 3
(a) In general. Under section 4945(d)(5) the term “taxable expenditure” includes any amount paid or incurred by a private foundation for any purpose other than one specified in section 170(c)(2)(B). Thus, ordinarily only an expenditure for an activity which, if it were a substantial part of the organization's total activities, would cause loss of tax exemption is a taxable expenditure under section 4945(d)(5). For purposes of this section and §§ 53.4945-1 through 53.4945-5, the term “purposes described in section 170(c)(2)(B)” shall be treated as including purposes described in section 170(c)(2)(B) whether or not carried out by an organization described in section 170(c).
(b) Particular expenditures.
(1) The following types of expenditures ordinarily will not be treated as taxable expenditures under section 4945(d)(5):
(i) Expenditures to acquire investments entered into for the purpose of obtaining income or funds to be used in furtherance of purposes described in section 170(c)(2)(B),
(ii) Reasonable expenses with respect to investments described in subdivision (i) of this subparagraph,
(iii) Payment of taxes,
(iv) Any expenses which qualify as deductions in the computation of unrelated business income tax under section 511,
(v) Any payment which constitutes a qualifying distribution under section 4942(g) or an allowable deduction under section 4940,
(vi) Reasonable expenditures to evaluate, acquire, modify, and dispose of program-related investments, or
(vii) Business expenditures by the recipient of a program-related investment.
(2) Conversely, any expenditures for unreasonable administrative expenses, including compensation, consultant fees, and other fees for services rendered, will ordinarily be taxable expenditures under section 4945(d)(5) unless the foundation can demonstrate that such expenses were paid or incurred in the good faith belief that they were reasonable and that the payment or incurrence of such expenses in such amounts was consistent with ordinary business care and prudence. The determination whether an expenditure is unreasonable shall depend upon the facts and circumstances of the particular case.
(c) Grants to “noncharitable” organizations—
(1) In general. Since a private foundation cannot make an expenditure for a purpose other than a purpose described in section 170(c)(2)(B), a private foundation may not make a grant to an organization other than an organization described in section 501(c)(3) unless
(i) The making of the grant itself constitutes a direct charitable act or the making of a program-related investment, or
(ii) Through compliance with the requirements of subparagraph (2) of this paragraph, the grantor is reasonably assured that the grant will be used exclusively for purposes described in section 170(c)(2)(B).

For purposes of this paragraph, an organization treated as a section 509(a)(1) organization under § 53.4945-5(a)(4) shall be treated as an organization described in section 501(c)(3).

(2) Grants other than transfers of assets described in § 1.507-3(c)(1).
(i) If a private foundation makes a grant which is not a transfer of assets pursuant to any liquidation, merger, redemption, recapitalization, or other adjustment, organization or reorganization to any organization (other than an organization described in section 501(c)(3) except an organization described in section 509(a)(4)), the grantor is reasonably assured (within the meaning of subparagraph (1)(ii) of this paragraph) that the grant will be used exclusively for purposes described in section 170(c)(2)(B) only if the grantee organization agrees to maintain and, during the period in which any portion of such grant funds remain unexpended, does continuously maintain the grant funds (or other assets transferred) in a separate fund dedicated to one or more purposes described in section 170(c)(2)(B). The grantor of a grant described in this paragraph must also comply with the expenditure responsibility provisions contained in sections 4945(d) and (h) and § 53.4945-5.
(ii) For purposes of this paragraph, a foreign organization which does not have a ruling or determination letter that it is an organization described in section 501(c)(3) (other than section 509(a)(4)) will be treated as an organization described in section 501(c)(3) (other than section 509(a)(4)) if in the reasonable judgment of a foundation manager of the transferor private foundation, the grantee organization is an organization described in section 501(c)(3) (other than section 509(a)(4)). The term “reasonable judgment” shall be given its generally accepted legal sense within the outlines developed by judicial decisions in the law of trusts.
(3) Transfers of assets described in § 1.507-3(c)(1). If a private foundation makes a transfer of assets (other than a transfer described in subparagraph (1)(i) of this paragraph) pursuant to any liquidation, merger, redemption, recapitalization, or other adjustment, organization, or reorganization to any person, the transferred assets will not be considered used exclusively for purposes described in section 170(c)(2)(B) unless the assets are transferred to a fund or organization described in section 501(c)(3) (other than an organization described in section 509(a)(4)) or treated as so described under section 4947(a)(1).

[T.D. 7215, 37 FR 23161, Oct. 31, 1972, as amended by T.D. 7233, 37 FR 28162, Dec. 21, 1972]

Terms defined here

Where the text says “the term … means”. Select a term to jump to its definition.

Other regulations under § 4945

Cross-references

Computed from the citations in the text of 26 CFR.

Code sections it cites

Regulations it cites

Cited by 3 other regulations

Amendment history

From the source citation at the end of the section, newest first. T.D. is a Treasury decision; FR is the Federal Register.

  1. Amended by T.D. 7233 (37 FR 28162)
  2. Issued by T.D. 7215 (37 FR 23161)

Where it sits in 26 CFR

  1. Subchapter D Miscellaneous excise taxes
  2. Part 53 Foundation and similar excise taxes
  3. Subpart F Taxes on Taxable Expenditures

Nearby sections