If you’re the person who established a private foundation, you are, by definition, what’s called a disqualified person. If you’re a disqualified person, you can’t engage in self-dealing. The term self-dealing is generally used to describe deals between a private foundation and a disqualified person that involve one or more of the following types of transactions: The sale or exchange of property: This transaction between a private foundation and a disqualified person is automatically an act of self-dealing, even if unintentional. For example, a disqualified person who’s a medical supplies salesperson can’t make any sales to his hospital’s private foundation, regardless of the amount of the sale.
- Leases: Any lease between a disqualified person and a private foundation is automatically considered to be self-dealing.
- Extending credit or making loans: These types of transactions between private foundations and disqualified persons are acts of self-dealing unless the loan is completely interest-free.
- The provision of any goods, services, or facilities (including office space, cars, secretarial help, meals, parking, and so on): These transactions between a private foundation and a disqualified person is automatically an act of self-dealing unless these items are provided without charge and are used exclusively for the exempt purpose of the private foundation.
- The payment of any compensation or expense reimbursement: This transaction between a private foundation and a disqualified person is considered to be self dealing unless the payment is for personal services necessary to carry out the private foundation’s mission and the payment isn’t excessive.
- Transferring foundation income or assets to, or for the use or benefit of, a disqualified person: This transaction is automatically considered an act of self-dealing.
- Certain agreements to make payments to government officials: This transaction would generally be considered an act of self-dealing unless such payments are logically excluded. For example, a prize doesn’t have to be included in gross income if the official receiving it is selected from the general public. Similarly, a scholarship grant would also be exempt. If a case of self-dealing is egregious enough, the tax-exempt organization could lose its taxexempt status. For example, if an officer of a nonprofit enters into a lease agreement for the headquarters of the organization that’s in a building she owns, and the rent for the space is way above market rent, this would constitute self-dealing
