Is it Considered Self-Dealing to Give Money to Local Institutions in Which the Donor Participates?

You can make grants to any organization or cause if it serves the general public. So, the tax- center answer is, you can make a grant that benefits a charitable class, even if you’re in that charitable class. For example, if you are a breast cancer survivor and you want to use your foundation to support breast cancer research, the fact that you are a survivor and will benefit personally does not make it a self-dealing grant. This is because everyone and anyone who has been afflicted with breast cancer benefits from the grant.

Similarly, if you make a grant to your doctor for ongoing research, as long as it’s not ongoing research that is limited to you and you alone, but would benefit anyone dealing with that, it is permissible. The same thing holds with a grant to a hospital. However, you need to be very careful. There can be no quid pro quo. You can’t make that payment with the expectation, either written or implied, that it’s for your own personal benefit, but at the same time, it’s not your responsibility to chase that down too far.

What you cannot do is make grants that are earmarked for your benefit, whether it’s for you personally to have a better room, or it’s for your child at a school to get a new instrument or a new uniform. But if the program is large enough and more kids than your own child will benefit, then it is permissible. As long as your child is not the only beneficiary or one of a very small handful of beneficiaries, that should be okay.

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Self-Dealing and Conflicts of Interest

This Content Collection defines conflict of interest and self-dealing in family philanthropy, and highlights the most common problem areas, including: excessive compensation, tickets to fundraising events, and overlapping board members.

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