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Senate colloquies groups and foreign-parented multina- foundations to engage in careful tax
On Aug. 6, 2022, several U.S. senators tional groups. Comprehensive model- planning to avoid negative tax conse-
engaged in colloquies with Sen. Ron ing can help applicable corporations quences when making distributions to
Wyden, D-Ore., the chair of the Sen- consider any potential increase in their nonpublic charities, including related
ate Finance Committee, on the Senate federal income tax liability. Modeling is private foundations. The other reminds
floor to formally discuss several aspects especially critical post-TCJA, given the nonoperating foundations that mak-
of the corporate alternative minimum many complex and interrelated foreign ing proper, timely elections could avert
tax. Generally, a colloquy is a formal and domestic tax provisions that can negative tax consequences, such as by
scripted conversation among members affect a corporation’s tax liability, includ- mitigating a shortfall in a foundation’s
of Congress that can become part of the ing the corporate alternative minimum distributions and avoiding excise tax
Congressional Record. Colloquies can be tax, BEAT, Sec. 163(j), foreign-derived imposed under Sec. 4942 for failure to
used for various purposes, including to intangible income, global intangible make sufficient qualifying distributions.
draw attention to or clarify the intent low-taxed income, and the Organisa-
of a particular issue or provision in a tion for Economic Co-operation and Transfers to private foundations
bill. The impact of a colloquy on federal Development’s base-erosion and profit- will not cause unwanted
agencies, including Treasury, and their shifting Pillar 2. repercussions
power to make policy decisions is not Additionally, a number of issues re- In Letter Ruling 202231007, the IRS
always clear. main outstanding across income tax dis- ruled that proposed transfers from a
In a colloquy with Sen. Bob Menen- ciplines. These range from mergers and private nonoperating foundation (“Fam-
dez, D-N.J., Wyden confirmed that acquisitions to income tax accounting ily Foundation”) to two related private
regulations addressing potential issues methods to international tax issues. It is nonoperating foundations would not
with foreign income taxes in noncon- the authors’ understanding that Treasury result in negative tax consequences for
forming foreign tax years would be in is working on guidance to address many the three foundations or require Fam-
line with the legislative text and the of these issues (e.g., preventing the du- ily Foundation to exercise expenditure
Senate’s intent for companies to be able plication or omission of income or loss responsibility over the grants for longer
to appropriately utilize foreign tax cred- when applying the adjusted financial than three years.
its in the corporate alternative minimum statement income qualification test or Facts: Family Foundation is a Sec.
tax. In a colloquy with Sen. Ben Cardin, determining adjusted financial statement 501(c)(3) entity classified as a private
D-Md., Wyden clarified that Treasury income for computing the corporate nonoperating foundation under Sec.
may issue regulations under the corpo- alternative minimum tax). Pending guid- 509(a). Family Foundation’s only trustee
rate alternative minimum tax to address ance, companies will have to take posi- (“Trustee”) is a family trust company
potential issues with the ordering of the tions and file returns based solely on the that provides fiduciary, financial, and
calculation of the credit under Sec. 53 statute as enacted. personal services to one family and its
and BEAT under Sec. 59A. In another From J.D. Hamilton, CPA, New York related charitable entities. The fam-
colloquy with Cardin, Wyden clarified City; Enrica Ma, J.D., Washington, D.C.; ily members make up the majority of
that “other comprehensive income” is and Rayth T. Myers, J.D., Washington, Trustee’s board of directors and are do-
not included in financial statement in- D.C. nors to Family Foundation. The family
come for corporate alternative minimum members own the controlling shares of
tax purposes. “Company,” a business corporation.
Exempt Organizations “Company Foundation,” a Sec.
Implications 501(c)(3) corporation classified as a
The act will require applicable corpora- Private foundations’ private nonoperating foundation under
tions to compute two separate calcula- distributions to and from Sec. 509(a), makes grants and supports
tions for federal income tax purposes nonpublic charities educational programs in locations where
and pay the greater of the corporate Two recently published IRS letter rulings Company has a business presence. In
alternative minimum tax or their regular provide helpful informal guidance for pri- addition, Company Foundation makes
tax liability (regular tax liability plus vate nonoperating foundations, particu- grants to support college programs that
BEAT liability). Companies should larly ones that receive and/or make grants train students in Company’s industry.
assess their structures to identify appli- from or to other private foundations. Company Foundation is controlled by
cable corporations, taking into account One letter ruling underscores Company, which is controlled by the
the special rules for common employer the need for private nonoperating family members.

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