Pay for Play -- Trump Style

[320 Years of History]

Trump donated $25,000 from his foundation, which as a nonprofit is not supposed to aid political candidates, to a group backing Florida Attorney General Pam Bondi in 2013. The money came under scrutiny at the time because Trump donated the money just days after Bondi said she was reviewing complaints surrounding Trump’s real estate school, Trump University.

What is the sequence of the 2013 events?

• FL Atty Gen. Bondi announces that she's reviewing complaints about Trump U.
• Trump Foundation illegally donates $25,000 to And Justice for All, a political organization backing Bondi.
• Trump Foundation misrepresents the donation as being to a similarly named group, "Justice for All."
  • The money did go to "And Justice for All." It did not go to "Justice for All."
• Bondi drops the investigation.
• IRS fines Trump Foundation for making an illegal donation to a political organization.

For the details, read:

• Trump camp says $25,000 charity contribution to Florida AG was a mistake
  
• Trump pays IRS a penalty for his foundation violating rules with gift to aid Florida attorney general

Things one needs to know about foundations and charities in order to fully understand the "issues" that have been raised about both the Clinton Foundation and the Trump Foundation:

First, let me be clear from the start: foundations and public charity accounting, classification, taxation, and operation is a very arcane topic. This is the stuff that only financial advisors, tax accountants, tax attorneys and the people they serve will bother to understand. I'm going to try to keep this as simple as possible because I suspect few folks here are CPAs, CFAs, etc, IRS auditors, etc. Accordingly, if you are going to take exception with it, you need to click on the link just above before you start spouting off about "what is and isn't." I'm simply not going to entertain a discussion about the nuances of tax accounting, classification, and IRS regulations with non-experts (non-CPA, non-CFA, non-tax attorney, non-tax auditor, etc.)

• Unlike the Clinton Foundation which is a public charity, the Trump Foundation is a private foundation. Why is that important? Because private foundations, as one of the tools wealthy folks use to shelter and protect income that they nonetheless control and can use for their own benefit, are often revenue generating/profit making entities because of the types of assets they hold.
  • If one puts assets into a private foundation, one can, assuming one is on the board of the foundation, still control those assets. Do the same with a private charity and it's "bye bye" assets. This greater degree of control is "paid for" with the lower deductibility rate (30%) of donations to a private foundation than those made to a public charity (50%).
  • Private foundations, because they generally are not operating charities have few costs other than donations to other charities. Their main activity is managing financial assets, collecting donations, identifying organizations and individuals to which/whom they will give money. Accordingly, they generally have only administrative costs. Thus for a private foundation, the ratio of donations the foundation makes to income generated is rightly seen as a measure of how efficient/effective the foundation is, or in other words, how charitable it is. That is, a private foundation that donates ninety cents of every dollar received/generated to charity is very charitable.
  • Public charities are generally operating charities. What that means is they themselves perform the work that results in achieving the entity's charitable objectives. Their donations-to-income ratio will be far lower than a private foundation's. So when one sees the expense classification on a public charity's P&L, the majority of what one is looking at is the sum the entity spent to conduct a given charitable activity. Direct donations appear as a separate line (cash outlay) item because they are required to; it's just basic GAAP accounting and classification that requires them to do that. Thus, in addition to incurring the same types of administrative costs as a foundation and making direct donations of cash, they also will have expenses related to performing whatever operating activity(s) they perform. For example, an operating charity, unlike a foundation might:
    • hire contractors and workers, or feed and transport volunteers, who build houses and water wells in a community, as might Habitat for Humanity,
    • own and operate a hospital, church or school,
    • mentor/tutor children and/or train adults,
    • fund and/or perform research,
    • directly sponsor, organize and host events like The Race for the Cure.
• A public charity doesn't offer the same tax advantages to the individuals who create/run them.
  • Foundations - Guide to Private Family Foundations

Also, public charities are subject to far tighter oversight and regulation.

• The IRS requires certain language to be in a public charity’s articles of incorporation explicitly restricting its activities to such.
• A public charity must represent the public interest by having a diversified board of directors. More than 50% of the board must be unrelated by blood, marriage or outside business co-ownership and not be compensated as employees of the organization.
• Public Charity Governance -- The Board: The IRS requires that governance of a public charity be at arms-length and without private benefit (inurement) to insiders. It requires that it be possible for a quorum of public charity's board whereby no board members needed to form a quorum have a personal stake, either directly or potentially through relationship. Put another way, the board of the "320 Years of History Foundation," a private foundation, can consist solely of me, or me and my kids and spouse. Were the "320 Years of History Foundation" classified as a public charity, there would have to be at least two other board members for every one board member who is related to another board member and those "others" must have nothing to do with the fortunes, well being, businesses, etc. of the related (not necessarily by blood or marriage) board members.
  • Public charity hypothetical board:
    • me --> there must be two other individuals on the board in order for the charity to retain its public charity status.
    • me, my two kids --> six unrelated individuals must also be on the board in order for the charity to retain its public charity status.

Hopefully that basic background about the distinctions between public charities and private foundations helps you understand how the Trump Foundation (private foundation) matter is very different from the Clinton Foundation (public charity) hoopla. The issue with the former is very real and a legal one; the latter is just folks taking advantage of the fact that most folks think of charities as "ought to be" all the same and not really knowing the "ins and outs" of charitable organizations.....Understandably, seeing as most folks don't have the kind of wealth that militates for and justifies setting up a public charity or private foundation.

 

[DarkFury]

tl;dr

 

[DarkFury]

Oh and by the way idiot, the money was taken from the wrong fund and placed in the wrong account. The states ruling was a 10% fine which has been PAID.

F#cking retard.

 

[320 Years of History]

And don't try to tell me that it was just a clerical error.

Nobody writes a check to "A," hands it to them or mails it to them, or has the account info to do an electronic payment, and then records the payment in any book of accounting record as being to "named similarly to A" when the fact of the matter is that A is an entity to which one is prohibited from donating in the first place.

I was born at night, but not last night. You know as well as I that accounting types just aren't that sloppy.

 

[TNHarley]

At least bondi is still alive..