Item — HN Reader

Even a charitable organization the donor fully controls must follow regulations on its activity. Surely some people use their foundations as personal piggy banks, but that’s fraud and is pursued as such.

It’s like a conservation agreement. The land (wealth) remains in control of the owner, but the state gets some say in its use and the public benefits. Abuse of the the system is a case for stricter enforcement; sanctioned but objectionable uses are a case for stricter regulations

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Yes, but these regulations are not well policed. They effectively take the accounting books provided at face value.

It's almost never investigated, and there is, in the normal course, so much overlap between expenses that benefit ME as a person, and ME as the owner of the charity.

Travel is a big one, for example.

This type of misbehavior is widespread, too. These foundations are not limited to the ultra wealthy. Tons of even moderately rich people (say, tens of millions in wealth) take advantage of these vehicles. Pumping their income into "charity" where charity is not Habitat For Humanity, but "MR JOHN B ENTREPRENEUR CHARITABLE FOUNDATION LLC". The foundation is run within a millimeter of the law, and basically funds the owner's lavish lifestyle tax-free. It's such an obvious scam but since it's just barely legal, nobody bats an eye. And if anyone questions the practice, you have people coming out of the woodwork saying "why are you against charities like Habitat For Humanity?"

Probably a fair complaint. I’d question whether enough people with foundations take bald-face risks with enough of the assets to be relevant to tax policy.

More pedestrian stuff (eg expensing a conference in Seychelles) definitely slips through, but we could make the same principal-agent complaint about business expenses or other settings where one person gets to spend money from different buckets that are taxed differently.

I’d challenge the notion that the rules are unenforced though - someone will have questions if you’re living in a house your foundation purchased or somesuch. At the very least several people with an obligation to know better and much less to lose we’re going to be very nervous.

> Even a charitable organization the donor fully controls must follow regulations on its activity.

Conversely, even a charitable organization not run by the donor may be heavily influenced by a disproportionate donor such that it is de facto controlled by them.

So they get to set organizational policy, but still can’t compel the organization to do illegal things (like route the donors money back to them tax-free)

>but that’s fraud and is pursued as such.

Our former president would beg to differ

Sadly true, though he did get get sued by the NYAG and in settlement agreed to a raft of restrictions on his charitable service, as well as the closure of the foundation and return of $2m in misused funds[0]

[0]:https://ag.ny.gov/press-release/2019/donald-j-trump-pays-cou...