Working with Government Officials — Course Transcript

Introduction

Maya: Hi, my name is Maya, and I am a program officer at a private foundation that cares about making positive change in the world. Right now, I’m looking at a potential venue for a global health conference that my foundation is hosting. It’s still a few months away, but our team has lots of good ideas for the event.  It’s going to be great!

Narrator: Hi, Maya!  Can we talk a minute before you start planning this important event?

Maya: Oh…hello! I wasn’t expecting to hear from you today. I’m just working on a conference, booking hotel rooms, lining up speakers. No legal issues here!

Narrator: Well, Maya, have you considered whether any government officials will attend the conference?  You know, there are special rules that apply when a foundation interacts with someone from the government. You need to consider those rules before you make plans involving a government official because the rules will determine what the foundation may and may not do or pay for under the rules.

Maya: Really? We want to invite the Secretary of the US Department of Health and Human Services to the conference.  But, we won’t treat the Secretary differently than all the other attendees. Does that resolve the legal concerns?

Narrator: I’m afraid not, Maya.  If you invite a government official, we have to navigate the legal rules even if the government official doesn’t receive any special treatment or benefits.

Maya: Hmm, I wouldn’t have thought of that.  After all, we’re all working towards the same important goal… But I’m guessing you can walk me through all the rules before I do any more planning?

Narrator: I sure can. And you will see that you can follow the rules and still accomplish your foundation’s objectives while working with a government official.  It just takes some planning. And that starts with this course that consists of the five modules listed on your screen.

Maya: Great!  I want to make sure I understand the applicable rules.  After this training, will I have all the information I need?

Narrator: Well, this course will be a really good start.  But it’s not possible to cover every detail about all the rules that might apply to the different scenarios you could face.  What is possible-and I believe will be quite useful for you-is that this course will help you identify the situations when your foundation’s activities may be covered by the IRS tax rules and various ethics rules for working with government officials.

Maya: Okay!

Narrator: My goal is to help you learn how to spot issues that require special consideration.  As these situations come up, you should seek help from the person at your foundation who is responsible for legal compliance.  Depending on your organization, that may be your in-house legal staff, outside legal counsel, or another department responsible for compliance.  Your legal advisor can help you analyze each situation and determine what steps you must take to follow the rules while accomplishing your foundation’s goals.  And, you can always refer back to this course as a refresher.

Maya: That sounds perfect!

Narrator: Now, before we get started, if you’re taking a LearnFoundationLaw.org course for the first time, it’s best that you start by clicking the Course Navigation button on the bottom of your screen to learn how to control your training experience.

Additionally, if you’re taking this course for the first time we recommend that you go through each module in order, starting with the module called “Overview of the Rules”.  If you are a returning user, please select any of the modules to continue with your learning.

 

Navigation

Narrator: Again, if you’re taking this course for the first time, it’s best that you go through each module in order.

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Module 1: Overview of the Rules

Introduction

Maya:  Hi, this is Maya.  (Hand over the phone, whispers, “It’s my boss.”)  Sure, I can meet tomorrow to discuss the global health conference.  I was just working on it.  See you tomorrow!

I really am glad you are here.  Is now a good time to help me with my conference?

Narrator:  Sure! Before you dive into planning, you need to consider two kinds of rules anytime the foundation will be working with a government official.  There are the IRS tax rules and there are federal, state and local ethics rules.

 

IRS Tax Rules

Narrator:  I am going to start by giving you an overview of the IRS tax rules, and then we can walk through how these rules apply in different situations.  Under these rules, a private foundation may not offer or give a government official “any payment of money or other property.”

Maya:  That sounds simple  …. and harsh!

Narrator:  It does, but in practice, it is neither of those things. The rules seem simple, but they can be quite complicated when applied to everyday situations.  And while they sound harsh, the IRS tax rules actually permit private foundations to include government officials in many aspects of their charitable activities.  But you need to think about these issues before you start working with a government official and definitely before you offer gifts or extend a formal or informal invitation.

Maya:  So it’s a big deal?

Narrator:  Yes, it is.  The bottom line is that your foundation can get into trouble if it offers or provides a prohibited gift or benefit to a government official-even if the gift or benefit is something that furthers your foundation’s charitable mission.

Maya: Okay, then, what I need to know is what my foundation is allowed to do when working with government officials.  I’m ready to learn!  But first, I have a question about our grantees.  Do these IRS tax rules apply to our public charity grantees as well?

Narrator:  No, Maya.  These IRS tax rules relating to government officials do not apply to public charity grantees, as long as the private foundation has not directed grant funds to be used for the benefit of a particular government official.  So, assuming you don’t earmark, or tell your public charity grantees they have to provide money or payments to benefit certain government officials, the grantees may have more flexibility than your private foundation when working with government officials.

Maya: Ah…Good to know.

Narrator: You should also know that the IRS tax rules do not apply to foreign government officials.  But the rules do cover officials at all levels of the U.S. government, including federal, state and local government.  The size of the government agency doesn’t matter.  So, even someone at a small department in a small town may be a government official under the IRS tax rules.  We’ll talk more about which government employees fit the definition of “government official” in Module 2.

Maya:  When I think about tax rules and working with the government, I usually think about the prohibition on lobbying by private foundations.  Will we be talking about that in this course?

Narrator:  No, not in this course, Maya.  But those rules matter, too, and may come up when you work with government officials.  Questions about the prohibition on campaign intervention, also called electioneering, may also arise. If you have questions about either lobbying or electioneering, you should ask your legal advisor.

In addition, you can view the courses on Advocacy and Lobbying Rules for Private Foundations and Electioneering Rules by clicking the links on your screen. Click Next when you’re ready to continue.

 

Penalties

Maya:  There sure are a lot of rules to worry about.  Who is responsible for getting all of this right?

Narrator:  Let’s talk about the IRS tax rules first.  Each year, when a private foundation completes its annual tax return, it has to report whether it made any impermissible payments to government officials. If it has made an impermissible payment, the foundation is required to undo the payment, and under certain circumstances, foundation executives and government officials may be subject to a penalty tax.

Maya:  Wow.  I really do need to learn these rules!  What about the ethics rules? Who is responsible for getting those right?

Narrator:  For the ethics rules, it’s both the private foundation and the government official, but the penalties generally fall primarily on the government official.

Maya:  Hmm, it seems like, for their own protection and credibility, a government official would be more likely to want to work with a private foundation that understands the rules.

Narrator:  Exactly. Keep in mind, that in addition to the legal risks, there are reputational risks. Violating the rules could attract media attention for everyone involved, including the private foundation.

Maya: You mean if we get this wrong then the people we’re trying to work with could be penalized and we could all end up on the front page of the newspaper even if no one meant to do anything wrong?

Narrator:  That’s right.

Maya:  Okay, there is an awful lot to keep track of here.  I wish I had a checklist to help me work through the questions I should be asking.

 

Key Questions

Narrator:  I can help with that.  As we go through the modules, you’ll see that what matters most is how you approach interactions with government officials, one person and situation at a time. You, with the help of your legal advisor, can work through any situation by asking the following questions:

• What do your internal foundation rules say? This question is important because each private foundation may have its own approach to complying with both the IRS tax rules and the ethics rules.
• Is this a payment to a government official under the IRS tax rules?
• If it is, is it a permissible payment to a government official under the IRS tax rules?
• If it’s not permissible, how can the foundation achieve its objective while complying with the IRS tax rules?
• Then, once you’re done with the analysis under the IRS tax rules, is this a permissible payment to an employee of the government under the applicable ethics rules?

We will call these key questions the “Government Officials Checklist”. The goal of this course is to help you learn to spot the potential issues under the tax and ethics rules and this Checklist should help you do that. See the Resource tab for a printable version of these questions, and remember, when interacting with government officials, you should also always consider the lobbying and electioneering rules.

Alright, are you ready for your first Knowledge Check? Click Begin to get started.

 

Ethics Rules

Maya:  Earlier, you said there were two sets of rules, the IRS tax rules and the ethics rules.  Are the ethics rules part of the IRS tax rules, or are they something different?

Narrator:  They are something different.  Federal, state and some local governments have ethics rules, otherwise known as gift rules, that dictate what types of gifts and benefits a government employee may accept from a non-governmental source.  The federal, state and local ethics rules may define “government official” differently than the IRS tax rules, making navigation of all the rules tricky.

Maya:  What ethics rules will apply to my work with government officials?

Narrator:  That depends on where the government officials work.  Each branch of the federal government has ethics rules that apply to it’s employees. States and many cities and towns also have their own ethics rules which apply to their employees. Plus, many foreign countries have ethics rules for their employees. We can’t cover all of these rules in this course, so we are going to focus on a few rules that are most likely to come up in your work.

Maya:  What’s the point of all these rules?  Why make it so difficult to work with government officials?

Narrator:  That’s an important question, Maya.  The rules are designed to ensure that government works for the benefit of everyone, not just a few.  The rules prevent government officials from accepting inappropriate gifts or benefits from private parties, including foundations.  Both the IRS tax rules and the ethics rules are designed to prohibit the sorts of transactions that people believe lead to corruption in government.

Maya:  Wow, these rules may make my job harder, but they do serve an important purpose.  Aren’t there other laws that deal with corruption and bribery?  Are you going to talk about those, too?

Narrator:  Not in this course, Maya, but if you would like to learn more about them, you can view the course on Anti-Bribery and Anti-Corruption by clicking the link on your screen.  When you are ready to move on, click Next.

 

Module 2: Foundation Conferences

Introduction

Narrator:  Okay, Maya. Now that you understand what rules we need to consider, let’s start planning your conference. It sounds very interesting.

Maya:  Well, my team just got approval for the conference on global health.  We have been bouncing around lots of ideas but don’t have any set plans yet.  We’ve identified quite a few people from government who may be interested in attending.

 

Internal Foundation Rules

Narrator: First, consider what your foundation rules say before you start to implement any idea.  As a foundation employee, you should know and follow the foundation’s internal policies because they were adopted to protect the foundation and its resources.  You may find that your foundation does not permit certain activities even if they are allowed by the law.

Maya:  Good point.  I am sure the foundation policies were drafted with both the legal requirements and the foundation’s reputation in mind.  It makes sense to start there.  I will consult my legal advisor to make sure I am not missing anything, but, in looking at my foundation rules, they say we are allowed to invite government officials to conferences.

 

Who is a Government Official?

Maya:  So, let’s move on to the next question:  Is this a payment to a government official under the IRS tax rules?

Is everyone who works in government a “government official” under the IRS tax rules?

Narrator:  No, not everyone.  But the definition of a “government official” in the IRS tax rules is quite technical and can be complicated to work through, so you should consult with your legal advisor before deciding that a government employee is not a government official.  One option is to treat all government employees as government officials.  You can’t get into trouble if you do that. Click the button on your screen to see exactly who is a government official under the IRS tax rules.  When you’re ready to move on, click the Next button.

 

Domestic Travel Expenses and Transportation Costs

Maya:  Practically speaking, government officials may not be able to attend the conference unless the foundation flies them in, gives them a place to stay and provides meals.  What about those costs?  Are they allowed?

Narrator:  Yes, they are, within certain limits.  A foundation is permitted to pay travel expenses for government officials within the United States, including meals and lodging, if the travel is for a charitable purpose.  In this example, we already know the global health conference is being held within the U.S., and it is related to the foundation’s charitable purpose.

Maya:  Does that mean that if the foundation held a meeting in a foreign country, a government official could come and participate, but the foundation couldn’t pay for their airfare or for their meals and lodging?

Narrator: That’s right, Maya. A foundation can only pay for expenses associated with domestic travel.  That means travel must begin and end in one of the fifty states or the District of Columbia.  Travel cannot begin or end in a U.S. possession or territory, like Puerto Rico, or in any foreign country.

Maya: I’m glad this conference is in the U.S.  But we can still pay expenses for the foreign health minister to come, right, since the IRS tax rules only apply to officials of governments in the U.S.?

Narrator:  Correct!  Although it’s always important to be mindful of other rules that might affect payments to foreign government officials, such as the U.S. Foreign Corrupt Practices Act or any rules in the foreign official’s home country.

Maya:  Okay, what about the limits you mentioned?

Narrator:  Well, in addition to the domestic travel limitation, there is a limit on cost.  The foundation can pay no more than the actual cost of transportation, which most foundations apply to mean no more than a reasonable amount.

Maya:  That seems simple enough.  Our foundation prefers to book and pay for travel through our travel service. Is that okay?

Narrator:  Yes, that’s perfectly fine.  The rules allow you to pay for actual travel expenses directly or through reimbursement, or you can even make reasonable advances for expected travel expenses.

 

Foundation-Sponsored Conferences

Maya:  So, now it’s on to the next question in the checklist:  Is this a permissible payment to a government official under the IRS tax rules?

In other words, is it permissible for the foundation to invite government officials to attend a conference it is sponsoring?

Narrator:  Yes, a government official is permitted to attend or participate in a conference sponsored by the foundation in furtherance of the foundation’s charitable purposes. And, Maya, I understand you are focused on your global health conference right now, but you should know that this same principle applies to other foundation meetings like the foundation’s board or committee meetings. The key is that each meeting must be in furtherance of the foundation’s charitable purposes.

Maya:  That’s good news, and I’ll remember that this doesn’t just apply to something labeled a “conference.”  But this time we are hosting a conference, and it will definitely further the foundation’s charitable purposes because it’s about educating people and solving global health problems.  But the government official will also receive some benefits from attending.  Is that okay?

Narrator:  Yes, it’s clear that information and materials offered to a government official in connection with the conference are not a problem under the IRS tax rules, provided those materials are related to the educational purpose of the conference. For example, you might want to provide written or electronic materials to attendees before, during and even after the conference.

Maya:  That makes sense.  If we are holding a conference to educate people, we certainly should be able to provide them with educational information.

Maya:  But can we spend money to make sure the conference is enjoyable?  Can we hire entertainment?

Narrator:  Well, Maya, what do you think?

Maya:  Hmmm.  I think that if the entertainment is related to the charitable purpose of the conference, then it’s okay.  Like if a grantee wants to have a student band perform to show off how its program benefits kids, then that should be okay.  But a popular singer or rock band, maybe not so much.  If I have any questions, I’ll ask my legal advisor.

Narrator:  That’s right, Maya!  You get it.

 

Who is a Government Official?

Narrator: Maya, who would you like to invite to the conference? I can help you figure out if they are government officials under the IRS tax rules.

Maya:  Well, this is who we’ve been discussing so far as possible attendees:

• the Secretary of the U.S. Department of Health and Human Services;
• her top policy advisor;
• the head of a foreign health ministry; and
• a member of a White House task force on global health issues

They sound like government officials to me!

Narrator:  I can see why you would think they are all government officials. But, according to the IRS tax rules, only two of these individuals count as government officials: the Secretary of the Department of Health and Human Services and her top policy advisor.

Maya:  Really, that’s surprising?  Why isn’t the foreign health minister on the list?  That’s a pretty important job.

Narrator:  Remember, Maya, the IRS tax rules only apply to U.S. government officials. So the IRS tax rules don’t apply to a foreign health minister. However, other rules apply that you should be mindful of, such as the Foreign Corrupt Practices Act and foreign country ethics rules.

Maya:  Ok, got it.

Narrator:  The IRS tax rules also don’t cover “special government employees”, essentially, part-time or short term employees.  The White House task force member is very likely a special government employee who is not covered by the rules.

Maya:  Thanks, I wouldn’t have guessed that either.  I will definitely consult with my legal advisor about who is-and who is not-a government official.

Narrator: One other way to get help is to ask government employees to sign a form indicating whether they hold a position that is covered by the IRS tax rules.

Maya:  That’s a great tip and certainly would help show that the foundation is trying to follow the rules. 

 

Costs of Meals and Lodging

Maya:  Okay, now I know that I can pay the actual costs of transportation.  Can I do the same thing for other expenses, like meals and lodging?

Narrator:  Well . . . up to a point.  There is a limit. The IRS tax rules say that a foundation can pay for the actual cost of meals and lodging if they are related to its charitable purpose, but only up to a specified amount.  The limit is based on the per diem amounts that have been set by the federal government for its employees. Foundations are permitted to pay actual costs for other travel expenses, such as food and lodging, but only up to 125% of the maximum federal per diem rate, set for the relevant destination and time of year.

Maya:  So, actual costs that exceed that standard per diem amount would be an impermissible payment for a private foundation?

Narrator:  That’s right, Maya, in most circumstances.  However, your legal advisor can help you determine whether a special per diem rate might apply. Your global health conference might qualify for this special per diem rate if all the lodging and meals take place at the same venue where the conference is being held.

Maya:  Okay, but it sounds like I should never plan to pay expenses above the standard per diem rate without approval from my legal advisor.

Narrator: That is absolutely right!  Do you have any more questions about per diem expenses?

Maya:  Yes, I do.  How can I tell the difference between an expense that is related to the conference, which is not subject to per diem limits, and the expense of a meal, which is subject to the per diem limits?  This is why I’m asking: My boss knows of a great speaker for a lunchtime session who does a multi-media presentation.  We’ll need to rent special equipment to do it.  Does that sort of expense count as part of the cost of the meal?

Narrator:  As long as the speaker is related to the charitable purpose of the conference, it is not counted as part of the meal expense.  The fact that people may be eating during the presentation doesn’t change the treatment of those expenses.

 

Token Gifts

Maya:  Okay, one more question:  What about gift bags?  I mean people are traveling all this way, it’s inconvenient, they get behind at work, they don’t see their families for a few days … It seems like we should be able to offer them something nice for their trouble.

Narrator:  Well, it depends on how much the gift bags are worth, Maya. There is an exception to the IRS tax rules for token gifts.  And by “token,” I mean gifts from the foundation that are worth no more than $25 in total to the government official in a calendar year.  So if you provided a token gift to the official earlier in the year worth $10, you could only spend $15 on the government official’s gift bag at this particular conference.

Maya:  I had something a little bit nicer in mind …

Narrator:  Nope, sorry, Maya.  SWAG is out of bounds. Fancy gifts are unlikely to have any relationship to the foundation’s charitable purpose.  So, if they have a value of more than $25, aggregate in a calendar year, they are not allowed.  You may also want to check your internal foundation policy. Some foundations do not allow for even token gifts to government officials.

Maya:  Okay.  I get it.  The key thing I learned is that, so long as we stay within the limitations, our conference and associated travel expenses are permissible payments to government officials under the IRS tax rules.

Narrator:  That’s right, Maya.  And for your further learning, click the button on your screen to see a list of payments to government officials that are not permissible under the rules. When you’re ready to move on, click the Next button.

 

Executive Branch Ethics Rules

Maya: Got it.  Let’s move on down the checklist … What do the ethics rules say that might affect our planning of the global health conference?

Maya:  I remember you said that we can tell which ethics rules apply if we know where a government official works.  Well, we know we would like to invite officials who work for the Department of Health and Human Services.     

Narrator:  That’s right, and they are both covered by the federal executive branch ethics rules.  And the task force member is, too.  Like I said earlier, special government employees aren’t covered under the IRS tax rules, but they are covered under federal executive branch ethics rules.

Maya:  Okay, that’s kind of tricky when the IRS tax rules and the ethics rules cover different people.

Narrator:  You’re right-it can be tricky. You should assume that anyone who works for the federal executive branch is covered by the ethics rules, whether they are political appointees or civil servants. The executive branch ethics rules spell out what executive branch employees are able to accept from private parties, like the foundation.  This includes “gifts” such as meals, lodging, and travel.

Maya:  Do the executive branch ethics rules allow the Health and Human Services secretary, her policy advisor and the task force member to attend our conference?

Narrator: They can attend if the agency they work for says it’s okay. Each person must get prior written approval from their executive branch agency to accept payment for travel expenses.  Generally, an agency will approve the payment if it is related to the official duties of the employee and the travel is in the interest of the government.

Maya:  Will our conference qualify?

Narrator:  I expect it will.

Maya:  So, this is my takeaway:  As long as executive branch employees get advance approval from their federal agency employers, they can attend and participate in the conference and the foundation can pay for all of their reasonable expenses for travel, food and lodging.  Is that right?

Narrator:  That’s exactly right!

Maya:  Okay!  So the Health and Human Services employees and the task force member should be able to come to the conference. Are we done with the rules on the conference for now?  I feel like I’m ready to start talking about all of this with my boss.

Narrator:  We’re almost done.  Remember that the foreign health minister may attend, so you should work with your legal advisor to determine whether any ethics rules apply to the foreign government official and how your foundation handles payments involving foreign officials.

One final key piece of advice…   Navigating all these rules and getting any required government approvals takes time. You don’t want to have to deal with these issues at the last minute. It’s a good thing you still have some time before your conference to plan.

Alright Maya, ready for another Knowledge Check?  Click Begin to get started.

 

Module 3: Foundation Meetings

Introduction

Evan:  Hey, Maya.

Maya: Oh hi, Evan, how’s it going?

Evan: Well I’ve been working on a project on nutrition in schools. I have been trying to get a meeting with the Health and Human Services policy advisor who is coming to your global health conference. Would it be okay if I invited her to a dinner while she’s in town for the conference? I am also inviting a senior congressional staffer, the city school superintendent and a couple of other foundation staff. The dinner would be kind of a working session where we get input on a grant program we’re planning.

Maya: That seems like a good opportunity. I have been learning about the rules on working with government officials and they can be complicated. Before extending an invitation, you should check with our legal advisor.

Evan: Thanks for the tip, Maya. Will do.

Maya:  Hello? … Did you hear Evan’s question? I’m curious, is the foundation allowed to invite these government officials to a meeting. Does it matter that a meal will be served during the meeting?

Evan:  Hey, do you mind if I listen in?  I could learn something.

Narrator:  Sure you can, Evan!  And, hi, Maya.  Great job spotting this issue. Let’s use our Government Officials Checklist to think about your question.

Maya:  Got it. So the first question we need to ask is:  What do your internal foundation rules say?

I checked my foundation’s rules earlier today, and they say we can invite government officials to meetings as long as we get approval from our manager and comply with all applicable legal rules.

Evan:  My boss has already approved it!

Maya:  I think we are ready to move on to the second question on the checklist!

Narrator:  Sounds good, team. So, is this a payment to a government official under the IRS tax rules?

Maya:  I know the safest thing is to assume every government employee is a government official under the IRS tax rules, but I am going to check anyway.

Narrator: If you would like to look at the definition of government officials with Maya, click on her laptop.  Click the Next button when you’re ready to move on.

Maya:  So, according to the definition of a government official, the policy advisor and the congressional staffer are government officials.  What about the school superintendent?

Narrator: Because the school superintendent reports to the school board, which makes the policy, he is not a government official.

Click on each person to see why they are or are not covered under the IRS tax rules.  Click the Next button when you’re ready to move on.

 

Food at a Meeting

Maya:  Two out of the three potential guests are “government officials,” so the dinner expenses will definitely have to comply with the IRS tax rules for payments to government officials.

So, next question…  Is this a permissible payment?

Narrator:  The short answer is yes, but it will have to be a moderately priced dinner that fits within the IRS tax rule limits. Under the IRS tax rules, there are two types of permissible payments that might cover a meeting with government officials where a meal is served. One is the token gift exception.

Maya: Isn’t that limited to $25, aggregate for the year?  Would it have to include taxes and tip, too?

Narrator:  Yes, the limit is $25 per calendar year for all gifts given by the foundation, so you have to consider if anyone else at your foundation has already given a gift to the same government official. And the value of the meal should include tax and tip.

Maya: Twenty-five dollars is not very much to spend…   Remind me of the second type of permissible payment that might cover a meal?

Narrator: Under the IRS tax rules, as long as the expenses are incurred for a charitable purpose, a foundation can pay for meals based on the per diem amount set by the federal government.

Maya:  Oh that’s right!  That’s the same analysis we did about meal expenses for the global health conference.  This meeting has a charitable purpose, too, so we should be able to pay for a meal based on the standard per diem rate.

Narrator:  Yes, as we talked about earlier, your legal advisor can help you determine the maximum allowable amount for a meal based on the standard per diem rate. Remember, though, that the amount will be modest, probably not significantly more than $25.

Click the button on your screen to learn more about the Standard Per Diem.  When you’re ready to move on, click the Next button.

Maya:  Can Evan use the special per diem rate for the dinner that we may be able to use for the global health conference?

Narrator:  Probably not, Maya.  Evan should discuss it with your legal advisor to be sure, but the special per diem rate is generally not an option for private meals attended by a small group, even if everyone present is working on foundation business.

Maya:  That makes sense. But, it seems like it may be hard to plan a meeting with dinner if the cost is limited to around $25 per person. Hmmm…

Narrator:  That’s a good segue….  Let’s consider the next question on the Government Officials Checklist:  How can the foundation achieve its objective while complying with the IRS tax rules? The objective is to get these people together for a working session to get input on a grant program.

Evan:  You’re right, and that can happen without a dinner.  Maybe we could all meet at the foundation for our working session?  If we meet at an earlier or later time, we won’t need to worry about dinner. Maybe I can offer light refreshments like we do for most meetings at the foundation. Or, we could meet somewhere before the conference for coffee and bagels? That would be very inexpensive and still give us a chance to talk.

Narrator:  Good job thinking up options, Evan.  The key thing is to think about ways you can achieve the foundation’s objective while following the IRS tax rules. This is why it’s so important to plan ahead.

Maya:  Isn’t that the truth!  Before I learned about the rules for working with government officials, I would have thought it was fine for Evan to have this dinner and then, after the fact, the foundation would have had some problems to deal with.

 

Congressional Ethics Rules

Maya:  Okay, now let’s move on to the ethics rules. We have invitees from three different places in government, so I guess I have to consider separate ethics rules for each one of them.  We have the congressional staffer, the policy advisor and the city school superintendent.

Narrator:  You’re right, Maya.  Let’s look at the rules for the congressional staffer first.

The Congressional ethics rules tell us what members of the U.S. Senate and the U.S. House of Representatives and their staff can accept from private parties, like the foundation.  This includes gifts, such as meals or travel.

Maya: Even though it looks like having a meeting with dinner may not be the best option under the IRS tax rules, can you tell me whether the congressional ethics rules would even allow it?

Narrator: The congressional ethics rules currently allow the foundation to provide meals to Members of Congress and their staff under two main circumstances. The first way is if the meal is less than $49.99, and gifts given to the person by the foundation for the calendar year, including the meal, total less than $100 in value. The second way is if the meal is part of a “widely attended event”.

Maya: What counts as a widely attended event? Would Evan’s dinner count?

Narrator:  Unfortunately, no Maya. Widely attended events are not small meetings like the one you are thinking about. They are larger events like conferences.

Click the button on your screen for more information about what events may qualify as “widely attended events”, and click the Next button when you’re done.

 

Maya:  Now let’s think about the possible alternatives that would be permissible under the IRS tax rules and whether those are also allowed under the congressional ethics rules, such as having a meeting at the foundation with refreshments or going out somewhere and meeting over coffee.

Narrator:  Sure.  The congressional staffer should be able to attend either the meeting at the foundation or at a coffee shop because the congressional ethics rules allow members and staff to accept non-meal food and refreshments of nominal value like modest hors d’oeuvres or appetizers, coffee, soft drinks and other beverages, and continental breakfast.

Maya:  All of this information has been really helpful.  Do I need to know anything else about the ethics rules?

Narrator:  Two things. First, you should be aware that I am talking about the congressional ethics rules that apply when an organization does NOT employ or retain a federal lobbyist. Private foundations will usually fall into this category. You should ask your legal advisor if you have any questions about the stricter rules that apply to lobbying organizations.

Maya:  Okay, that’s good to know.   What’s the second thing I need to know?

Narrator:  The second thing is to remember that executive branch employees and local government employees are subject to their own specific ethics rules.  So, you’ll need to work with your legal advisor to check those ethics rules as well before sending out any invitations.

Maya: Okay, I will give our legal advisor a call as soon as we are done talking.

Narrator:  Sounds good.  In the meantime, click Begin when you’re ready to move on to the Knowledge Check!

 

Module 4: Other Types of Gifts

Introduction

Maya:  Hello, this is Maya!

(garbled voice)

Hi, Evan.  I’m glad you got clearance to have your meeting with the congressional staffer, policy advisor and school superintendent. I think it’s a great idea to skip the outside dinner and instead have the meeting here at the foundation with some light refreshments.

(garbled voice)

Wow, thanks. Since the meeting will take place here at the office, I would love to join you. It would be great if we could give the attendees a small token to remind them of our work with the local schools. Before we offer anything, we need to make sure it’s okay under the rules. Let me do some research and I’ll get back to you with some ideas.

Narrator:  Hi, Maya – shall we take a look at the Government Officials Checklist again?

Maya:  Sure, let’s do it!  I first need to check my internal foundation policies.

They say that we can provide token gifts to government officials if we get approval from our manager and comply with all applicable legal rules.

Narrator:  Okay, next: Is this a payment to a government official under the IRS tax rules?

Maya:  Well, the congressman and the policy advisor are definitely government officials under the IRS tax rules.

Narrator: So, what “payments” are you concerned about here, Maya?

 

Token Gifts

Maya:  Well, I am wondering about what kind of gift we can give.  I like the idea of a plaque that talks about the schools, or maybe a framed photo. These typically cost about $75 each.  Is that okay?

Narrator:  No it’s not, Maya.  Remember the IRS tax rules only allow gifts with a total value of $25 in a calendar year.

Maya:  Hmmm, that’s pretty low. The foundation sometimes gives a book published by one its grantees, but it retails for $35.  So that’s out. We also have some cool mugs and T-shirts that might fit under the limit..

Hey, I know I’m thinking out loud a bit…Doesn’t it make sense to also consider what the ethics rules say about this before we make any decisions?

Narrator:  Yes, it does.  Actually, the congressional ethics rules would have allowed the foundation to give the plaque to the congressional staffer, but, as we just discussed, that’s not permitted under the IRS tax rules.

Narrator:  The congressional ethics rules do allow the congressional staffer to accept token gifts and items of little intrinsic or nominal value.  You should check the cost, but the coffee mug or t-shirt are probably okay under both the IRS tax rules and the congressional ethics rules.

Click the button on your screen for more information about token gifts and items of nominal value permitted under these congressional ethics rules.  When you’re ready to move on, click the Next button.

 

Maya:  Well a coffee mug or t-shirt is not really what I had in mind … What about a jacket?  Our foundation has some cool jackets left over from a research trip.  We wouldn’t have to buy anything new.

Wait, sorry, I know it’s about the value, not whether we purchase it for this event.  Okay, the jackets are worth more than $25.  They also are not permitted under the IRS tax rules.

Narrator:  Maya, don’t forget that the executive branch ethics rules are also relevant here … 

Maya:  Oh, that’s right. What rules apply to the Health and Human Services policy advisor?

Narrator:  Well, just like the congressional staffer, it might have been okay to give him the plaque.  Executive branch officials are generally allowed to accept gifts of nominal value for presentation.

Narrator:  Additionally, the executive branch ethics rules generally allow executive branch officials to accept gifts valued at no more than $20 per occasion up to $50 per calendar year in total.

Maya:  $20?  I guess the mug or the t-shirt would still be permissible, but , again, that’s not really what I had in mind.

Narrator:  Maya, it’s time for some creative problem solving:  How can the foundation achieve its objective while following the rules?

Maya:  I knew you were going to ask that. And I suppose the answer is that we either go with the mug and t-shirt, or just decide that it’s better not to give a gift.  Giving a token gift may not be worth the time and trouble.  After all, we don’t really need to give a gift.  Our primary objective is to get broad input on the proposed grant program to support the local schools.  A gift, in the end, is just not that important.

One last question:  Can we still give a gift to the superintendent?  Her assistant told Evan that we don’t have to worry about the state or local ethics rules for her.

Narrator:  Well, Maya, my advice is that you should check in with your foundation’s legal advisor about that. While the ethics rules are primarily the responsibility of the government employee, the superintendent’s assistant may not be familiar with the rules, and the consequences of getting it wrong could be bad for the superintendent and for the foundation.

Maya:  Okay, I’ll be sure to do that.

Narrator:  It’s that time again. Click Begin to complete another brief Knowledge check.

 

Module 5: Employment Issues

Introduction

Maya:  Hi.

(garbled voice)

Oh, really. Those sound like interesting opportunities. Keep my posted!

(Hangs up phone)

Are you there? My boss just told me about three other possibilities for working with government officials.

First, we just had a new position approved for the team and my boss thinks the senior congressional staffer who attended the global health conference is the perfect person for the job.  He understands our issues really well. I remember that he’s a government official. Are there any rules on hiring government officials that we need to worry about before we contact him about the possibility?

 

Hiring Former Government Officials

Narrator:  Hi, Maya.  Let’s pull out the Government Officials Checklist.

Maya:  Ok, first question: “What do your internal foundation rules say?”  My boss said that our legal advisor and the human resources team were okay with us considering this person as a candidate. They said it doesn’t violate the foundation’s conflict of interest policies to consider a government employee, but we need to do it in a way that complies with any legal obligations.  So what’s next?

Narrator:  You know this prospective foundation employee is a government official under the IRS tax rules, so what you need to think about is whether it’s a permissible payment?

Maya:  I need some help with this. Is it a permissible payment?

Narrator:  It can be. The IRS tax rules permit a private foundation to hire a government official as long it follows one simple rule:  The foundation cannot agree to hire a government employee more than 90 days before the employee leaves government service.  For example, if the foundation agrees on March 1 to hire the congressional staffer, he must terminate his government employment within 90 days of March 1, or the foundation will have violated the IRS tax rules.

Maya:  Okay, that is pretty easy to understand.

Let’s say it takes us four months to bring someone on board.  Entering into an employment agreement now-four months early-is not allowed under the IRS tax rules, and that matters because I know the staffer is a government official.

So, I can achieve my objective by waiting to enter into the agreement until I know the staffer can leave his current position within 90 days.

That’s pretty clear.  We should be able to follow that rule without too much trouble.  And it makes sense, too.  It seems like a reasonable requirement to prevent corruption in government.  Once someone has agreed to work for us, I can see how it might be problematic if they continued as a government employee.

Normally, we would talk about ethics rules next.  But there’s no gift here.

 

Post-Employment Rules

Maya:  Normally, we would talk about ethics rules next, but there’s no gift here.

Narrator:  That’s right, Maya, but just like the government has rules about employees accepting gifts, the government also has strict rules about the future employment of its employees.  The government’s post-employment rules kick in as soon as negotiations for employment start.

Maya:  That’s good to know. Anything we have to do to comply with the rules will be worth it. This staffer is really knowledgeable about our issues.

Narrator:  Your foundation should also be aware that some of the post-employment restrictions continue even after the government employee has taken a new job.  There are often restrictions on the sorts of contacts former government employees can have with their former employer.  In addition, they may not be able to work on matters they worked on while in the government.  In some cases, those restrictions expire after a certain period of time, but not in all cases.  And the penalties for violating these types of rules can be severe.

Maya:  Thanks for the warning.  We will be very careful about how we handle the negotiating process.  And then we’ll be sure to understand what the former staffer-if we’re lucky enough to hire him-can and can’t do once he’s on board at the foundation.

Narrator:  Some foundations require their new hires from government to ask their former employer to give them written information explaining the applicable post-employment restrictions, before they leave government service.  That’s one way of being sure that the foundation understands what the staffer can and can’t do once he’s on board.

So, what was the next opportunity your boss told you about?

 

Task Force or Commission Members

Maya:  Okay, I have one more question about employment from the conversation with my boss.  She said the White House wants our foundation’s senior vice president to serve on a presidential commission.  We want her to do it, but how does that work?  How can she still be our employee and accept a paycheck from the foundation if she also works for the government?

Narrator:  This can work out under the IRS tax rules, if her position on the commission fits the description of “a special government employee.”   “Special government employees” are not subject to the IRS tax rules.

Narrator:  A special government employee is someone who is retained, designated, appointed, or employed to perform temporary duties, with or without compensation, for not more than 130 days during any period of 365 consecutive days.

Maya:  How do you count the 130 days?  Do we just count up how much time our employee will spend in commission meetings each year?

Narrator:  No, Maya.  You need to count all the time-phone calls and any other work on commission business.  Have your foundation employee keep track of her time, so you will know if you need to start thinking about an alternative solution under the IRS tax rules.

Maya:  Okay, for now, it sounds like her commission service will make her a special government employee and the IRS tax rules won’t apply.  But what about ethics rules?

Narrator:  Although the IRS tax rules don’t apply to special government employees, the executive branch ethics rules do.  So, be aware of that.  Your foundation’s senior vice president should consult your legal advisor on how her foundation duties and her commission duties might intersect.

Maya:  Thanks!  This has been super helpful!

Narrator: Ok Maya, ready for the final Knowledge Check? Click Begin to get started.

 

Intergovernmental Personnel Act (IPA)

Maya:  This one is not about an employee coming from government to the foundation.  It’s about an employee going in other direction-that is from the foundation to government.  One of my colleagues has the chance to go work with a federal government agency on a temporary basis.  Have you ever heard of anything like that?

Narrator:  Yes, I have heard of it.  There is a federal law called the Intergovernmental Personnel Act (or the IPA).  It provides for temporary assignments between federal government agencies and eligible organizations, including private foundations.  The point of the program is to allow organizations and government to share resources and expertise to solve mutual problems and improve public services.

Maya:  It sounds like there is a good policy rationale for IPAs, but do the IRS tax rules allow the foundation to permit an employee to participate in an IPA and go work for the government temporarily?

Narrator:  It is possible for a private foundation to participate in an IPA-or to fund a grantee to participate in an IPA-without violating the IRS tax rules, but not in every case.  Each IPA assignment is structured according to an agreement between the agency and the participating organization. So the terms of that agreement determine whether an IPA is permissible under the IRS tax rules.

Maya:  This sounds like something that is very fact-specific.  My boss will need to work closely with our legal advisor to see if we can make this work under the tax rules.

Narrator:  That’s exactly right, Maya.

Maya:  What about the ethics rules?  How do they apply to a foundation employee on a federal IPA assignment?

Narrator:  Generally speaking, the executive branch ethics rules will apply to IPAs, whether the assignment is in to or out of the federal government.  But each IPA assignment is subject to the terms of the agreement, and it should spell out how issues like travel expenses should be handled and how costs might even be shared between the federal agency and the foundation or grantee.  The foundation should expect to work through concerns about possible conflicts of interest and other ethics issues when it negotiates the IPA agreement with the agency.

Maya:  Wow, I am glad that my foundation’s legal advisor will be involved as the IPA agreement is structured.  This sounds complicated.

Narrator:  Good thinking, Maya.

 

Conclusion

Maya: This has been great! I’m going to quickly write down the main points that I need to keep in mind.

• One, special rules apply when working with government officials.
• Two, plan early.
• And three, find out the expenditure limits.

Narrator: I think those are great takeaways, Maya.

Maya: I’m leaving today feeling confident that I have a general understanding of the rules for working with government officials. I know that I can use the Government Officials Checklist to help me consider how the rules apply to foundation activities. And most importantly, I understand that my legal advisor will be a great resource to help me accomplish the foundation’s objectives while complying with the rules on government officials.

Narrator: It’s been great talking with you today, Maya. I’m glad you found this helpful. You can use this course as a reference, as often as you need. To access any topic of interest to you, you can click the Course Map button. If you want to return to the Home screen, then click … you guessed it … the Home button. You can now print a certificate of completion and provide feedback on the course. We hope you will take the time to give feedback. Your input will help us design future courses! See you next time!