1034-00004 · Group Strathmore Corp · Private Foundation Documents

foundation-determination-letter-transmittal-memo.docx DOCUMENT M&A / Corporate

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PRIVILEGED AND CONFIDENTIAL ATTORNEY-CLIENT COMMUNICATION ATTORNEY WORK PRODUCT

CALDERWOOD & HARKNESS LLP 375 Park Avenue, 42nd Floor New York, New York 10152

MEMORANDUM

This memorandum constitutes an attorney-client privileged and confidential communication. It is intended solely for the use of the addressee and the individuals copied herein. This memorandum contains confidential legal advice and analysis related to the tax-exempt status of The Caldwell Family Foundation and is protected by the attorney-client privilege and the work product doctrine. Any unauthorized disclosure, distribution, or copying of this memorandum, or the information contained herein, is strictly prohibited. If you have received this memorandum in error, please notify Calderwood & Harkness LLP immediately at (212) 555-7800.

I. Purpose and Summary

The purpose of this memorandum is to confirm that Calderwood & Harkness LLP ("C&H") has received the determination letter from the Internal Revenue Service (the "IRS") granting The Caldwell Family Foundation (the "Foundation") recognition of tax-exempt status under Section 501(c)(3) of the Internal Revenue Code of 1986, as amended (the "Code" or "IRC"). The determination letter is dated July 14, 2023, and was received at the C&H offices on that same date via the United States Postal Service.

As set forth in greater detail below, the IRS has determined that the Foundation is exempt from federal income tax under IRC § 501(c)(3), effective as of the date of the Foundation's organization — March 20, 2023. The Foundation has been classified as a private foundation under IRC § 509(a), which is the expected and intended classification given the Foundation's funding and governance structure. The Foundation has not been classified as a public charity.

The receipt of this determination letter represents a significant milestone in the comprehensive generational estate plan that C&H has designed and is implementing on behalf of Mr. Caldwell and his family. The Foundation's formation process has proceeded on the timeline contemplated by that plan: the Foundation was incorporated on March 20, 2023, as a New York not-for-profit corporation with the New York Department of State (DOS Filing No. 230320-001847), and C&H filed IRS Form 1023 (Application for Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code) on behalf of the Foundation on May 15, 2023. The IRS's determination, received approximately sixty days following the filing — a notably efficient turnaround — confirms the Foundation's exempt status without conditions or qualifications.

The original determination letter is enclosed with this memorandum and will be forwarded to Mr. Caldwell for safekeeping, together with a second copy for Mr. Caldwell's personal files. A copy of the determination letter will be retained in the C&H closing binder for this matter and will be provided to Martin J. Prescott, CPA, at Strathmore Corporation & Greaves LLP for the Foundation's tax compliance files.

This memorandum addresses the key provisions of the determination letter, summarizes the Foundation's ongoing compliance obligations as a private foundation, places the Foundation within the context of the broader Caldwell estate plan, and sets forth recommended next steps.

II. Background: Formation and Application Timeline

A. Incorporation. The Caldwell Family Foundation was incorporated as a New York not-for-profit corporation under the New York Not-for-Profit Corporation Law ("N-PCL") on March 20, 2023. On that date, C&H filed the Foundation's Certificate of Incorporation with the New York Department of State, which accepted the filing and assigned DOS Filing No. 230320-001847. The Certificate of Incorporation was drafted to satisfy the organizational requirements of IRC § 501(c)(3), including the requisite limitation-of-purposes clause and dissolution clause directing the distribution of the Foundation's assets upon dissolution to one or more organizations described in IRC § 501(c)(3) or to a governmental entity described in IRC § 170(c)(1), as required by Treasury Regulation § 1.501(c)(3)-1(b)(4).

The Foundation's registered address is 330 Madison Avenue, Suite 2401, New York, New York 10017. The Foundation obtained its Employer Identification Number ("EIN") from the IRS: 88-3021547. This EIN will be used for all federal and state tax filings, banking relationships, and official correspondence pertaining to the Foundation.

B. Organizational Steps

Following incorporation, the Foundation completed a series of organizational steps in March and April 2023. The Foundation held its initial organizational meeting of the Board of Directors, at which the following individuals were constituted as the Foundation's Board of Directors and officers:

Dr. Elsworth serves as an independent director and is Professor Emerita at Columbia University. Her appointment satisfies the Foundation's governance objective of including at least one director who is not a member of the Caldwell family or a related party, thereby enhancing the Foundation's governance profile and supporting the Foundation's commitment to independent oversight.

At the organizational meeting, the Board adopted the Foundation's Bylaws and the following governance and operational policies:

(a) Conflict-of-Interest Policy — establishing procedures for the identification, disclosure, and management of actual and potential conflicts of interest involving directors, officers, and key employees, consistent with the requirements of IRS Form 1023 and best practices for private foundation governance;

(b) Gift Acceptance Policy — setting forth the types of contributions the Foundation will and will not accept, including guidelines for the acceptance of non-cash assets, and procedures for the valuation and acknowledgment of charitable contributions;

(c) Investment Policy Statement — establishing the Foundation's investment objectives, asset allocation guidelines, risk tolerance parameters, and standards of prudent investment, developed in consultation with Havensbrook Wealth Advisors LLC (Diana R. Linden, CFP®, Managing Director);

(d) Grant-Making Policy and Procedures Manual — setting forth the Foundation's procedures for evaluating, approving, documenting, and monitoring charitable grants and distributions, including expenditure responsibility procedures for grants to organizations that are not public charities under IRC § 509(a)(1) or (a)(2).

Consistent with the self-dealing prohibition under IRC § 4941 and the Foundation's conflict-of-interest policy, no compensation is paid to any family-member director or officer of the Foundation. This approach was adopted to eliminate any risk that payments to family members who are "disqualified persons" under IRC § 4946 could be characterized as acts of self-dealing subject to the excise taxes imposed by IRC § 4941.

C. Initial Funding

On April 1, 2023, Jonathan R. Caldwell and Eleanor V. Caldwell made an initial cash contribution of $10,000,000 to the Foundation. The contribution is attributable $5,000,000 to each spouse pursuant to the gift-splitting election that will be made on their respective 2023 IRS Forms 709 (United States Gift (and Generation-Skipping Transfer) Tax Return). The contribution was documented in the Initial Contribution Agreement executed by Mr. Caldwell and Mrs. Caldwell on April 1, 2023, a copy of which is maintained in the C&H closing binder for this matter.

The contribution was made by wire transfer from the Caldwell joint checking account at Ashbury National Bank to the Foundation's operating account at the same institution, and the Foundation issued a contemporaneous written acknowledgment of the contribution as required by IRC § 170(f)(8) for charitable contributions in excess of $250.

D. Form 1023 Filing

Calderwood & Harkness LLP prepared and filed IRS Form 1023 (Application for Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code) on behalf of the Foundation on May 15, 2023. The application was filed electronically through Pay.gov, and the applicable user fee was remitted at the time of filing.

The Form 1023 application included the following materials and supporting documentation:

(a) A comprehensive narrative description of the Foundation's charitable activities, including its stated mission to support the arts, education, and environmental conservation, with a particular focus on the New York metropolitan area;

(b) A copy of the Foundation's Certificate of Incorporation (as filed with the New York Department of State on March 20, 2023);

(d) Resolutions of the Board of Directors adopted at the organizational meeting;

(e) Financial data for the Foundation, including a description of the initial $10,000,000 cash contribution and projected revenue and expenditure information for the Foundation's first three fiscal years;

(f) Statements confirming the Foundation's intended classification as a private foundation under IRC § 509(a), and confirming the Foundation's awareness of and intent to comply with the excise tax and operating requirements applicable to private foundations under IRC §§ 4940 through 4946; and

(g) A schedule of the Foundation's directors, officers, and key employees, along with their relationships to one another and to any substantial contributors.

No additional information or documentation was requested by the IRS following the submission of the Form 1023 application. The IRS processed the application and issued the enclosed determination letter without further inquiry, which is a favorable outcome reflecting the thoroughness of the application and supporting materials.

III. Summary of the IRS Determination Letter

A. Exempt Status Granted

The IRS determination letter, dated July 14, 2023, confirms that The Caldwell Family Foundation is exempt from federal income tax under IRC § 501(c)(3). This determination means that the Foundation will not be subject to federal income tax on income derived from activities that are substantially related to its exempt purposes. The Foundation will, however, remain subject to the excise tax on net investment income under IRC § 4940 (discussed in Section IV.A below), as well as the unrelated business income tax under IRC §§ 511–514, to the extent the Foundation engages in any unrelated trade or business activity in the future.

The determination is effective as of March 20, 2023 — the date the Foundation's Certificate of Incorporation was filed with the New York Department of State. Because the Foundation filed its Form 1023 application within twenty-seven months of the end of the month in which it was organized, the Foundation's exempt status relates back to the date of organization, as provided by IRC § 508(a) and Treasury Regulation § 1.508-1(a)(2). This means that the Foundation has been recognized as a tax-exempt organization from the inception of its existence, and all activities conducted and contributions received since March 20, 2023, are treated as having been conducted by or made to an organization described in IRC § 501(c)(3).

Contributions to the Foundation are deductible by donors under IRC § 170, subject to the percentage limitations applicable to contributions to private foundations (discussed in Section III.C below). The Foundation is also eligible to receive tax-deductible bequests, legacies, devises, transfers, and gifts under IRC §§ 2055, 2106, and 2522, which is relevant to the broader Caldwell estate plan.

B. Classification as a Private Foundation

The determination letter classifies the Foundation as a private foundation under IRC § 509(a). This classification is the expected and intended result. Given that the Foundation is funded principally by the Caldwell family and is governed by a board composed predominantly of Caldwell family members, the Foundation does not meet the criteria for classification as a public charity under IRC § 509(a)(1), (a)(2), or (a)(3).

For context, the distinction between a private foundation and a public charity is as follows:

• A public charity is an organization described in IRC § 509(a)(1), (a)(2), or (a)(3) — generally, an organization that derives a substantial part of its financial support from the general public, from governmental sources, or from a broad base of donors, and that is not controlled by a small number of individuals. Public charities are subject to less restrictive regulatory requirements and enjoy more favorable charitable deduction limitations for their donors.

• A private foundation is, by statutory definition, any IRC § 501(c)(3) organization that is not a public charity. Private foundations are typically funded by a single source — a family, an individual, or a corporation — and are subject to a more rigorous set of excise tax and operating requirements under IRC §§ 4940 through 4946. These requirements are designed to ensure that private foundations operate exclusively for charitable purposes and do not serve as vehicles for private benefit or self-dealing by their founders and related parties.

The Foundation's classification as a private foundation was anticipated from the outset of the planning process, and the Foundation's Certificate of Incorporation, Bylaws, and governance policies were drafted to comply with the specific requirements applicable to private foundations. As discussed in Section IV below, the Foundation is subject to a number of ongoing compliance obligations as a result of this classification.

C. Deductibility Limitations for Donors

As a private foundation, the deductibility of contributions to the Foundation is subject to the percentage limitations applicable to contributions to private foundations, which are less favorable than the limitations applicable to contributions to public charities. The relevant limitations are summarized as follows:

Cash Contributions. Cash contributions to the Foundation are deductible up to 30% of the donor's adjusted gross income ("AGI") under IRC § 170(b)(1)(B). Any contribution amount in excess of the 30% limitation may be carried forward and deducted over the succeeding five taxable years, subject to the same 30% limitation in each carryforward year.

For the 2023 taxable year, based on Mr. Caldwell's estimated AGI of $22,500,000 (as provided by Strathmore Corporation & Greaves LLP), the application of the 30% limitation yields a maximum Year 1 charitable deduction of $6,750,000 (calculated as 30% × $22,500,000). Because the total cash contribution to the Foundation in 2023 was $10,000,000 ($5,000,000 attributable to each spouse under the gift-splitting election), Mr. Caldwell's share of the deduction ($5,000,000) is fully deductible in 2023 (as $5,000,000 is less than $6,750,000). Mrs. Caldwell's deduction will depend on her individual AGI and should be confirmed with Strathmore Corporation & Greaves LLP; however, if the Caldwells file a joint return and the full $10,000,000 is claimed against a joint AGI, the maximum Year 1 deduction would be $6,750,000, and the remaining $3,250,000 would be carried forward for up to five years (i.e., through the 2028 taxable year).

Contributions of Appreciated Property. Contributions of appreciated property to the Foundation are subject to a more restrictive 20% of AGI limitation under IRC § 170(b)(1)(D). Contributions of publicly traded securities that have been held for more than one year are generally valued at their fair market value on the date of the contribution. Contributions of non-publicly-traded assets (such as interests in closely held entities, real estate, or other property) may be limited in deductible value to the donor's cost basis in the contributed property, depending on the character of the property and the applicable provisions of IRC § 170(e). These limitations can significantly affect the tax benefit of in-kind contributions to a private foundation and should be analyzed on a case-by-case basis.

Important Advisory. Before any future in-kind contributions are made to the Foundation — including contributions of publicly traded securities, interests in Caldwell Ridgeline Capital LLC or its affiliated fund entities, interests in Stonecrest Realty Holdings LLC, or any other non-cash assets — Mr. and Mrs. Caldwell should consult with Sylvia Hartwell at C&H and Martin J. Prescott at Strathmore Corporation & Greaves LLP to ensure that the contribution is structured to maximize the available income tax deduction and to avoid any adverse self-dealing or excess business holdings consequences.

IV. Ongoing Compliance Obligations

The Foundation's classification as a private foundation imposes a comprehensive set of ongoing compliance and regulatory obligations. This section summarizes the principal requirements. C&H, in coordination with Strathmore Corporation & Greaves LLP, will provide ongoing guidance to ensure the Foundation's compliance with these requirements.

A. Private Foundation Excise Taxes (IRC §§ 4940–4946)

The Code imposes a series of excise taxes on private foundations and their managers to regulate the conduct of private foundation operations. These provisions are strictly enforced, and violations can result in significant penalty excise taxes imposed on both the Foundation and, in certain cases, on individual foundation managers (i.e., directors and officers). The principal excise tax provisions are summarized below.

Excise Tax on Net Investment Income (IRC § 4940). The Foundation is subject to an annual excise tax of 1.39% on its net investment income. Net investment income includes gross investment income (interest, dividends, rents, royalties, and other similar amounts) and net capital gains from the sale or other disposition of assets, reduced by expenses directly connected with the production of investment income. This excise tax is reported and paid on the Foundation's annual Form 990-PF. Strathmore Corporation & Greaves LLP will coordinate the calculation of the Foundation's net investment income and the computation of the § 4940 excise tax as part of the annual Form 990-PF preparation process.

Self-Dealing Prohibition (IRC § 4941). The Foundation is strictly prohibited from engaging in acts of self-dealing with "disqualified persons." Under IRC § 4946, the term "disqualified person" includes the following individuals and entities:

(i) Substantial contributors to the Foundation (i.e., Jonathan R. Caldwell and Eleanor V. Caldwell);

(ii) Foundation managers (i.e., all directors and officers of the Foundation);

(iii) Owners of more than 20% of the voting power or beneficial interest of a substantial contributor that is an entity;

(iv) Members of the families of the individuals described in (i), (ii), and (iii), including spouses, ancestors, children, grandchildren, great-grandchildren, and the spouses of children, grandchildren, and great-grandchildren; and

(v) Entities in which the persons described in (i) through (iv), in the aggregate, own more than 35% of the voting power or beneficial interest — which includes, but is not limited to, Caldwell Ridgeline Capital LLC, Stonecrest Realty Holdings LLC, Meridian Crest Partners LLC, and Havensbrook Wealth Advisors LLC.

Prohibited self-dealing transactions include, without limitation:

(a) The sale, exchange, or leasing of property between the Foundation and a disqualified person;

(b) The lending of money or other extension of credit between the Foundation and a disqualified person;

(c) The furnishing of goods, services, or facilities between the Foundation and a disqualified person (other than certain de minimis exceptions);

(d) The payment of compensation or reimbursement of expenses by the Foundation to a disqualified person (other than reasonable compensation for personal services that are necessary to carry out the Foundation's exempt purposes); and

(e) The transfer of Foundation income or assets to, or for the use or benefit of, a disqualified person.

Consistent with the Foundation's conflict-of-interest policy, no compensation is paid to any family-member director or officer of the Foundation. This approach eliminates the most common source of self-dealing risk in family foundations. If the Foundation determines that it is necessary to compensate any disqualified person for personal services in the future — for example, if Dr. Elsworth or an outside advisor who is a disqualified person were to provide specialized consulting services — such compensation must be reasonable and necessary to the Foundation's exempt purposes, and should be reviewed by C&H prior to any commitment.

The initial excise tax for an act of self-dealing under IRC § 4941 is 10% of the amount involved, imposed on the self-dealer, plus 5% of the amount involved imposed on any foundation manager who knowingly participated in the act. If the self-dealing is not corrected within the applicable correction period, additional excise taxes of 200% (on the self-dealer) and 50% (on the foundation manager) apply. These penalties are severe and underscore the importance of strict compliance.

Minimum Distribution Requirement (IRC § 4942). The Foundation is required to distribute, for charitable purposes, at least 5% of the fair market value of its net investment assets on an annual basis. This is commonly referred to as the "minimum distribution requirement" or the "payout requirement." Based on the Foundation's initial funding of $10,000,000, the Year 1 minimum distribution target is approximately $500,000, although the precise amount will be determined based on the average monthly fair market value of the Foundation's net investment assets as computed on the Form 990-PF.

Qualifying distributions that count toward the 5% minimum include:

(a) Grants to organizations described in IRC § 509(a)(1), (a)(2), or (a)(3) (i.e., public charities);

(b) Grants to other private foundations or non-exempt organizations, provided the Foundation exercises "expenditure responsibility" under IRC § 4945(h);

(d) Reasonable and necessary administrative expenses directly attributable to the Foundation's charitable activities (including certain legal, accounting, and investment management fees, subject to allocation between charitable and investment activities).

The Foundation's grant-making policy and procedures manual establishes the framework and procedures for meeting this requirement, including the timeline for grant evaluation and approval, documentation requirements, and post-grant reporting and monitoring.

Failure to meet the minimum distribution requirement subjects the Foundation to an initial excise tax of 30% of the undistributed income under IRC § 4942(a), and a second-tier tax of 100% if the shortfall is not corrected within the applicable period. It is therefore critical that the Board of Directors remain attentive to the Foundation's distribution schedule throughout each fiscal year.

Excess Business Holdings (IRC § 4943). The Foundation, together with all disqualified persons, may not hold more than 20% of the voting stock (or profits interest) of any business enterprise (or 35% if it can be demonstrated that the Foundation does not have effective control). This limitation is not immediately implicated by the Foundation's current all-cash portfolio, but it should be monitored carefully if any future contributions to the Foundation include interests in business entities — including, without limitation, interests in Caldwell Ridgeline Capital LLC, Stonecrest Realty Holdings LLC, or Meridian Crest Partners LLC.

Jeopardizing Investments (IRC § 4944). The Foundation may not invest its assets in a manner that jeopardizes the carrying out of its exempt purposes. While the Code does not define "jeopardizing investments" with specificity, the IRS and the courts have generally held that investments involving a high degree of risk — such as speculative trading, margin purchases, short sales, and investments in highly volatile or illiquid instruments — may constitute jeopardizing investments. The Foundation's investment policy statement, developed in consultation with Havensbrook Wealth Advisors LLC (Diana R. Linden, CFP®, Managing Director), establishes prudent investment standards consistent with this requirement. The investment policy statement should be reviewed and updated periodically to reflect changes in the Foundation's asset base, investment objectives, and market conditions.

Taxable Expenditures (IRC § 4945). The Foundation is prohibited from making certain categories of expenditures, including:

(a) Grants to individuals for travel, study, or similar purposes without advance IRS approval of the Foundation's selection criteria and procedures;

(b) Grants to organizations that are not described in IRC § 509(a)(1), (a)(2), or (a)(3) (i.e., grants to other private foundations, foreign organizations, or non-exempt organizations) unless the Foundation exercises "expenditure responsibility" as defined in IRC § 4945(h) and the applicable Treasury Regulations;

(c) Expenditures for lobbying — specifically, any attempt to influence legislation through communication with members or employees of a legislative body, or through urging the general public to contact legislators;

(d) Expenditures for voter registration drives (unless certain conditions are met); and

(e) Expenditures for political campaign activities — specifically, participation or intervention in any political campaign on behalf of (or in opposition to) any candidate for public office.

The Foundation's grant-making policy and procedures manual addresses the expenditure responsibility requirements for any grants that may be made to organizations that are not public charities, including the pre-grant inquiry, written grant agreement, post-grant reporting, and record-keeping requirements set forth in Treasury Regulation § 53.4945-5(b).

B. Annual Filing Requirements

IRS Form 990-PF. The Foundation is required to file IRS Form 990-PF (Return of Private Foundation or Section 4947(a)(1) Trust Treated as Private Foundation) on an annual basis. This return reports the Foundation's income, expenses, assets, liabilities, disbursements for charitable purposes, and compliance with the private foundation excise tax provisions. The Form 990-PF is a public document — it is subject to mandatory public disclosure under IRC § 6104 and is available for inspection by any member of the public upon request.

The Foundation's first Form 990-PF will be due by the 15th day of the 5th month following the close of the Foundation's first fiscal year. Assuming the Foundation adopts a calendar fiscal year (January 1 – December 31), the first Form 990-PF (covering the short period from March 20, 2023, through December 31, 2023) will be due on May 15, 2024 (unless an extension is filed). Strathmore Corporation & Greaves LLP (Martin J. Prescott) will prepare the Foundation's Form 990-PF and will coordinate with C&H on any legal or compliance questions arising in the preparation process.

New York State Filings. The Foundation is required to register with the New York Attorney General's Charities Bureau and to file the annual CHAR500 registration form. The CHAR500 includes a financial report and, depending on the Foundation's gross revenue and total assets, may require an independent audit or review by a certified public accountant. The Foundation must maintain its registration in good standing with the Charities Bureau in order to solicit and receive charitable contributions in New York.

In addition, the Foundation may be subject to other filing or reporting requirements under New York law, including any filings required by the New York Department of State to maintain its corporate status as a not-for-profit corporation under the N-PCL.

State Tax Exemption. The Foundation should apply for New York State sales tax exemption by filing Form ST-119.2 (Application for an Exempt Organization Certificate) with the New York State Department of Taxation and Finance. The Foundation may also be eligible for exemption from New York City and State real property taxes if it acquires real property in the future, and from other state and local taxes applicable to exempt organizations. C&H will coordinate these filings on behalf of the Foundation.

C. Public Disclosure

As a private foundation, the Foundation is subject to the public disclosure requirements of IRC § 6104. The following documents must be made available for public inspection upon request:

(a) The Foundation's annual Form 990-PF for each of the three most recent taxable years;

(b) The Foundation's Form 1023 application for recognition of tax-exempt status; and

The Foundation must make these documents available at its principal office (330 Madison Avenue, Suite 2401, New York, New York 10017) during regular business hours, and must provide copies within a reasonable time in response to written or in-person requests. The Foundation may charge a reasonable fee for copying, consistent with IRS guidelines. Alternatively, the Foundation may satisfy its public disclosure obligation by making these documents widely available by posting them on the Foundation's website, if one is established.

The Board of Directors and the Foundation's advisors should be aware that all information reported on the Form 990-PF — including the names and addresses of directors and officers, the compensation of any paid employees, the names and amounts of all grants made, the Foundation's investment holdings and asset balances, and the Foundation's income and expenses — will be publicly available. Accordingly, the Foundation should exercise care in the preparation of the Form 990-PF to ensure accuracy and completeness, and should be mindful that the information disclosed will be subject to public scrutiny.

D. Governance and Recordkeeping

The Board of Directors should hold regular meetings — at a minimum, annually, and more frequently as the Foundation's activities require — and should maintain complete and accurate minutes of all board meetings. The minutes should document all significant actions taken by the Board, including the approval of grants, the adoption or amendment of policies, the review of financial reports, and any conflict-of-interest disclosures.

Annual conflict-of-interest disclosure statements should be collected from each director and officer of the Foundation at the beginning of each fiscal year, consistent with the Foundation's conflict-of-interest policy. Completed disclosure statements should be maintained in the Foundation's records.

The Foundation should maintain detailed records of:

(a) All contributions received, including the identity of each donor, the date and amount (or description and fair market value) of each contribution, and copies of all written acknowledgments issued;

(b) All grants made and other qualifying distributions, including the identity of each grantee, the amount and date of each grant, the charitable purpose of each grant, and any expenditure responsibility reports received from non-public-charity grantees;

(c) All investment activity, including account statements, trade confirmations, and records of investment income and realized gains and losses; and

(d) All administrative expenses incurred, with documentation supporting the allocation of expenses between charitable and investment activities.

Strathmore Corporation & Greaves LLP should be provided with copies of all relevant financial records on a regular basis to facilitate proper accounting and the timely preparation of the Foundation's annual Form 990-PF and other tax filings.

V. Coordination with the Broader Estate Plan

The establishment and funding of The Caldwell Family Foundation is one component of the comprehensive generational estate plan that C&H has designed and is implementing for Mr. Caldwell and his family. The Foundation operates in conjunction with, and is complementary to, the following additional planning instruments and structures:

(a) Grantor Retained Annuity Trusts (GRATs). Three zeroed-out GRATs have been established and funded as follows:

• GRAT A — Caldwell 2023 Securities GRAT: Funded on April 15, 2023, with publicly traded securities valued at $60,000,000;

• GRAT B — Caldwell 2023 Realty GRAT: Funded on May 1, 2023, with membership interests in Stonecrest Realty Holdings LLC valued at $80,000,000; and

• GRAT C — Caldwell 2023 Carried Interest GRAT: Funded on June 1, 2023, with interests in Caldwell Ridgeline Capital fund vehicles valued at $38,000,000.

(b) Caldwell Family Dynasty Trust. A Delaware situs dynasty trust with Northgate Trust Company of Delaware serving as institutional co-trustee, funded with an initial contribution of $5,000,000. This trust is designed to hold assets in perpetuity for the benefit of Mr. Caldwell's descendants, free of estate and generation-skipping transfer taxes, taking advantage of Delaware's favorable trust laws, including the absence of a rule against perpetuities for trusts of personal property.

(c) Caldwell Family Insurance Trust. An irrevocable life insurance trust holding a $15,000,000 second-to-die (survivorship) life insurance policy issued by Beacon Life Assurance Company (Policy No. BLA-2023-77419), designed to provide estate tax liquidity upon the death of the survivor of Mr. Caldwell and Mrs. Caldwell.

(d) Amended and Restated Caldwell Revocable Trust and Pour-Over Will. Mr. Caldwell's revocable trust and coordinated pour-over will have been amended and restated to integrate with the foregoing planning instruments and to reflect Mr. Caldwell's current dispositive objectives.

The $10,000,000 charitable contribution to the Foundation serves a dual purpose within the estate plan. First, it reduces Mr. Caldwell's taxable estate by removing $10,000,000 from the assets that will be included in Mr. Caldwell's gross estate under IRC § 2031 at his death (or, in the case of community property or joint ownership, reducing the assets of both spouses). Second, it provides current income tax deductions that reduce Mr. and Mrs. Caldwell's federal and state income tax liabilities for 2023 and, to the extent of any carryforward, for subsequent years. In the aggregate, the Foundation, together with the GRATs, the dynasty trust, and the insurance trust, are projected to produce estate tax savings of approximately $24,000,000 to $30,000,000, depending on asset appreciation, the applicable estate tax rate, and the date of death.

Gift Tax Reporting. Mr. Caldwell's $5,000,000 share of the Foundation contribution (and Eleanor V. Caldwell's $5,000,000 share, assuming gift-splitting is elected) will be reported on the Caldwells' respective 2023 IRS Forms 709 (United States Gift (and Generation-Skipping Transfer) Tax Return). Although charitable contributions are eligible for the unlimited gift tax charitable deduction under IRC § 2522, the gift must nonetheless be reported on the Form 709. Draft preparation of the 2023 Forms 709 commenced on August 1, 2023, and is being coordinated between Sylvia Hartwell at C&H and Martin J. Prescott at Strathmore Corporation & Greaves LLP.

Spousal Consent. Eleanor V. Caldwell's consent to the Foundation structure and her participation as Vice President and Director of the Foundation have been reviewed and approved by Mrs. Caldwell's independent counsel, Rachel F. Dunlap, Esq., of Pemberton, Locke & Strauss LLP. Mrs. Dunlap's involvement as independent counsel for Mrs. Caldwell ensures that Mrs. Caldwell has received independent legal advice regarding her rights and obligations in connection with the Foundation and the broader estate plan.

VI. Recommended Next Steps

Based on the receipt of the IRS determination letter and the Foundation's current status, C&H recommends the following next steps:

1. File and Safeguard the Determination Letter. Mr. Caldwell should retain the original IRS determination letter in a secure location (e.g., safe deposit box or fireproof safe). C&H will retain a copy in the closing binder for Matter No. 1034-00004 and will provide a copy to Martin J. Prescott at Strathmore Corporation & Greaves LLP for the Foundation's tax compliance files. The Foundation should also maintain a copy at its principal office at 330 Madison Avenue, Suite 2401, New York, New York 10017, to satisfy the public disclosure requirements of IRC § 6104.

2. Begin Grant-Making Activities. The Board of Directors should convene at its earliest convenience to initiate the Foundation's grant-making program, consistent with the Foundation's stated mission of supporting the arts, education, and environmental conservation in the New York metropolitan area. Grant-making should be commenced with sufficient lead time to ensure that the Foundation meets its Year 1 minimum distribution target of approximately $500,000 under IRC § 4942 by the end of the Foundation's first fiscal year. The grant-making policy and procedures manual provides the framework for grant evaluation, approval, documentation, and monitoring.

3. Register with the New York Attorney General's Charities Bureau. If the Foundation has not already completed its registration with the New York Attorney General's Charities Bureau, this registration should be filed promptly. The Foundation is required to register before soliciting or receiving charitable contributions in New York. C&H will assist with the preparation and filing of the CHAR500 registration form and any accompanying documentation.

4. Coordinate Tax Compliance with Strathmore Corporation & Greaves LLP. A copy of the determination letter should be provided to Martin J. Prescott at Strathmore Corporation & Greaves LLP for inclusion in the Foundation's tax files. Strathmore Corporation & Greaves LLP should be formally engaged to prepare the Foundation's initial Form 990-PF (covering the short period from March 20, 2023, through December 31, 2023), to compute the IRC § 4940 excise tax on net investment income for the initial year, and to establish the Foundation's accounting systems and chart of accounts in coordination with the Foundation's Treasurer, Katherine C. Hartfield.

5. Apply for State Tax Exemptions. C&H will coordinate the preparation and filing of applications for New York State sales tax exemption (Form ST-119.2) and any other applicable state and local tax exemptions. The sales tax exemption will enable the Foundation to make qualifying purchases without incurring New York State and local sales tax, which will preserve the Foundation's charitable assets for distribution.

6. Establish Foundation Bank and Investment Accounts. If the Foundation has not already done so, the Foundation should open dedicated bank and investment accounts under EIN 88-3021547, consistent with the resolutions adopted at the organizational board meeting. All Foundation funds should be held in accounts titled in the name of The Caldwell Family Foundation and should not be commingled with the personal accounts of any director, officer, or disqualified person. Investment accounts should be established in coordination with Havensbrook Wealth Advisors LLC (Diana R. Linden, CFP®, Managing Director) and should be managed in accordance with the Foundation's investment policy statement.

7. Schedule Fall 2023 Board Meeting. A meeting of the Board of Directors should be scheduled for fall 2023 (October or November is recommended) to address the following agenda items:

(a) Review the Foundation's investment policy statement and confirm asset allocation;

(b) Review and approve initial grants consistent with the Foundation's mission and minimum distribution requirements;

(d) Review the Foundation's financial statements for the period from inception through the date of the meeting;

(e) Collect annual conflict-of-interest disclosure statements from each director and officer; and

(f) Discuss any other business appropriate for consideration by the Board.

VII. Enclosures

The following documents are enclosed with this memorandum:

1. Original IRS Determination Letter dated July 14, 2023 (The Caldwell Family Foundation, EIN 88-3021547) — for Mr. Caldwell's safekeeping;

2. Copy of IRS Determination Letter (for Mr. Caldwell's personal files); and

3. Copy of the filed Form 1023 Application (for Mr. Caldwell's reference).

Additional copies of these documents will be provided to Strathmore Corporation & Greaves LLP and will be maintained in the C&H closing binder.

VIII. Availability for Questions

Victoria Chambers (Responsible Partner), Sylvia Hartwell (Specialist Partner, Tax), and the undersigned remain available at any time to discuss the determination letter, the Foundation's ongoing compliance obligations, or any aspect of the Foundation's operations and governance. We would be pleased to arrange a meeting or call at Mr. Caldwell's and Mrs. Caldwell's convenience to review this memorandum and address any questions.

Please do not hesitate to contact me directly with any questions or to schedule a discussion.

Respectfully submitted,

CALDERWOOD & HARKNESS LLP

By: ________

Monica Reyes Lead Associate Calderwood & Harkness LLP 375 Park Avenue, 42nd Floor New York, New York 10152 Telephone: (212) 555-7800 Facsimile: (212) 555-7801

Email: mreyes@calderwoodharkness.com

This memorandum is provided as part of the legal services rendered under Calderwood & Harkness LLP Matter No. 1034-00004 (Billing Code 78412-JRC) and constitutes a privileged and confidential attorney-client communication. The information and analysis contained herein are based on the facts and circumstances as they exist on the date of this memorandum and the applicable provisions of the Internal Revenue Code and Treasury Regulations in effect as of that date. This memorandum should not be relied upon as a substitute for independent legal or tax advice in the event of future changes in law or fact. Distribution of this memorandum to any person not identified as a recipient herein is not authorized without the prior written consent of Calderwood & Harkness LLP.

Matter No.:	1034-00004
Billing Code:	78412-JRC
Date:	July 14, 2023
To:	Jonathan R. Caldwell

418 East 72nd Street, Apt. 14A

New York, New York 10021

CC:

Victoria Chambers, Esq., Responsible Partner, Calderwood & Harkness LLP

Sylvia Hartwell, Esq., Specialist Partner, Tax, Calderwood & Harkness LLP

Martin J. Prescott, CPA, Senior Partner, Private Client Group

Strathmore Corporation & Greaves LLP, 600 Third Avenue, 28th Floor, New York, NY 10016

From:	Monica Reyes, Lead Associate, Calderwood & Harkness LLP
Re:	Receipt of IRS Determination Letter — The Caldwell Family Foundation (EIN 88-3021547); Tax-Exempt Status Under IRC § 501(c)(3)
Name	Position(s)
Jonathan R. Caldwell	Director; President
Eleanor V. Caldwell	Director; Vice President
Thomas R. Caldwell	Director; Secretary
Katherine C. Hartfield	Director; Treasurer
Olivia G. Caldwell	Director
Dr. Margaret P. Elsworth	Director (Independent)

PRIVILEGED AND CONFIDENTIAL ATTORNEY-CLIENT COMMUNICATION ATTORNEY WORK PRODUCT
CALDERWOOD & HARKNESS LLP 375 Park Avenue, 42nd Floor New York, New York 10152
MEMORANDUM
This memorandum constitutes an attorney-client privileged and confidential communication. It is intended solely for the use of the addressee and the individuals copied herein. This memorandum contains confidential legal advice and analysis related to the tax-exempt status of The Caldwell Family Foundation and is protected by the attorney-client privilege and the work product doctrine. Any unauthorized disclosure, distribution, or copying of this memorandum, or the information contained herein, is strictly prohibited. If you have received this memorandum in error, please notify Calderwood & Harkness LLP immediately at (212) 555-7800.
I. Purpose and Summary
The purpose of this memorandum is to confirm that Calderwood & Harkness LLP ("C&H") has received the determination letter from the Internal Revenue Service (the "IRS") granting The Caldwell Family Foundation (the "Foundation") recognition of tax-exempt status under Section 501(c)(3) of the Internal Revenue Code of 1986, as amended (the "Code" or "IRC"). The determination letter is dated July 14, 2023, and was received at the C&H offices on that same date via the United States Postal Service.
As set forth in greater detail below, the IRS has determined that the Foundation is exempt from federal income tax under IRC § 501(c)(3), effective as of the date of the Foundation's organization — March 20, 2023. The Foundation has been classified as a private foundation under IRC § 509(a), which is the expected and intended classification given the Foundation's funding and governance structure. The Foundation has not been classified as a public charity.
The receipt of this determination letter represents a significant milestone in the comprehensive generational estate plan that C&H has designed and is implementing on behalf of Mr. Caldwell and his family. The Foundation's formation process has proceeded on the timeline contemplated by that plan: the Foundation was incorporated on March 20, 2023, as a New York not-for-profit corporation with the New York Department of State (DOS Filing No. 230320-001847), and C&H filed IRS Form 1023 (Application for Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code) on behalf of the Foundation on May 15, 2023. The IRS's determination, received approximately sixty days following the filing — a notably efficient turnaround — confirms the Foundation's exempt status without conditions or qualifications.
The original determination letter is enclosed with this memorandum and will be forwarded to Mr. Caldwell for safekeeping, together with a second copy for Mr. Caldwell's personal files. A copy of the determination letter will be retained in the C&H closing binder for this matter and will be provided to Martin J. Prescott, CPA, at Strathmore Corporation & Greaves LLP for the Foundation's tax compliance files.
This memorandum addresses the key provisions of the determination letter, summarizes the Foundation's ongoing compliance obligations as a private foundation, places the Foundation within the context of the broader Caldwell estate plan, and sets forth recommended next steps.
II. Background: Formation and Application Timeline
A. Incorporation.  The Caldwell Family Foundation was incorporated as a New York not-for-profit corporation under the New York Not-for-Profit Corporation Law ("N-PCL") on March 20, 2023. On that date, C&H filed the Foundation's Certificate of Incorporation with the New York Department of State, which accepted the filing and assigned DOS Filing No. 230320-001847. The Certificate of Incorporation was drafted to satisfy the organizational requirements of IRC § 501(c)(3), including the requisite limitation-of-purposes clause and dissolution clause directing the distribution of the Foundation's assets upon dissolution to one or more organizations described in IRC § 501(c)(3) or to a governmental entity described in IRC § 170(c)(1), as required by Treasury Regulation § 1.501(c)(3)-1(b)(4).
The Foundation's registered address is 330 Madison Avenue, Suite 2401, New York, New York 10017. The Foundation obtained its Employer Identification Number ("EIN") from the IRS: 88-3021547. This EIN will be used for all federal and state tax filings, banking relationships, and official correspondence pertaining to the Foundation.
B. Organizational Steps
Following incorporation, the Foundation completed a series of organizational steps in March and April 2023. The Foundation held its initial organizational meeting of the Board of Directors, at which the following individuals were constituted as the Foundation's Board of Directors and officers:
Dr. Elsworth serves as an independent director and is Professor Emerita at Columbia University. Her appointment satisfies the Foundation's governance objective of including at least one director who is not a member of the Caldwell family or a related party, thereby enhancing the Foundation's governance profile and supporting the Foundation's commitment to independent oversight.
At the organizational meeting, the Board adopted the Foundation's Bylaws and the following governance and operational policies:
(a) Conflict-of-Interest Policy — establishing procedures for the identification, disclosure, and management of actual and potential conflicts of interest involving directors, officers, and key employees, consistent with the requirements of IRS Form 1023 and best practices for private foundation governance;
(b) Gift Acceptance Policy — setting forth the types of contributions the Foundation will and will not accept, including guidelines for the acceptance of non-cash assets, and procedures for the valuation and acknowledgment of charitable contributions;
(c) Investment Policy Statement — establishing the Foundation's investment objectives, asset allocation guidelines, risk tolerance parameters, and standards of prudent investment, developed in consultation with Havensbrook Wealth Advisors LLC (Diana R. Linden, CFP®, Managing Director);
(d) Grant-Making Policy and Procedures Manual — setting forth the Foundation's procedures for evaluating, approving, documenting, and monitoring charitable grants and distributions, including expenditure responsibility procedures for grants to organizations that are not public charities under IRC § 509(a)(1) or (a)(2).
Consistent with the self-dealing prohibition under IRC § 4941 and the Foundation's conflict-of-interest policy, no compensation is paid to any family-member director or officer of the Foundation. This approach was adopted to eliminate any risk that payments to family members who are "disqualified persons" under IRC § 4946 could be characterized as acts of self-dealing subject to the excise taxes imposed by IRC § 4941.
C. Initial Funding
On April 1, 2023, Jonathan R. Caldwell and Eleanor V. Caldwell made an initial cash contribution of $10,000,000 to the Foundation. The contribution is attributable $5,000,000 to each spouse pursuant to the gift-splitting election that will be made on their respective 2023 IRS Forms 709 (United States Gift (and Generation-Skipping Transfer) Tax Return). The contribution was documented in the Initial Contribution Agreement executed by Mr. Caldwell and Mrs. Caldwell on April 1, 2023, a copy of which is maintained in the C&H closing binder for this matter.
The contribution was made by wire transfer from the Caldwell joint checking account at Ashbury National Bank to the Foundation's operating account at the same institution, and the Foundation issued a contemporaneous written acknowledgment of the contribution as required by IRC § 170(f)(8) for charitable contributions in excess of $250.
D. Form 1023 Filing
Calderwood & Harkness LLP prepared and filed IRS Form 1023 (Application for Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code) on behalf of the Foundation on May 15, 2023. The application was filed electronically through Pay.gov, and the applicable user fee was remitted at the time of filing.
The Form 1023 application included the following materials and supporting documentation:
(a) A comprehensive narrative description of the Foundation's charitable activities, including its stated mission to support the arts, education, and environmental conservation, with a particular focus on the New York metropolitan area;
(b) A copy of the Foundation's Certificate of Incorporation (as filed with the New York Department of State on March 20, 2023);
(c) A copy of the Foundation's Bylaws;
(d) Resolutions of the Board of Directors adopted at the organizational meeting;
(e) Financial data for the Foundation, including a description of the initial $10,000,000 cash contribution and projected revenue and expenditure information for the Foundation's first three fiscal years;
(f) Statements confirming the Foundation's intended classification as a private foundation under IRC § 509(a), and confirming the Foundation's awareness of and intent to comply with the excise tax and operating requirements applicable to private foundations under IRC §§ 4940 through 4946; and
(g) A schedule of the Foundation's directors, officers, and key employees, along with their relationships to one another and to any substantial contributors.
No additional information or documentation was requested by the IRS following the submission of the Form 1023 application. The IRS processed the application and issued the enclosed determination letter without further inquiry, which is a favorable outcome reflecting the thoroughness of the application and supporting materials.
III. Summary of the IRS Determination Letter
A. Exempt Status Granted
The IRS determination letter, dated July 14, 2023, confirms that The Caldwell Family Foundation is exempt from federal income tax under IRC § 501(c)(3). This determination means that the Foundation will not be subject to federal income tax on income derived from activities that are substantially related to its exempt purposes. The Foundation will, however, remain subject to the excise tax on net investment income under IRC § 4940 (discussed in Section IV.A below), as well as the unrelated business income tax under IRC §§ 511–514, to the extent the Foundation engages in any unrelated trade or business activity in the future.
The determination is effective as of March 20, 2023 — the date the Foundation's Certificate of Incorporation was filed with the New York Department of State. Because the Foundation filed its Form 1023 application within twenty-seven months of the end of the month in which it was organized, the Foundation's exempt status relates back to the date of organization, as provided by IRC § 508(a) and Treasury Regulation § 1.508-1(a)(2). This means that the Foundation has been recognized as a tax-exempt organization from the inception of its existence, and all activities conducted and contributions received since March 20, 2023, are treated as having been conducted by or made to an organization described in IRC § 501(c)(3).
Contributions to the Foundation are deductible by donors under IRC § 170, subject to the percentage limitations applicable to contributions to private foundations (discussed in Section III.C below). The Foundation is also eligible to receive tax-deductible bequests, legacies, devises, transfers, and gifts under IRC §§ 2055, 2106, and 2522, which is relevant to the broader Caldwell estate plan.
B. Classification as a Private Foundation
The determination letter classifies the Foundation as a private foundation under IRC § 509(a). This classification is the expected and intended result. Given that the Foundation is funded principally by the Caldwell family and is governed by a board composed predominantly of Caldwell family members, the Foundation does not meet the criteria for classification as a public charity under IRC § 509(a)(1), (a)(2), or (a)(3).
For context, the distinction between a private foundation and a public charity is as follows:
•  A public charity is an organization described in IRC § 509(a)(1), (a)(2), or (a)(3) — generally, an organization that derives a substantial part of its financial support from the general public, from governmental sources, or from a broad base of donors, and that is not controlled by a small number of individuals. Public charities are subject to less restrictive regulatory requirements and enjoy more favorable charitable deduction limitations for their donors.
•  A private foundation is, by statutory definition, any IRC § 501(c)(3) organization that is not a public charity. Private foundations are typically funded by a single source — a family, an individual, or a corporation — and are subject to a more rigorous set of excise tax and operating requirements under IRC §§ 4940 through 4946. These requirements are designed to ensure that private foundations operate exclusively for charitable purposes and do not serve as vehicles for private benefit or self-dealing by their founders and related parties.
The Foundation's classification as a private foundation was anticipated from the outset of the planning process, and the Foundation's Certificate of Incorporation, Bylaws, and governance policies were drafted to comply with the specific requirements applicable to private foundations. As discussed in Section IV below, the Foundation is subject to a number of ongoing compliance obligations as a result of this classification.
C. Deductibility Limitations for Donors
As a private foundation, the deductibility of contributions to the Foundation is subject to the percentage limitations applicable to contributions to private foundations, which are less favorable than the limitations applicable to contributions to public charities. The relevant limitations are summarized as follows:
Cash Contributions. Cash contributions to the Foundation are deductible up to 30% of the donor's adjusted gross income ("AGI") under IRC § 170(b)(1)(B). Any contribution amount in excess of the 30% limitation may be carried forward and deducted over the succeeding five taxable years, subject to the same 30% limitation in each carryforward year.
For the 2023 taxable year, based on Mr. Caldwell's estimated AGI of $22,500,000 (as provided by Strathmore Corporation & Greaves LLP), the application of the 30% limitation yields a maximum Year 1 charitable deduction of $6,750,000 (calculated as 30% × $22,500,000). Because the total cash contribution to the Foundation in 2023 was $10,000,000 ($5,000,000 attributable to each spouse under the gift-splitting election), Mr. Caldwell's share of the deduction ($5,000,000) is fully deductible in 2023 (as $5,000,000 is less than $6,750,000). Mrs. Caldwell's deduction will depend on her individual AGI and should be confirmed with Strathmore Corporation & Greaves LLP; however, if the Caldwells file a joint return and the full $10,000,000 is claimed against a joint AGI, the maximum Year 1 deduction would be $6,750,000, and the remaining $3,250,000 would be carried forward for up to five years (i.e., through the 2028 taxable year).
Contributions of Appreciated Property. Contributions of appreciated property to the Foundation are subject to a more restrictive 20% of AGI limitation under IRC § 170(b)(1)(D). Contributions of publicly traded securities that have been held for more than one year are generally valued at their fair market value on the date of the contribution. Contributions of non-publicly-traded assets (such as interests in closely held entities, real estate, or other property) may be limited in deductible value to the donor's cost basis in the contributed property, depending on the character of the property and the applicable provisions of IRC § 170(e). These limitations can significantly affect the tax benefit of in-kind contributions to a private foundation and should be analyzed on a case-by-case basis.
Important Advisory. Before any future in-kind contributions are made to the Foundation — including contributions of publicly traded securities, interests in Caldwell Ridgeline Capital LLC or its affiliated fund entities, interests in Stonecrest Realty Holdings LLC, or any other non-cash assets — Mr. and Mrs. Caldwell should consult with Sylvia Hartwell at C&H and Martin J. Prescott at Strathmore Corporation & Greaves LLP to ensure that the contribution is structured to maximize the available income tax deduction and to avoid any adverse self-dealing or excess business holdings consequences.
IV. Ongoing Compliance Obligations
The Foundation's classification as a private foundation imposes a comprehensive set of ongoing compliance and regulatory obligations. This section summarizes the principal requirements. C&H, in coordination with Strathmore Corporation & Greaves LLP, will provide ongoing guidance to ensure the Foundation's compliance with these requirements.
A. Private Foundation Excise Taxes (IRC §§ 4940–4946)
The Code imposes a series of excise taxes on private foundations and their managers to regulate the conduct of private foundation operations. These provisions are strictly enforced, and violations can result in significant penalty excise taxes imposed on both the Foundation and, in certain cases, on individual foundation managers (i.e., directors and officers). The principal excise tax provisions are summarized below.
Excise Tax on Net Investment Income (IRC § 4940). The Foundation is subject to an annual excise tax of 1.39% on its net investment income. Net investment income includes gross investment income (interest, dividends, rents, royalties, and other similar amounts) and net capital gains from the sale or other disposition of assets, reduced by expenses directly connected with the production of investment income. This excise tax is reported and paid on the Foundation's annual Form 990-PF. Strathmore Corporation & Greaves LLP will coordinate the calculation of the Foundation's net investment income and the computation of the § 4940 excise tax as part of the annual Form 990-PF preparation process.
Self-Dealing Prohibition (IRC § 4941). The Foundation is strictly prohibited from engaging in acts of self-dealing with "disqualified persons." Under IRC § 4946, the term "disqualified person" includes the following individuals and entities:
(i) Substantial contributors to the Foundation (i.e., Jonathan R. Caldwell and Eleanor V. Caldwell);
(ii) Foundation managers (i.e., all directors and officers of the Foundation);
(iii) Owners of more than 20% of the voting power or beneficial interest of a substantial contributor that is an entity;
(iv) Members of the families of the individuals described in (i), (ii), and (iii), including spouses, ancestors, children, grandchildren, great-grandchildren, and the spouses of children, grandchildren, and great-grandchildren; and
(v) Entities in which the persons described in (i) through (iv), in the aggregate, own more than 35% of the voting power or beneficial interest — which includes, but is not limited to, Caldwell Ridgeline Capital LLC, Stonecrest Realty Holdings LLC, Meridian Crest Partners LLC, and Havensbrook Wealth Advisors LLC.
Prohibited self-dealing transactions include, without limitation:
(a) The sale, exchange, or leasing of property between the Foundation and a disqualified person;
(b) The lending of money or other extension of credit between the Foundation and a disqualified person;
(c) The furnishing of goods, services, or facilities between the Foundation and a disqualified person (other than certain de minimis exceptions);
(d) The payment of compensation or reimbursement of expenses by the Foundation to a disqualified person (other than reasonable compensation for personal services that are necessary to carry out the Foundation's exempt purposes); and
(e) The transfer of Foundation income or assets to, or for the use or benefit of, a disqualified person.
Consistent with the Foundation's conflict-of-interest policy, no compensation is paid to any family-member director or officer of the Foundation. This approach eliminates the most common source of self-dealing risk in family foundations. If the Foundation determines that it is necessary to compensate any disqualified person for personal services in the future — for example, if Dr. Elsworth or an outside advisor who is a disqualified person were to provide specialized consulting services — such compensation must be reasonable and necessary to the Foundation's exempt purposes, and should be reviewed by C&H prior to any commitment.
The initial excise tax for an act of self-dealing under IRC § 4941 is 10% of the amount involved, imposed on the self-dealer, plus 5% of the amount involved imposed on any foundation manager who knowingly participated in the act. If the self-dealing is not corrected within the applicable correction period, additional excise taxes of 200% (on the self-dealer) and 50% (on the foundation manager) apply. These penalties are severe and underscore the importance of strict compliance.
Minimum Distribution Requirement (IRC § 4942). The Foundation is required to distribute, for charitable purposes, at least 5% of the fair market value of its net investment assets on an annual basis. This is commonly referred to as the "minimum distribution requirement" or the "payout requirement." Based on the Foundation's initial funding of $10,000,000, the Year 1 minimum distribution target is approximately $500,000, although the precise amount will be determined based on the average monthly fair market value of the Foundation's net investment assets as computed on the Form 990-PF.
Qualifying distributions that count toward the 5% minimum include:
(a) Grants to organizations described in IRC § 509(a)(1), (a)(2), or (a)(3) (i.e., public charities);
(b) Grants to other private foundations or non-exempt organizations, provided the Foundation exercises "expenditure responsibility" under IRC § 4945(h);
(c) Direct charitable activities carried out by the Foundation in furtherance of its exempt purposes; and
(d) Reasonable and necessary administrative expenses directly attributable to the Foundation's charitable activities (including certain legal, accounting, and investment management fees, subject to allocation between charitable and investment activities).
The Foundation's grant-making policy and procedures manual establishes the framework and procedures for meeting this requirement, including the timeline for grant evaluation and approval, documentation requirements, and post-grant reporting and monitoring.
Failure to meet the minimum distribution requirement subjects the Foundation to an initial excise tax of 30% of the undistributed income under IRC § 4942(a), and a second-tier tax of 100% if the shortfall is not corrected within the applicable period. It is therefore critical that the Board of Directors remain attentive to the Foundation's distribution schedule throughout each fiscal year.
Excess Business Holdings (IRC § 4943). The Foundation, together with all disqualified persons, may not hold more than 20% of the voting stock (or profits interest) of any business enterprise (or 35% if it can be demonstrated that the Foundation does not have effective control). This limitation is not immediately implicated by the Foundation's current all-cash portfolio, but it should be monitored carefully if any future contributions to the Foundation include interests in business entities — including, without limitation, interests in Caldwell Ridgeline Capital LLC, Stonecrest Realty Holdings LLC, or Meridian Crest Partners LLC.
Jeopardizing Investments (IRC § 4944). The Foundation may not invest its assets in a manner that jeopardizes the carrying out of its exempt purposes. While the Code does not define "jeopardizing investments" with specificity, the IRS and the courts have generally held that investments involving a high degree of risk — such as speculative trading, margin purchases, short sales, and investments in highly volatile or illiquid instruments — may constitute jeopardizing investments. The Foundation's investment policy statement, developed in consultation with Havensbrook Wealth Advisors LLC (Diana R. Linden, CFP®, Managing Director), establishes prudent investment standards consistent with this requirement. The investment policy statement should be reviewed and updated periodically to reflect changes in the Foundation's asset base, investment objectives, and market conditions.
Taxable Expenditures (IRC § 4945). The Foundation is prohibited from making certain categories of expenditures, including:
(a) Grants to individuals for travel, study, or similar purposes without advance IRS approval of the Foundation's selection criteria and procedures;
(b) Grants to organizations that are not described in IRC § 509(a)(1), (a)(2), or (a)(3) (i.e., grants to other private foundations, foreign organizations, or non-exempt organizations) unless the Foundation exercises "expenditure responsibility" as defined in IRC § 4945(h) and the applicable Treasury Regulations;
(c) Expenditures for lobbying — specifically, any attempt to influence legislation through communication with members or employees of a legislative body, or through urging the general public to contact legislators;
(d) Expenditures for voter registration drives (unless certain conditions are met); and
(e) Expenditures for political campaign activities — specifically, participation or intervention in any political campaign on behalf of (or in opposition to) any candidate for public office.
The Foundation's grant-making policy and procedures manual addresses the expenditure responsibility requirements for any grants that may be made to organizations that are not public charities, including the pre-grant inquiry, written grant agreement, post-grant reporting, and record-keeping requirements set forth in Treasury Regulation § 53.4945-5(b).
B. Annual Filing Requirements
IRS Form 990-PF. The Foundation is required to file IRS Form 990-PF (Return of Private Foundation or Section 4947(a)(1) Trust Treated as Private Foundation) on an annual basis. This return reports the Foundation's income, expenses, assets, liabilities, disbursements for charitable purposes, and compliance with the private foundation excise tax provisions. The Form 990-PF is a public document — it is subject to mandatory public disclosure under IRC § 6104 and is available for inspection by any member of the public upon request.
The Foundation's first Form 990-PF will be due by the 15th day of the 5th month following the close of the Foundation's first fiscal year. Assuming the Foundation adopts a calendar fiscal year (January 1 – December 31), the first Form 990-PF (covering the short period from March 20, 2023, through December 31, 2023) will be due on May 15, 2024 (unless an extension is filed). Strathmore Corporation & Greaves LLP (Martin J. Prescott) will prepare the Foundation's Form 990-PF and will coordinate with C&H on any legal or compliance questions arising in the preparation process.
New York State Filings. The Foundation is required to register with the New York Attorney General's Charities Bureau and to file the annual CHAR500 registration form. The CHAR500 includes a financial report and, depending on the Foundation's gross revenue and total assets, may require an independent audit or review by a certified public accountant. The Foundation must maintain its registration in good standing with the Charities Bureau in order to solicit and receive charitable contributions in New York.
In addition, the Foundation may be subject to other filing or reporting requirements under New York law, including any filings required by the New York Department of State to maintain its corporate status as a not-for-profit corporation under the N-PCL.
State Tax Exemption. The Foundation should apply for New York State sales tax exemption by filing Form ST-119.2 (Application for an Exempt Organization Certificate) with the New York State Department of Taxation and Finance. The Foundation may also be eligible for exemption from New York City and State real property taxes if it acquires real property in the future, and from other state and local taxes applicable to exempt organizations. C&H will coordinate these filings on behalf of the Foundation.
C. Public Disclosure
As a private foundation, the Foundation is subject to the public disclosure requirements of IRC § 6104. The following documents must be made available for public inspection upon request:
(a) The Foundation's annual Form 990-PF for each of the three most recent taxable years;
(b) The Foundation's Form 1023 application for recognition of tax-exempt status; and
(c) The Foundation's IRS determination letter.
The Foundation must make these documents available at its principal office (330 Madison Avenue, Suite 2401, New York, New York 10017) during regular business hours, and must provide copies within a reasonable time in response to written or in-person requests. The Foundation may charge a reasonable fee for copying, consistent with IRS guidelines. Alternatively, the Foundation may satisfy its public disclosure obligation by making these documents widely available by posting them on the Foundation's website, if one is established.
The Board of Directors and the Foundation's advisors should be aware that all information reported on the Form 990-PF — including the names and addresses of directors and officers, the compensation of any paid employees, the names and amounts of all grants made, the Foundation's investment holdings and asset balances, and the Foundation's income and expenses — will be publicly available. Accordingly, the Foundation should exercise care in the preparation of the Form 990-PF to ensure accuracy and completeness, and should be mindful that the information disclosed will be subject to public scrutiny.
D. Governance and Recordkeeping
The Board of Directors should hold regular meetings — at a minimum, annually, and more frequently as the Foundation's activities require — and should maintain complete and accurate minutes of all board meetings. The minutes should document all significant actions taken by the Board, including the approval of grants, the adoption or amendment of policies, the review of financial reports, and any conflict-of-interest disclosures.
Annual conflict-of-interest disclosure statements should be collected from each director and officer of the Foundation at the beginning of each fiscal year, consistent with the Foundation's conflict-of-interest policy. Completed disclosure statements should be maintained in the Foundation's records.
The Foundation should maintain detailed records of:
(a) All contributions received, including the identity of each donor, the date and amount (or description and fair market value) of each contribution, and copies of all written acknowledgments issued;
(b) All grants made and other qualifying distributions, including the identity of each grantee, the amount and date of each grant, the charitable purpose of each grant, and any expenditure responsibility reports received from non-public-charity grantees;
(c) All investment activity, including account statements, trade confirmations, and records of investment income and realized gains and losses; and
(d) All administrative expenses incurred, with documentation supporting the allocation of expenses between charitable and investment activities.
Strathmore Corporation & Greaves LLP should be provided with copies of all relevant financial records on a regular basis to facilitate proper accounting and the timely preparation of the Foundation's annual Form 990-PF and other tax filings.
V. Coordination with the Broader Estate Plan
The establishment and funding of The Caldwell Family Foundation is one component of the comprehensive generational estate plan that C&H has designed and is implementing for Mr. Caldwell and his family. The Foundation operates in conjunction with, and is complementary to, the following additional planning instruments and structures:
(a) Grantor Retained Annuity Trusts (GRATs). Three zeroed-out GRATs have been established and funded as follows:
•  GRAT A — Caldwell 2023 Securities GRAT: Funded on April 15, 2023, with publicly traded securities valued at $60,000,000;
•  GRAT B — Caldwell 2023 Realty GRAT: Funded on May 1, 2023, with membership interests in Stonecrest Realty Holdings LLC valued at $80,000,000; and
•  GRAT C — Caldwell 2023 Carried Interest GRAT: Funded on June 1, 2023, with interests in Caldwell Ridgeline Capital fund vehicles valued at $38,000,000.
(b) Caldwell Family Dynasty Trust. A Delaware situs dynasty trust with Northgate Trust Company of Delaware serving as institutional co-trustee, funded with an initial contribution of $5,000,000. This trust is designed to hold assets in perpetuity for the benefit of Mr. Caldwell's descendants, free of estate and generation-skipping transfer taxes, taking advantage of Delaware's favorable trust laws, including the absence of a rule against perpetuities for trusts of personal property.
(c) Caldwell Family Insurance Trust. An irrevocable life insurance trust holding a $15,000,000 second-to-die (survivorship) life insurance policy issued by Beacon Life Assurance Company (Policy No. BLA-2023-77419), designed to provide estate tax liquidity upon the death of the survivor of Mr. Caldwell and Mrs. Caldwell.
(d) Amended and Restated Caldwell Revocable Trust and Pour-Over Will. Mr. Caldwell's revocable trust and coordinated pour-over will have been amended and restated to integrate with the foregoing planning instruments and to reflect Mr. Caldwell's current dispositive objectives.
The $10,000,000 charitable contribution to the Foundation serves a dual purpose within the estate plan. First, it reduces Mr. Caldwell's taxable estate by removing $10,000,000 from the assets that will be included in Mr. Caldwell's gross estate under IRC § 2031 at his death (or, in the case of community property or joint ownership, reducing the assets of both spouses). Second, it provides current income tax deductions that reduce Mr. and Mrs. Caldwell's federal and state income tax liabilities for 2023 and, to the extent of any carryforward, for subsequent years. In the aggregate, the Foundation, together with the GRATs, the dynasty trust, and the insurance trust, are projected to produce estate tax savings of approximately $24,000,000 to $30,000,000, depending on asset appreciation, the applicable estate tax rate, and the date of death.
Gift Tax Reporting. Mr. Caldwell's $5,000,000 share of the Foundation contribution (and Eleanor V. Caldwell's $5,000,000 share, assuming gift-splitting is elected) will be reported on the Caldwells' respective 2023 IRS Forms 709 (United States Gift (and Generation-Skipping Transfer) Tax Return). Although charitable contributions are eligible for the unlimited gift tax charitable deduction under IRC § 2522, the gift must nonetheless be reported on the Form 709. Draft preparation of the 2023 Forms 709 commenced on August 1, 2023, and is being coordinated between Sylvia Hartwell at C&H and Martin J. Prescott at Strathmore Corporation & Greaves LLP.
Spousal Consent. Eleanor V. Caldwell's consent to the Foundation structure and her participation as Vice President and Director of the Foundation have been reviewed and approved by Mrs. Caldwell's independent counsel, Rachel F. Dunlap, Esq., of Pemberton, Locke & Strauss LLP. Mrs. Dunlap's involvement as independent counsel for Mrs. Caldwell ensures that Mrs. Caldwell has received independent legal advice regarding her rights and obligations in connection with the Foundation and the broader estate plan.
VI. Recommended Next Steps
Based on the receipt of the IRS determination letter and the Foundation's current status, C&H recommends the following next steps:
1.  File and Safeguard the Determination Letter. Mr. Caldwell should retain the original IRS determination letter in a secure location (e.g., safe deposit box or fireproof safe). C&H will retain a copy in the closing binder for Matter No. 1034-00004 and will provide a copy to Martin J. Prescott at Strathmore Corporation & Greaves LLP for the Foundation's tax compliance files. The Foundation should also maintain a copy at its principal office at 330 Madison Avenue, Suite 2401, New York, New York 10017, to satisfy the public disclosure requirements of IRC § 6104.
2.  Begin Grant-Making Activities. The Board of Directors should convene at its earliest convenience to initiate the Foundation's grant-making program, consistent with the Foundation's stated mission of supporting the arts, education, and environmental conservation in the New York metropolitan area. Grant-making should be commenced with sufficient lead time to ensure that the Foundation meets its Year 1 minimum distribution target of approximately $500,000 under IRC § 4942 by the end of the Foundation's first fiscal year. The grant-making policy and procedures manual provides the framework for grant evaluation, approval, documentation, and monitoring.
3.  Register with the New York Attorney General's Charities Bureau. If the Foundation has not already completed its registration with the New York Attorney General's Charities Bureau, this registration should be filed promptly. The Foundation is required to register before soliciting or receiving charitable contributions in New York. C&H will assist with the preparation and filing of the CHAR500 registration form and any accompanying documentation.
4.  Coordinate Tax Compliance with Strathmore Corporation & Greaves LLP. A copy of the determination letter should be provided to Martin J. Prescott at Strathmore Corporation & Greaves LLP for inclusion in the Foundation's tax files. Strathmore Corporation & Greaves LLP should be formally engaged to prepare the Foundation's initial Form 990-PF (covering the short period from March 20, 2023, through December 31, 2023), to compute the IRC § 4940 excise tax on net investment income for the initial year, and to establish the Foundation's accounting systems and chart of accounts in coordination with the Foundation's Treasurer, Katherine C. Hartfield.
5.  Apply for State Tax Exemptions. C&H will coordinate the preparation and filing of applications for New York State sales tax exemption (Form ST-119.2) and any other applicable state and local tax exemptions. The sales tax exemption will enable the Foundation to make qualifying purchases without incurring New York State and local sales tax, which will preserve the Foundation's charitable assets for distribution.
6.  Establish Foundation Bank and Investment Accounts. If the Foundation has not already done so, the Foundation should open dedicated bank and investment accounts under EIN 88-3021547, consistent with the resolutions adopted at the organizational board meeting. All Foundation funds should be held in accounts titled in the name of The Caldwell Family Foundation and should not be commingled with the personal accounts of any director, officer, or disqualified person. Investment accounts should be established in coordination with Havensbrook Wealth Advisors LLC (Diana R. Linden, CFP®, Managing Director) and should be managed in accordance with the Foundation's investment policy statement.
7.  Schedule Fall 2023 Board Meeting. A meeting of the Board of Directors should be scheduled for fall 2023 (October or November is recommended) to address the following agenda items:
(a) Review the Foundation's investment policy statement and confirm asset allocation;
(b) Review and approve initial grants consistent with the Foundation's mission and minimum distribution requirements;
(c) Adopt any additional operating procedures deemed necessary;
(d) Review the Foundation's financial statements for the period from inception through the date of the meeting;
(e) Collect annual conflict-of-interest disclosure statements from each director and officer; and
(f) Discuss any other business appropriate for consideration by the Board.
VII. Enclosures
The following documents are enclosed with this memorandum:
1.  Original IRS Determination Letter dated July 14, 2023 (The Caldwell Family Foundation, EIN 88-3021547) — for Mr. Caldwell's safekeeping;
2.  Copy of IRS Determination Letter (for Mr. Caldwell's personal files); and
3.  Copy of the filed Form 1023 Application (for Mr. Caldwell's reference).
Additional copies of these documents will be provided to Strathmore Corporation & Greaves LLP and will be maintained in the C&H closing binder.
VIII. Availability for Questions
Victoria Chambers (Responsible Partner), Sylvia Hartwell (Specialist Partner, Tax), and the undersigned remain available at any time to discuss the determination letter, the Foundation's ongoing compliance obligations, or any aspect of the Foundation's operations and governance. We would be pleased to arrange a meeting or call at Mr. Caldwell's and Mrs. Caldwell's convenience to review this memorandum and address any questions.
Please do not hesitate to contact me directly with any questions or to schedule a discussion.
Respectfully submitted,
CALDERWOOD & HARKNESS LLP
By: ________
Monica Reyes Lead Associate Calderwood & Harkness LLP 375 Park Avenue, 42nd Floor New York, New York 10152 Telephone: (212) 555-7800 Facsimile: (212) 555-7801
Email: mreyes@calderwoodharkness.com
This memorandum is provided as part of the legal services rendered under Calderwood & Harkness LLP Matter No. 1034-00004 (Billing Code 78412-JRC) and constitutes a privileged and confidential attorney-client communication. The information and analysis contained herein are based on the facts and circumstances as they exist on the date of this memorandum and the applicable provisions of the Internal Revenue Code and Treasury Regulations in effect as of that date. This memorandum should not be relied upon as a substitute for independent legal or tax advice in the event of future changes in law or fact. Distribution of this memorandum to any person not identified as a recipient herein is not authorized without the prior written consent of Calderwood & Harkness LLP.
Matter No.: | 1034-00004
Billing Code: | 78412-JRC
Date: | July 14, 2023
To: | Jonathan R. Caldwell
418 East 72nd Street, Apt. 14A
New York, New York 10021
CC: | Eleanor V. Caldwell
Victoria Chambers, Esq., Responsible Partner, Calderwood & Harkness LLP
Sylvia Hartwell, Esq., Specialist Partner, Tax, Calderwood & Harkness LLP
Martin J. Prescott, CPA, Senior Partner, Private Client Group
Strathmore Corporation & Greaves LLP, 600 Third Avenue, 28th Floor, New York, NY 10016
From: | Monica Reyes, Lead Associate, Calderwood & Harkness LLP
Re: | Receipt of IRS Determination Letter — The Caldwell Family Foundation (EIN 88-3021547); Tax-Exempt Status Under IRC § 501(c)(3)
Name | Position(s)
Jonathan R. Caldwell | Director; President
Eleanor V. Caldwell | Director; Vice President
Thomas R. Caldwell | Director; Secretary
Katherine C. Hartfield | Director; Treasurer
Olivia G. Caldwell | Director
Dr. Margaret P. Elsworth | Director (Independent)

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