CALDERWOOD & HARKNESS LLP
375 Park Avenue, 42nd Floor New York, New York 10152 Telephone: (212) 555-7800
May 12, 2023
PRIVILEGED AND CONFIDENTIAL ATTORNEY-CLIENT COMMUNICATION ATTORNEY WORK PRODUCT
VIA HAND DELIVERY AND ELECTRONIC MAIL
Jonathan R. Caldwell Eleanor V. Caldwell 418 East 72nd Street, Apt. 14A New York, NY 10021
Re: IRS Form 1023 — Application for Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code for The Caldwell Family Foundation (EIN 88-3021547)
C&H Matter No.: 1034-00004 Billing Code: 78412-JRC Status: Final version for filing; draft version retained in matter file for reference
Dear Jonathan and Eleanor:
We are pleased to enclose the final executed IRS Form 1023 (Application for Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code) for The Caldwell Family Foundation (the "Foundation"). This cover memorandum summarizes the contents of the application, highlights key aspects of the filing, and addresses certain matters requiring your continued attention.
I. Summary of Transmittal
The enclosed application package comprises the completed IRS Form 1023 and all supporting exhibits, schedules, and attachments necessary for the Internal Revenue Service to evaluate the Foundation's request for recognition of tax-exempt status under Section 501(c)(3) of the Internal Revenue Code of 1986, as amended (the "Code"). The application will be filed with the IRS on May 15, 2023, via the IRS's Pay.gov electronic submission portal, together with the requisite filing fee.
As you are aware, the Foundation was incorporated on March 20, 2023 as a New York not-for-profit corporation under the New York Not-for-Profit Corporation Law (the "N-PCL"), and its Certificate of Incorporation was filed with the New York Department of State on that date under Filing No. 230320-001847. The Foundation will be classified as a private foundation under Section 509(a) of the Code. The Foundation's Employer Identification Number, 88-3021547, was obtained from the IRS in March 2023 promptly following incorporation.
The filing fee accompanying the application is $600, which is the current fee prescribed by the IRS for organizations with anticipated annual gross receipts exceeding $10,000. This fee is non-refundable regardless of the outcome of the application.
We note for your records that the draft version of this application, dated April 28, 2023 (Draft v.1), was circulated to both of you for review on April 29, 2023. Your comments were received on May 3, 2023, and the application was revised accordingly. The revised draft (Draft v.2, dated May 5, 2023) was reviewed by Victoria Chambers, Senior Tax Counsel at Calderwood & Harkness. The final version, dated May 10, 2023, was approved by Ms. Chambers and the undersigned. All revisions are reflected in the enclosed final version, and the draft versions have been retained in our matter file for reference purposes.
The application attaches the following supporting documents, each of which is discussed in greater detail below:
• Exhibit A — Certificate of Incorporation (filed March 20, 2023)
• Exhibit B — Bylaws
• Exhibit C — Conflict of Interest Policy
• Exhibit D — Organizational Board Resolutions
• Exhibit E — Initial Contribution Agreement
• Exhibit F — Investment Policy Statement
• Exhibit G — Grant-Making Policy and Procedures Manual
• Exhibit H — Power of Attorney (IRS Form 2848)
Based on current IRS processing timelines for Form 1023 applications, we anticipate a determination period of approximately three to six months. We will monitor the status of the application and promptly advise you of any IRS correspondence or requests for additional information. For your records, we note that the actual IRS determination letter was received on July 14, 2023, granting Section 501(c)(3) exempt status as a private foundation, with an effective date of March 20, 2023.
Should you have any questions regarding the enclosed application or any related matter, please do not hesitate to contact either of the undersigned.
Very truly yours,
CALDERWOOD & HARKNESS LLP
By: ________
Sylvia Hartwell Specialist Partner, Tax-Exempt Practice
By: ________
Monica Reyes Lead Associate, Tax-Exempt Practice
Enclosures
cc: Victoria Chambers, Senior Tax Counsel, Calderwood & Harkness LLP (via email) Martin J. Prescott, CPA, Strathmore Corporation & Greaves LLP (via email) Diana R. Linden, CFP®, Havensbrook Wealth Advisors LLC (via email)
INTERNAL REVENUE SERVICE
Form 1023
Application for Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code
(Rev. January 2020) Department of the Treasury — Internal Revenue Service
OMB No. 1545-0056. This form is open to public inspection. Use the instructions for Form 1023 to complete this application. Failure to complete all applicable parts may delay or prevent favorable action on this application.
PART I — IDENTIFICATION OF APPLICANT
Line 1. Full Name of Organization:
The Caldwell Family Foundation
The full legal name of the applicant organization is "The Caldwell Family Foundation," as set forth in its Certificate of Incorporation filed with the New York Department of State on March 20, 2023. The Foundation has not adopted, and does not intend to use, any trade name, assumed name, or "doing business as" designation.
Line 2. Employer Identification Number (EIN):
88-3021547
The Foundation's Employer Identification Number was assigned by the Internal Revenue Service upon the filing of IRS Form SS-4 in March 2023, shortly after the Foundation's incorporation. This EIN has been used on all federal and state filings to date and will be used on all future returns and correspondence with the IRS.
Line 3. Mailing Address:
The Caldwell Family Foundation 330 Madison Avenue, Suite 2401 New York, NY 10017
This address serves as the Foundation's principal office and mailing address. All correspondence from the IRS should be directed to this address unless otherwise indicated by the Foundation's authorized representative. The Foundation notes that it shares this office address with Stonecrest Realty Holdings LLC, a separate entity associated with the Caldwell family; however, the Foundation maintains its own separate books, records, bank accounts, and operational infrastructure at this location.
Line 4. Contact Person:
Name: Monica Reyes, Lead Associate
Firm: Calderwood & Harkness LLP
Address: 375 Park Avenue, 42nd Floor, New York, NY 10152
Telephone: (212) 555-7800
Ms. Reyes is an attorney with Calderwood & Harkness LLP and has been designated as the contact person for purposes of this application. She is authorized to receive and respond to IRS correspondence related to this application. A Power of Attorney (IRS Form 2848) designating Sylvia Hartwell as the Foundation's authorized representative and Monica Reyes as alternate representative is attached as Exhibit H.
Line 5. Date of Incorporation:
March 20, 2023
Line 6. State of Incorporation:
New York
The Foundation was incorporated under the New York Not-for-Profit Corporation Law (N-PCL) as a Type B corporation organized for charitable purposes. The Certificate of Incorporation was filed with the New York Department of State on March 20, 2023, under Filing No. 230320-001847.
Line 7. Entity Type:
Corporation (not-for-profit)
The Foundation is organized as a New York not-for-profit corporation. It is not a trust, unincorporated association, or limited liability company.
Line 8. Accounting Period / Fiscal Year:
Calendar year (January 1 through December 31)
The Foundation has adopted the calendar year as its fiscal year for both financial reporting and tax purposes. The first fiscal year will be a short year commencing March 20, 2023 (date of incorporation) and ending December 31, 2023.
Line 9. Date of Formation:
March 20, 2023
This is the date on which the Foundation's Certificate of Incorporation was filed with the New York Department of State under Filing No. 230320-001847. The organizational meeting of the Board of Directors took place on the same date, at which the Bylaws, Conflict of Interest Policy, and other foundational governance documents were adopted.
Line 10. Has the organization previously applied for recognition of exemption under Section 501(c)(3)?
No.
The Foundation has not previously applied for, or received, recognition of tax-exempt status under Section 501(c)(3) of the Code or any other provision. This is the Foundation's initial application.
Line 11. Classification Requested:
Private foundation under IRC § 509(a).
The Foundation does not expect to qualify as a public charity under Sections 509(a)(1), 509(a)(2), or 509(a)(3) of the Code. The Foundation will receive substantially all of its funding from a limited number of substantial contributors — specifically, Jonathan R. Caldwell and Eleanor V. Caldwell — and does not anticipate receiving broad-based public support. Accordingly, the Foundation requests classification as a private foundation and acknowledges its obligation to comply with all applicable excise tax provisions set forth in Chapter 42 of the Code.
PART II — ORGANIZATIONAL STRUCTURE
A. Governing Documents
The Foundation's organizational and governance framework is established by the following documents, each of which is attached to this application:
1. Certificate of Incorporation. The Certificate of Incorporation of The Caldwell Family Foundation was filed with the New York Department of State on March 20, 2023, under Filing No. 230320-001847. The Certificate establishes the Foundation as a New York not-for-profit corporation organized exclusively for charitable, educational, and scientific purposes within the meaning of Section 501(c)(3) of the Code. A complete copy of the Certificate of Incorporation, bearing the filing receipt and endorsement of the New York Department of State, is attached as Exhibit A.
2. Bylaws. The Bylaws of The Caldwell Family Foundation were adopted by unanimous written consent of the Board of Directors at the organizational board meeting held on March 20, 2023. The Bylaws govern the internal operations of the Foundation, including the composition and responsibilities of the Board of Directors, the election and duties of officers, meeting procedures, committee structure, the fiscal year, and procedures for amendment. A complete copy of the Bylaws is attached as Exhibit B.
3. Conflict of Interest Policy. The Foundation's Conflict of Interest Policy was adopted by the Board of Directors at the organizational board meeting on March 20, 2023. The policy is designed to ensure compliance with the self-dealing prohibitions of Section 4941 of the Code and to promote transparency and accountability in the Foundation's governance. A complete copy of the Conflict of Interest Policy is attached as Exhibit C.
B. Required Organizational Language
The Certificate of Incorporation contains the following provisions required by Section 501(c)(3) and Section 508(e) of the Code:
(i) Exclusive Charitable Purpose. The Foundation is organized exclusively for charitable, educational, and scientific purposes within the meaning of Section 501(c)(3) of the Internal Revenue Code of 1986, as amended, or the corresponding provision of any future United States internal revenue law.
(ii) Prohibition on Private Inurement. No part of the net earnings of the Foundation shall inure to the benefit of, or be distributable to, its directors, officers, or other private persons, except that the Foundation shall be authorized and empowered to pay reasonable compensation for services rendered and to make payments and distributions in furtherance of the purposes set forth herein.
(iii) Prohibition on Lobbying. No substantial part of the activities of the Foundation shall constitute the carrying on of propaganda or otherwise attempting to influence legislation, and the Foundation shall not participate in, or intervene in (including the publishing or distribution of statements), any political campaign on behalf of (or in opposition to) any candidate for public office.
(iv) Prohibition on Political Campaign Intervention. The Foundation shall not participate in or intervene in any political campaign on behalf of (or in opposition to) any candidate for public office.
(v) Dissolution Provision. Upon the dissolution of the Foundation, assets shall be distributed for one or more exempt purposes within the meaning of Section 501(c)(3) of the Internal Revenue Code, or the corresponding section of any future federal tax code, or shall be distributed to the federal government, or to a state or local government, for a public purpose. Any such assets not so disposed of shall be disposed of by a court of competent jurisdiction of the county in which the principal office of the Foundation is then located, exclusively for such purposes or to such organization or organizations as said court shall determine, which are organized and operated exclusively for such purposes.
(vi) Private Foundation Provisions (Section 508(e)). The Certificate of Incorporation contains the mandatory provisions required under Section 508(e) of the Code for private foundations, including:
(a) The Foundation shall distribute its income for each taxable year at such time and in such manner as not to subject the Foundation to the tax imposed by Section 4942 of the Code (failure to distribute income);
(b) The Foundation shall not engage in any act of self-dealing (as defined in Section 4941(d) of the Code);
(c) The Foundation shall not retain any excess business holdings (as defined in Section 4943(c) of the Code);
(d) The Foundation shall not make any investments in such manner as to subject the Foundation to the tax imposed by Section 4944 of the Code (jeopardizing investments); and
(e) The Foundation shall not make any taxable expenditures (as defined in Section 4945(d) of the Code).
These provisions are set forth in Article IV of the Certificate of Incorporation and are binding upon the Foundation and its directors, officers, and agents in perpetuity, or until such time as the Certificate is amended in accordance with applicable law.
C. Board of Directors and Officers
The Foundation is governed by a Board of Directors consisting of six (6) members, including five (5) family members and one (1) independent director. The current directors and officers of the Foundation, their respective positions, addresses, and relevant affiliations are as follows:
No compensation is paid to any family-member director or officer for service in such capacity. This policy is consistent with the self-dealing prohibitions of Section 4941 of the Code and is set forth in the Foundation's Bylaws and Conflict of Interest Policy. Dr. Elsworth, as the sole independent director, may receive reasonable compensation for her independent director services as approved by the Board; however, no compensation is anticipated in Year 1, as all directors will serve voluntarily during the organizational period.
The Board of Directors is responsible for all governance and oversight functions of the Foundation, including the approval of grants, the adoption and amendment of policies, the selection and supervision of any staff, and the oversight of the Foundation's financial affairs and investments. The Bylaws provide for regular quarterly meetings of the Board, with additional special meetings as called by the President or by any two directors.
D. Disqualified Persons
Pursuant to Section 4946 of the Code, the following individuals and entities are classified as disqualified persons with respect to the Foundation:
Substantial Contributors:
1. Jonathan R. Caldwell — substantial contributor by virtue of his $5,000,000 attributable share of the initial $10,000,000 cash contribution to the Foundation. Mr. Caldwell also serves as President and Director of the Foundation and is therefore a foundation manager and disqualified person in multiple capacities.
2. Eleanor V. Caldwell — substantial contributor by virtue of her $5,000,000 attributable share of the initial $10,000,000 cash contribution to the Foundation. Mrs. Caldwell also serves as Vice President and Director of the Foundation.
Family Members of Substantial Contributors:
3. Thomas R. Caldwell — son of Jonathan R. Caldwell and Eleanor V. Caldwell; a family member of substantial contributors within the meaning of Section 4946(d) of the Code. Mr. Caldwell serves as Secretary and Director of the Foundation.
4. Katherine C. Hartfield — daughter of Jonathan R. Caldwell and Eleanor V. Caldwell; a family member of substantial contributors. Ms. Hartfield serves as Treasurer and Director of the Foundation.
5. Olivia G. Caldwell — daughter of Jonathan R. Caldwell and Eleanor V. Caldwell; a family member of substantial contributors. Ms. Caldwell serves as a Director of the Foundation.
6. Dr. Sarah P. Caldwell — daughter-in-law of Jonathan R. Caldwell and Eleanor V. Caldwell (spouse of Thomas R. Caldwell); a family member of a disqualified person.
7. Dr. Andrew W. Hartfield — son-in-law of Jonathan R. Caldwell and Eleanor V. Caldwell (spouse of Katherine C. Hartfield); a family member of a disqualified person.
Entities Controlled by Disqualified Persons:
8. Caldwell Ridgeline Capital LLC — an entity in which the above-listed disqualified persons hold more than 35% combined ownership interest. This entity is a disqualified person under Section 4946(a)(1)(G) of the Code.
9. Stonecrest Realty Holdings LLC — an entity in which the above-listed disqualified persons hold more than 35% combined ownership interest. This entity is likewise a disqualified person under Section 4946(a)(1)(G).
The Foundation maintains a register of all known disqualified persons, which is reviewed and updated at least annually by the Board of Directors in connection with the annual certification process under the Conflict of Interest Policy. All transactions between the Foundation and any disqualified person are strictly prohibited except as specifically permitted by Section 4941(d)(2) of the Code, and all directors are required to disclose any actual or potential conflicts of interest in accordance with the Foundation's Conflict of Interest Policy.
PART III — REQUIRED DESCRIPTIONS OF ACTIVITIES
A. Narrative Description of Activities (Past, Present, and Planned)
1. Mission Statement. The Caldwell Family Foundation is organized and operated exclusively for charitable, educational, and scientific purposes within the meaning of Section 501(c)(3) of the Internal Revenue Code. The Foundation's mission is to support the arts, education, and environmental conservation, with a particular focus on organizations serving the New York metropolitan area. The Foundation seeks to advance the public good through strategic grantmaking to qualified charitable organizations that are making a meaningful impact in these fields.
The Foundation's charitable mission reflects the long-standing philanthropic interests and commitments of its founders, Jonathan R. Caldwell and Eleanor V. Caldwell, who have been active supporters of cultural institutions, educational organizations, and environmental conservation initiatives throughout their careers and personal lives. The Foundation provides a structured vehicle through which the Caldwell family can pursue its philanthropic objectives in a sustainable and impactful manner across multiple generations.
2. Planned Activities — Year One and Beyond. The Foundation's primary activity is grantmaking. The Foundation will make grants to organizations that qualify as public charities under Section 509(a)(1) or Section 509(a)(2) of the Code, or to governmental units described in Section 170(c)(1) of the Code. The Foundation does not intend to conduct direct charitable activities in its initial years of operation; rather, it will achieve its charitable purposes by providing financial support to established organizations with demonstrated track records of effectiveness in the Foundation's areas of interest.
The Foundation's grantmaking will be focused in the following three areas:
(a) Arts. The Foundation will support visual and performing arts organizations, museums, galleries, and artist residency programs in the New York metropolitan area. The Foundation recognizes the vital role that the arts play in enriching community life, fostering creativity and innovation, and preserving cultural heritage. Potential grantees include established museums and galleries, emerging arts organizations serving underrepresented communities, artist residency programs that provide emerging and mid-career artists with the resources and space needed to develop their work, and arts education programs that bring high-quality arts instruction to students in underserved schools and communities.
(b) Education. The Foundation will make grants to educational institutions, scholarship programs, and educational nonprofits that promote access to quality education, particularly for underserved communities. The Foundation believes that education is the foundation of individual opportunity and social progress, and that all students deserve access to rigorous, engaging, and supportive learning environments regardless of their economic circumstances. Potential grantees include independent and charter schools serving low-income students, scholarship funds at colleges and universities, tutoring and mentorship programs, literacy initiatives, and organizations developing innovative educational approaches and curricula.
(c) Environmental Conservation. The Foundation will make grants to organizations engaged in environmental research, conservation, land preservation, and sustainability initiatives. The Foundation is committed to supporting efforts to protect and restore the natural environment for current and future generations. Potential grantees include land trusts and conservation organizations, environmental research institutes, organizations working to promote clean energy and sustainable practices, and groups engaged in public education and advocacy on environmental issues (to the extent such advocacy does not constitute lobbying or political campaign intervention).
The Foundation anticipates making between five (5) and fifteen (15) grants per year in its initial years of operation. The size and number of grants will depend on the quality and availability of grant proposals, the Foundation's assessment of the potential impact of each proposed grant, and the Foundation's financial capacity in any given year.
The Foundation's Year 1 grantmaking target is at least $500,000, which is equal to the five percent (5%) minimum distribution requirement under Section 4942 of the Code, calculated on the basis of $10,000,000 in net investment assets. The Foundation intends to meet or exceed the minimum distribution requirement in each fiscal year and will monitor its distributable amount throughout the year to ensure timely compliance.
Any future program-related activities — such as direct charitable programs, program-related investments under Section 4944(c), or grants to individuals — will be carefully evaluated by the Board of Directors in consultation with legal counsel before being undertaken, and will be conducted in full compliance with all applicable provisions of the Code.
3. Grant Procedures. The Foundation has adopted a Grant-Making Policy and Procedures Manual (attached as Exhibit G) that governs all aspects of the Foundation's grantmaking activities. The key elements of the Foundation's grant procedures are as follows:
(a) Solicitation and Review. The Board of Directors is responsible for identifying, soliciting, reviewing, and approving all grants. The Board may accept unsolicited grant proposals from prospective grantees, but the Foundation does not maintain a formal open-application process. Board members may recommend potential grantees based on their personal knowledge of organizations working in the Foundation's focus areas.
(b) Due Diligence. Before approving any grant, the Foundation will conduct appropriate due diligence on the prospective grantee, including verification of the grantee's tax-exempt status under Section 501(c)(3) of the Code, review of the grantee's most recent Form 990 or Form 990-PF, review of the grantee's financial statements and organizational documents, and assessment of the grantee's capacity to use the grant funds effectively for the intended charitable purposes.
(c) Grant Agreements. All grants will be documented by written grant agreements specifying the amount of the grant, the charitable purposes for which the grant funds are to be used, the reporting and accountability requirements applicable to the grantee, and any other terms and conditions that the Board deems appropriate.
(d) Expenditure Responsibility. Where grants are made to organizations that are not public charities described in Section 509(a)(1) or Section 509(a)(2) of the Code, the Foundation will exercise expenditure responsibility as required by Section 4945(h) of the Code and the regulations thereunder. This includes requiring the grantee to repay any portion of the grant funds not used for the specified charitable purposes, obtaining full and complete annual reports from the grantee on the manner in which the funds are spent, and making full and detailed reports with respect to such expenditures to the IRS on the Foundation's annual Form 990-PF.
(e) Reporting and Monitoring. The Foundation will require all grantees to submit periodic reports on the use of grant funds, including financial accountings and narrative descriptions of the activities supported by the grant. The Foundation will monitor grantee compliance with the terms of each grant agreement and will take appropriate corrective action if grant funds are not being used for the intended charitable purposes.
The Foundation does not intend to make grants to individuals or to conduct direct charitable activities in its initial years of operation. If the Foundation determines in the future that it wishes to make grants to individuals (such as scholarships or prizes), it will establish procedures for such grants that comply with the requirements of Section 4945(g) of the Code and will, if required, seek advance IRS approval of such procedures.
4. No Lobbying or Political Activity. The Foundation will not engage in lobbying or political campaign activity of any kind. No substantial part of the Foundation's activities will consist of carrying on propaganda or otherwise attempting to influence legislation within the meaning of Section 501(c)(3) of the Code. The Foundation will not participate in, or intervene in (including the publishing or distribution of statements), any political campaign on behalf of (or in opposition to) any candidate for public office.
These prohibitions are set forth in the Foundation's Certificate of Incorporation and Bylaws and are binding upon all directors, officers, employees, and agents of the Foundation.
5. Relationship to Other Organizations. The Foundation is an independent entity, legally separate from all other entities and structures associated with the Caldwell family. The Foundation is not controlled by, and does not control, any other organization.
The Foundation acknowledges that its founders, Jonathan R. Caldwell and Eleanor V. Caldwell, have interests in a number of other entities and fiduciary structures, including the following:
• Caldwell Ridgeline Capital LLC
• Stonecrest Realty Holdings LLC
• Caldwell Family Dynasty Trust
• Caldwell 2023 Securities GRAT
• Caldwell 2023 Realty GRAT
• Caldwell 2023 Carried Interest GRAT
• Caldwell Family Insurance Trust
• Caldwell Revocable Trust
The Foundation has no financial, operational, or governance relationship with any of these entities or trusts. The Foundation's only connection to these entities is through the personal involvement of certain of the Foundation's directors, who are members of the Caldwell family and may also serve as fiduciaries, beneficiaries, or owners of interests in these entities. All such relationships are disclosed in the Foundation's Conflict of Interest Policy, and all directors are required to recuse themselves from any Foundation decision in which they have a personal interest.
The Foundation shares an office address with Stonecrest Realty Holdings LLC at 330 Madison Avenue, Suite 2401, New York, NY 10017. However, the Foundation maintains its own separate books, records, bank accounts, correspondence, and operational infrastructure at this location. The Foundation does not share employees, contractors, or professional service providers with Stonecrest Realty Holdings LLC, except to the extent that both entities may independently engage the same professional advisors (such as legal counsel or accountants) for separate matters.
PART IV — COMPENSATION AND FINANCIAL ARRANGEMENTS
A. Compensation of Officers, Directors, and Key Employees
No compensation is paid to Jonathan R. Caldwell, Eleanor V. Caldwell, Thomas R. Caldwell, Katherine C. Hartfield, or Olivia G. Caldwell for their service as directors or officers of the Foundation. These individuals serve on a purely voluntary basis and receive no salary, fees, stipends, or other remuneration of any kind in connection with their service to the Foundation. This policy is intended to ensure compliance with the self-dealing prohibitions of Section 4941 of the Code, which generally prohibit compensation and other financial transactions between a private foundation and its disqualified persons.
Dr. Margaret P. Elsworth, the Foundation's independent director, may receive reasonable compensation for her independent director services, subject to approval by the Board of Directors. Dr. Elsworth is not a disqualified person with respect to the Foundation and is therefore not subject to the self-dealing prohibitions of Section 4941 in this regard. The anticipated annual compensation for Dr. Elsworth is $0 in Year 1, as all directors have agreed to serve voluntarily during the Foundation's organizational period. If compensation is approved for Dr. Elsworth in future years, the Board will ensure that such compensation is reasonable in amount and consistent with amounts paid for comparable services by similar organizations.
The Foundation does not currently have any paid employees. In the future, the Foundation may engage paid staff to assist with administrative, programmatic, and grantmaking functions. Any compensation arrangements with future employees will comply with Section 4941 of the Code, and no compensation will be paid to any individual who is a disqualified person with respect to the Foundation, except as specifically permitted by Section 4941(d)(2)(E) (reasonable compensation for personal services reasonably necessary to carry out the Foundation's exempt purposes, as applicable to non-family disqualified persons).
B. Financial Arrangements with Disqualified Persons
The Foundation has adopted a comprehensive Conflict of Interest Policy (attached as Exhibit C) that addresses all financial transactions and arrangements between the Foundation and its disqualified persons. The key provisions of the Conflict of Interest Policy, as they relate to financial arrangements with disqualified persons, are as follows:
1. General Prohibition on Self-Dealing. The Foundation's Conflict of Interest Policy prohibits any financial transaction between the Foundation and any disqualified person (as defined under Section 4946 of the Code), except as specifically permitted by Section 4941(d)(2) of the Code. This prohibition encompasses all direct and indirect acts of self-dealing, including sales, exchanges, or leases of property; lending of money or other extensions of credit; furnishing of goods, services, or facilities; payment of compensation (or reimbursement of expenses); transfers of Foundation income or assets to or for the use of a disqualified person; and any agreement to make such payments or transfers.
2. No Personal Benefit. No Foundation assets will be used for the personal benefit of any disqualified person, whether directly or indirectly.
3. No Loans. No loans will be made to or from any disqualified person. This prohibition includes both direct loans and indirect credit arrangements.
4. Arm's-Length Standard. No goods, services, or facilities will be provided by or to any disqualified person except on terms that are at least as favorable to the Foundation as arm's-length terms with an unrelated third party. In practice, the Foundation intends to avoid all transactions with disqualified persons, even those that might technically qualify for an exception under Section 4941(d)(2), unless the transaction is clearly in the Foundation's best interest and has been approved by the disinterested members of the Board.
5. Annual Disclosure and Certification. Each director is required to complete an annual disclosure questionnaire identifying all actual and potential conflicts of interest, including all financial interests in entities that do business with or seek to do business with the Foundation, all family relationships with other disqualified persons, and all other relationships or circumstances that could give rise to a conflict of interest. Each director is further required to certify annually that he or she has reviewed and understands the Conflict of Interest Policy and has disclosed all actual and potential conflicts.
6. Recusal Procedures. Any director who has a conflict of interest with respect to a matter before the Board is required to disclose the conflict and to recuse himself or herself from all discussion and voting on the matter. The remaining disinterested directors will determine whether the proposed transaction or arrangement is in the Foundation's best interest and will approve or reject it accordingly.
PART V — FINANCIAL DATA
A. Statement of Revenue and Expenses (Actual and Projected)
The following financial projections have been prepared by the Foundation's management in consultation with Strathmore Corporation & Greaves LLP (Martin J. Prescott, CPA, Senior Partner, Private Client Group) and Havensbrook Wealth Advisors LLC (Diana R. Linden, CFP®, Managing Director, Family Office Services). These projections are based on the Foundation's initial capitalization, expected investment returns, anticipated grantmaking levels, and estimated operating expenses. Actual results may vary from these projections.
Year 1 (2023 — Partial Year, March 20 through December 31, 2023). Revenue:
The $10,000,000 contribution represents the initial cash contribution made by Jonathan R. Caldwell and Eleanor V. Caldwell, with $5,000,000 attributable to each spouse, pursuant to the Initial Contribution Agreement executed on April 1, 2023 (attached as Exhibit E). This contribution constitutes the Foundation's initial capitalization and is expected to be the Foundation's sole source of contributed support in Year 1.
Estimated investment income of $250,000 is based on anticipated returns on the contributed assets during the partial year, assuming investment of the contributed funds in a diversified portfolio of publicly traded securities, bonds, and cash equivalents beginning in April 2023. Investment management services are provided by Havensbrook Wealth Advisors LLC (Diana R. Linden, CFP®, Managing Director, 900 Third Avenue, 18th Floor, New York, NY 10022).
Expenses:
The grants and contributions paid of $500,000 represents the Foundation's minimum distribution requirement under Section 4942 of the Code, calculated as five percent (5%) of the Foundation's net investment assets of $10,000,000. The Foundation intends to distribute at least this amount in Year 1 to qualified public charities and governmental units in accordance with its grant-making procedures.
Administrative expenses of $75,000 include fees payable to Strathmore Corporation & Greaves LLP for tax preparation services (including preparation of the Foundation's initial Form 990-PF), fees payable to Calderwood & Harkness LLP for organizational legal services (including preparation and filing of this Form 1023 application and related organizational documents), and miscellaneous filing and administrative fees.
Investment management fees of $50,000 are payable to Havensbrook Wealth Advisors LLC pursuant to the Foundation's investment management agreement, based on a standard fee schedule.
The excise tax on net investment income is estimated at $3,125, calculated at the rate of 1.39% on estimated net investment income of approximately $250,000, subject to the applicable rate under Section 4940 of the Code as in effect for the 2023 tax year.
Net Assets End of Year 1: Approximately $9,621,875
Year 2 (2024 — Projected Full Year). Revenue:
No additional contributions are currently planned for Year 2, although future contributions may be made at the discretion of the founders or other donors. The Foundation's projected revenue for Year 2 consists entirely of estimated investment income of $500,000, based on anticipated returns on the Foundation's investment portfolio over a full twelve-month period.
Expenses:
The grants and contributions paid of $500,000 represents the Foundation's projected minimum distribution requirement under Section 4942, calculated as five percent (5%) of approximately $10,000,000 in net investment assets. Administrative expenses of $80,000 reflect a modest increase over Year 1 to account for a full year of operations and ongoing compliance costs. The excise tax estimate of $6,950 is based on the anticipated 1.39% rate applied to $500,000 in estimated net investment income.
Year 3 (2025 — Projected Full Year). Revenue:
No additional contributions are projected for Year 3, subject to future decisions by the donors. Estimated investment income of $525,000 reflects modest anticipated growth in the Foundation's investment portfolio.
Expenses:
The grants and contributions paid of $525,000 represents the Foundation's projected minimum distribution requirement under Section 4942 for Year 3, based on the five percent (5%) minimum distribution calculated on net investment assets. Administrative expenses and investment management fees reflect modest anticipated increases. The excise tax estimate of $7,300 is based on the anticipated applicable rate applied to $525,000 in net investment income.
B. Balance Sheet (as of April 1, 2023 — Date of Initial Contribution)
As of the date of the initial contribution, the Foundation's sole asset was the $10,000,000 cash contribution received from Jonathan R. Caldwell and Eleanor V. Caldwell. The Foundation had no liabilities of any kind.
C. Source of Initial Funding
The Foundation's initial funding consists of a $10,000,000 cash contribution from Jonathan R. Caldwell and Eleanor V. Caldwell. This contribution was made as a joint gift, with $5,000,000 attributable to each spouse, pursuant to the Initial Contribution Agreement executed on April 1, 2023 (attached as Exhibit E). The contribution was unrestricted and was made without any conditions, reservations, or retained interests of any kind.
With respect to the charitable income tax deduction arising from this contribution, the following analysis applies:
Jonathan R. Caldwell's charitable income tax deduction for the 2023 tax year is limited to 30% of adjusted gross income (AGI) for cash contributions to a private foundation, pursuant to Section 170(b)(1)(D) of the Code. Based on Mr. Caldwell's estimated 2022 adjusted gross income of $22,500,000, the maximum deduction available in Year 1 (2023) is approximately $6,750,000 ($22,500,000 × 30%). The remaining $3,250,000 ($10,000,000 minus $6,750,000) may be carried forward for up to five additional tax years, subject to the same 30% of AGI limitation in each carryforward year.
Eleanor V. Caldwell's separate charitable income tax deduction is not within the scope of this engagement but will be coordinated by her personal tax advisors at Pemberton, Locke & Strauss LLP (Rachel F. Dunlap, Partner) and Strathmore Corporation & Greaves LLP (Martin J. Prescott, CPA, Senior Partner).
The Foundation does not anticipate receiving additional contributions in the near term, although it remains open to receiving future contributions from the Caldwells or from other donors.
D. Investments. The Foundation's initial $10,000,000 contribution will be invested in a diversified portfolio of publicly traded securities, bonds, and cash equivalents consistent with the Foundation's Investment Policy Statement (attached as Exhibit F). The portfolio will be managed by Havensbrook Wealth Advisors LLC (Diana R. Linden, CFP®, Managing Director, Family Office Services, 900 Third Avenue, 18th Floor, New York, NY 10022) pursuant to an investment management agreement.
The Foundation's Investment Policy Statement establishes the following key principles:
• Investment Objectives. The Foundation seeks to preserve and grow its corpus over time while generating sufficient income and liquidity to meet its annual distribution requirements under Section 4942 of the Code. The portfolio is designed to achieve a reasonable total return over the long term, consistent with prudent risk management.
• Asset Allocation. The Foundation's assets will be allocated across a diversified mix of asset classes, including domestic and international equities, fixed income securities, and cash and cash equivalents. The specific allocation targets and ranges are set forth in the Investment Policy Statement.
• Risk Tolerance. The Foundation has a moderate risk tolerance, reflecting its long-term time horizon and its need for stable and predictable cash flows to fund annual grant distributions.
• Diversification. The Foundation's portfolio will be diversified across asset classes, sectors, geographies, and individual securities to reduce concentration risk and volatility.
• Prohibition on Jeopardizing Investments. The Investment Policy Statement specifically prohibits investments that would jeopardize the Foundation's ability to carry out its exempt purposes within the meaning of Section 4944 of the Code. The Foundation will not engage in speculative, highly leveraged, or unduly risky investments. The Foundation will not invest in any asset or strategy that could reasonably be expected to put the Foundation's corpus at significant risk of loss.
PART VI — PRIVATE FOUNDATION STATUS AND COMPLIANCE
A. Classification Under Section 509(a)
The Caldwell Family Foundation expects to be classified as a private foundation under Section 509(a) of the Code. The Foundation does not expect to receive a sufficient proportion of its support from the general public to qualify as a public charity under Section 509(a)(1) (read in conjunction with Section 170(b)(1)(A)) or Section 509(a)(2) of the Code. The Foundation's funding will come primarily, if not exclusively, from a limited number of substantial contributors — specifically, the Foundation's founders, Jonathan R. Caldwell and Eleanor V. Caldwell — rather than from the general public.
The Foundation is not a supporting organization under Section 509(a)(3), as it is not organized or operated to support one or more specified public charities and does not meet the organizational or operational tests applicable to supporting organizations.
Accordingly, the Foundation requests classification as a private foundation and acknowledges its obligation to comply with all applicable excise tax provisions of Chapter 42 of the Code, as described below.