Primer For Operating A Private Foundation

The purpose of this memo is to provide a brief summary of the legal and tax aspects relating to the organization and administration of charitable New York not-for-profit corporations.

1. What Is A Private Foundation?

The term "private foundation" is a tax designation rather than a description of a type of legal entity. The Internal Revenue Code designates any tax exempt organization not called something else (e.g., a public charity, a school or a religious institution) as a private foundation. There are two kinds of private foundations. The usual plain vanilla kind whose principle activity is to make grants to other tax exempt organizations, and the private operating foundation which spends its money by running a charitable service (e.g., a clinic or research center). It is possible to change from a private foundation to a private operating foundation upon filing the appropriate application with the Internal Revenue Service. Private foundations are usually supported by family and