9. The Unique Alternative to the Big Four®
Basics of Section 501(c)(3) Status - Qualification
Organizational test
• Permissible
purposes
Operational Test
(and
no
more)
• “Exclusively” versus “Primarily”
• Private benefit and inurement
• Form of entity
• Political activities
• Purposes set forth in organizational
• Lobbying activities
document
• Dissolution clause
9
A private foundation is a nongovernmental, nonprofit organization having a principal fund managed by its own trustees or directors. Private foundations maintain or aid charitable, educational, religious, or other activities serving the public good, primarily through the making of grants to other nonprofit organizations. Every U.S. and foreign charity that qualifies under Section 501(c)(3) of the Internal Revenue Service Code as tax-exempt is a "private foundation" unless it demonstrates to the IRS that it falls into another category. Broadly speaking, organizations that are not private foundations are public charities as described in the Internal Revenue Service Code.Public charities generally derive their funding or support primarily from the general public, receiving grants from individuals, government, and private foundations. Although some public charities engage in grantmaking activities, most conduct direct service or other tax-exempt activities. A private foundation, on the other hand, usually derives its principal fund from a single source, such as an individual, family, or corporation, and more often than not is a grantmaker. A private foundation does not solicit funds from the public.