Natalya Attestatova, CPA

Private Foundation vs. Public Charity

March 26th, 2010

All organizations qualified for the tax-exempt status are charities. But they must be further defined into either public charity OR private foundation.

Now, ALL 501(c)(3) organizations are private foundations, unless they come within any of these 4 categories:

1. “traditional public charities” – churches, hospitals, schools, etc.

2. “broad publicly supported organizations” – receive more than 1/3 of their support from gifts, grants, fees, and gross receipts from admission, sales of goods or services (but the income-generating activity must be related to the organization’s exempt purpose.)

3. “supporting organizations” – they have closely defined relationship with one or more public charities

4. “testing for public safety” organizations.

Why do we care? Private foundations must follow very distinct reporting and operational rules (no self-dealing, required 2% excise tax on net investment income, etc.). We will discuss this later.

Entry Filed under: Non-Profit Organizations