Private foundation

A private foundation is a charitable organization that, while serving a good cause, might not qualify as a public charity by government standards.[1] The Bill & Melinda Gates Foundation is the largest private foundation in the U.S. with over $38 billion in assets.[2] Most private foundations are much smaller. Approximately two-thirds of the more than 84,000 foundations which file with the IRS, in 2008, have less than $1 million in assets, and 93% have less than $10 million in assets.[2] In aggregate, private foundations in the U.S. control over $628 billion in assets[2] and made more than $44 billion in charitable contributions in 2007.[3]

Unlike a charitable foundation, a private foundation does not generally solicit funds from the public. And a private foundation does not have the legal requirements and reporting responsibilities of a registered, non-profit or charitable foundation. Not all foundations engage in philanthropy: some private foundations are used for estate planning purposes.

Chart of a foundation
Chart of a foundation


One of the characteristics of the legal entities existing under the status of "Foundations" is a wide diversity of structures and purposes. Nevertheless, there are some common structural elements that are the first observed under legal scrutiny or classification.

  • Legal requirements followed for establishment
  • Purpose of the foundation
  • Economic activity
  • Supervision and management provisions
  • Accountability and auditing provisions
  • Provisions for the amendment of the statutes or articles of incorporation
  • Provisions for the dissolution of the entity
  • Tax status of corporate and private donors
  • Tax status of the foundation

Some of the above must be, in most jurisdictions, expressed in the document of establishment. Others may be provided by the supervising authority at each particular jurisdiction.

Common law

The following foundations are set up under common law legal systems:


Foundations were first introduced in The Bahamas in December 2004 following the Foundations Act. [1]

United States

A private foundation, in the United States, is a charitable organization described in the Internal Revenue Code by section 509.[4] A private foundation is necessarily a 501(c)(3) exempt organization (or a former such entity). It is defined by a negative definition: by what it is not. A private foundation is not a public charity, as described in section 170(b)(1)(A) (i) through (vi). Neither is it a section 509(a)(2) organization, nor a supporting organization.[5] Private foundations are subject to 2% excise taxes found in section 4940 through 4945 of the internal revenue code.[6] Once a charity becomes a private foundation, it retains that status unless it follows the difficult termination rules of section 507.

Every organization that qualifies for tax exemption as an organization described in section 501(c)(3) is a private foundation unless it falls into one of the categories specifically excluded from the definition of that term (referred to in section 509(a)). In addition, certain nonexempt charitable trusts are also treated as private foundations. Organizations that fall into the excluded categories are institutions such as hospitals or universities and those that generally have broad public support or actively function in a supporting relationship to such organizations.[7]

In the United States, there are several restrictions and requirements on private foundations, including:

  1. restrictions on self-dealing between private foundations and their substantial contributors and other disqualified persons;
  2. requirements that the foundation annually distribute income for charitable purposes;
  3. limits on their holdings in private businesses;
  4. provisions that investments must not jeopardize the carrying out of exempt purposes; and
  5. provisions to assure that expenditures further exempt purposes.Violations of these provisions give rise to taxes and penalties against the private foundation and, in some cases, its managers, its substantial contributors, and certain related persons.[7]

Violations of these provisions give rise to taxes and penalties against the private foundation and, in some cases, its managers, its substantial contributors, and certain related persons.[7]

Civil law

The following foundations are set up under civil law legal systems:


The Austrian Private Foundation (Privatstiftung) was last reformed under the Private Foundation Act in September 1993.


In Canada the Canada Revenue Agency is a branch of the Canadian government which regulates all foundations. Under Canadian law, since 1967, a private foundation is controlled by a single donor or family through a board that is made up of a majority (more than 50%) of directors at non-arm’s length. It is a legally registered charity with the Canada Revenue Agency. A public foundation is governed by a board that is made up of a majority of directors at arm’s length. A private foundation is not allowed to engage in any business activity, but it can operate its own charitable program.

Canada Revenue Agency designates the application as a “charitable organization,” a “public foundation,” or a “private foundation,” depending on its structure, its source of funding and its operation. The Income Tax Act requirements are different, depending on the type of charity.(Canada Income Tax Act, R.S.C. 1985 (5th supp.) c. 1, para. 149.1(4)(a))


The Liechtenstein Family Foundation (Stiftung) was first introduced in 1926.


The Mauritius Foundation was introduced following 'The Foundations Act' of 2012.


A foundation in the Netherlands (Stichting) is a legal person created through a legal act. This act is usually either a notarised deed (or a will) that contains the articles of the foundation which must include the first appointed board.[8]

Netherlands Antilles

Foundation legislation was last reformed in 1998, giving rise to the Netherlands Antilles Private Foundation (Stichting Particulier Fonds).


The Nevis Multiform Foundation was introduced in 2005.


The Panama Private Interest Foundation was introduced following the Law 25, June 12, 1995. [9]

Saint Kitts

The Saint Kitts Foundation was introduced following the Foundation Act of 2003.


The Seychelles Foundation was introduced following the Foundation Act of 2009.


A private foundation in Sweden (Stiftelse) is formed by a letter of donation from a founder donating funds or assets to be administered for a specific purpose. A private foundation may have diverse purposes, including collective, familiar, or the purpose of passive administration of funds. Normally, the supervision of a private foundation is done by the county government where the foundation has its domicile, however, large foundations must be registered by the County Administrative Board (CAB), which must also supervise the administration of the foundation. The main legal instruments governing private foundations in Sweden are those that regulate foundations in general: the Foundation Act (1994:1220) and the Regulation for Foundations (1995:1280).

See also


  1. ^ Kagen, Julia. "Private Foundation". Investopedia. Retrieved 2018-12-19.
  2. ^ a b c National Center for Charitable Statistics
  3. ^ Foundation Center
  4. ^ 26 U.S.C. § 509
  5. ^ "IRS webpage, which defines private foundations". Archived from the original on 4 August 2012. Retrieved 4 May 2018.
  6. ^ "Excise taxes on private foundations". Archived from the original on 2 July 2012. Retrieved 4 May 2018.
  7. ^ a b c "Private Foundations | Internal Revenue Service". Retrieved 2018-12-19. This article incorporates text from this source, which is in the public domain.
  8. ^ "Archived copy". Archived from the original on 2015-04-25. Retrieved 2015-03-03.CS1 maint: Archived copy as title (link)
  9. ^ Asamblea Nacional de Panamá (12 Jun 1995). "Ley 25 de 1995 de Panama por la cual se regulan fundaciones de interes privadọ, promulgada en la Gaceta Oficial 22804 de 14 de junio de 1995" (PDF). Retrieved 21 May 2018.
501(c)(3) organization

A 501(c)(3) organization is a corporation, trust, unincorporated association, or other type of organization exempt from federal income tax under section 501(c)(3) of Title 26 of the United States Code. It is one of the 29 types of 501(c) nonprofit organizations in the US.

501(c)(3) tax-exemptions apply to entities that are organized and operated exclusively for religious, charitable, scientific, literary, or educational purposes, for testing for public safety, to foster national or international amateur sports competition, for the prevention of cruelty to children, women, or animals. 501(c)(3) exemption applies also for any non-incorporated community chest, fund, cooperating association or foundation organized and operated exclusively for those purposes. There are also supporting organizations—often referred to in shorthand form as "Friends of" organizations.26 U.S.C. § 170 provides a deduction for federal income tax purposes, for some donors who make charitable contributions to most types of 501(c)(3) organizations, among others. Regulations specify which such deductions must be verifiable to be allowed (e.g., receipts for donations of $250 or more).

Due to the tax deductions associated with donations, loss of 501(c)(3) status can be highly challenging if not fatal to a charity's continued operation, as many foundations and corporate matching funds do not grant funds to a charity without such status, and individual donors often do not donate to such a charity due to the unavailability of the deduction.

Andrew W. Mellon Foundation

The Andrew W. Mellon Foundation of New York City in the United States is a private foundation with five core areas of interest, and endowed with wealth accumulated by Andrew W. Mellon of the Mellon family of Pittsburgh, Pennsylvania. It is the product of the 1969 merger of the Avalon Foundation and the Old Dominion Foundation. These foundations were set up separately by Paul Mellon and Ailsa Mellon Bruce, the children of Andrew W. Mellon. It is housed in the expanded former offices of the Bollingen Foundation in New York City, another educational philanthropy supported by Paul Mellon. Elizabeth Alexander is the Foundation's president. Her predecessors have included Earl Lewis, Don Randel, William G. Bowen, John Edward Sawyer, and Nathan Pusey. In 2004, the Foundation was awarded the National Medal of Arts.

BI Norwegian Business School

BI Norwegian Business School (Nynorsk: Handelshøyskolen BI) is the largest business school in Norway and the second largest in all of Europe. BI has in total four campuses with the main one located in Oslo. The university has 845 employees consisting of an academic staff of 404 people and 441 administrative staff. In 2015, BI Norwegian Business School had 18,728 students. BI is the largest supplier of economic and administrative competence and skills in Norway with more than 200 000 graduates since 1983. BI Norwegian Business School is a private foundation and is accredited by NOKUT as a specialised university institution. BI organised its academic activities in nine separate research departments covering all of the disciplines that can be expected at a modern European business school.

Birmingham Independent School of Performing Arts

The Birmingham Independent School of Performing Arts (BISPA) was a private foundation school In Birmingham, England. The School was based at the Old Fire Station in Birmingham which was established in 1912. In 2004 the building was converted into BISPA.

Carol Roberts

Carol Antonia Roberts (born June 22, 1936) is a Florida politician of the Democratic Party. She is best known for her part in the 2000 Florida election recount, where she served on the Palm Beach County canvassing board.In 2002, she ran unsuccessfully for Florida's 22nd congressional district seat in the U.S. House of Representatives against Republican incumbent E. Clay Shaw, Jr., finishing with 38 percent of the vote.

She previously served as mayor and city commissioner of West Palm Beach, and as a county commissioner of Palm Beach County, Florida.

She is married to Dr. Hyman J. Roberts, by whom she has six children. For two years (1986–88) she was National President of ACTS, a private foundation assisting communities to Self Help. She served as ACTS' representative for famine relief in East Africa.

Carol and Hyman Roberts have been benefactors to several universities, museums, art galleries and charities. She has volunteered her time on the board of directors for numerous non-profit, educational and civil rights organizations.

Financial endowment

A financial endowment is a donation of money or property to a nonprofit organization which uses the resulting investment income for a specific purpose. Usually the endowment is structured so that the principal amount is kept intact, while the investment income is available for use, or part of the principal is released each year, which allows for their donation to have an impact over a longer period than if it were spent all at once. An endowment may come with stipulations regarding its usage.

The total value of an institution's investments is often referred to as the institution's endowment and is typically organized as a public charity, private foundation, or trust. Among the institutions that commonly manage endowments are academic institutions (e.g., colleges, universities, and private schools), cultural institutions (e.g., museums, libraries, and theaters), service organizations (e.g., hospitals, retirement homes, the Red Cross, the SPCA), and religious organizations (e.g., churches, synagogues, mosques).

Foundation (United States law)

A foundation in the United States is a type of charitable organization. However, the Internal Revenue Code distinguishes between private foundations (usually funded by an individual, family, or corporation) and public charities (community foundations and other nonprofit groups that raise money from the general public). Private foundations have more restrictions and fewer tax benefits than public charities like community foundations.

Frankfurter Rundschau

The Frankfurter Rundschau (FR) is a German daily newspaper, based in Frankfurt am Main. It is published every day but Sunday as a city, two regional and one nationwide issues and offers an online edition (see link below) as well as an e-paper. Local major competitors are the conservative-liberal Frankfurter Allgemeine Zeitung (FAZ), the local edition of the conservative tabloid Bild-Zeitung, the best-selling newspaper in Europe, and the smaller local conservative Frankfurter Neue Presse. The Rundschau's layout is modern and its editorial stance is social liberal. It holds that "independence, social justice and fairness" underlie its journalism.

Frankfurter Rundschau Druck and Verlagshaus GmbH filed for bankruptcy on 12 November 2012. Then the paper was acquired by Frankfurter Allgemeine Zeitung and Frankfurter Societät (publisher of the Frankfurter Neue Presse) in 2013, by taking over just 28 full-time journalists. The FR editorial board continues to be bound by the legacy of Karl Gerold and the commitment to a "left-liberal" political line, and continues to be integrated in the national and international editorial and correspondents network of the DuMont Mediengruppe, the former majority owners. The private foundation managing Karl Gerold's legacy still owns 10% of the shares. But all commercial activity of the paper, printing, selling advertisement and distribution is in the hands of the Frankfurer Societät. The FR printing enterprise was closed. The contracts for printing BILD-Zeitung and other papers went from the FR's printshop to the FAZ's Societätsdruckerei.

International Balkan University

International Balkan University (IBU) is a private, foundation-owned, not-for-profit university in the Republic of North Macedonia. It was founded in Skopje in 2006 by the Foundation for Education and Culture ÜSKÜP.

Private foundation (United States)

Until 1969, the term private foundation was not defined in the United States Internal Revenue Code. Since then, every U.S. 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. Private foundations in the United States are generally subject to a 1% or 2% excise tax on net investment income. According to the Foundation Center, a private foundation is a nongovernmental, nonprofit organization, which has a principal fund managed by its own trustees or directors. Hopkins (2013) listed four characteristics that make up a private foundation:

It is a charitable organization and thus subject to the rules applicable to charities generally;

Its financial support came from one source, usually an individual, family, or company;

Its annual expenditures are funded out of earnings from investment assets, rather than from an ongoing flow of contributions;

It makes grants to other organizations for charitable purposes, rather than to its own programs.

Wildlife Prairie Park

Wildlife Prairie Park, officially dedicated as Hazel & Bill Rutherford Wildlife Prairie Park, is located in Peoria County, Illinois, in central Illinois, about 10 miles (16 km) west of downtown Peoria. The park contains wildlife animals native to Illinois, in a natural environment.

The land was first obtained by the Forest Park Foundation in the late 1960s, and Wildlife Prairie Park first open to the public in September 1977, permanently opening in 1978. It was transferred from private foundation ownership to the Illinois Department of Natural Resources and renamed Wildlife Prairie State Park in autumn of 2001. In May 2013 the park was signed back over to private ownership, to be transferred to a group of community members who called themselves Friends of Wildlife Prairie Park. The land was officially regained in 2014. A motel, restaurant, playground, train, animals, safari bus, giant slide, banquet facilities, special holiday events and other attractions are also located on the grounds. Years before environmental protection was common practice in most places, many of the man-made features of the park were built manually and with recycled materials to minimize the impact to the environment.

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