Private Operating Foundations

Operating foundations are private foundations that use the bulk of their income to provide charitable services or to run charitable programs of their own. They make few, if any, grants to outside organizations. To qualify as an operating foundation, specific rules, in addition to the applicable rules for private foundations, must be followed.

Below is everything on our site for private operating foundations. You can use the filtering options on the right to narrow these results.

This Document Retention and Destruction Policy of the Council on Foundations (the "Council") identifies the record retention responsibilities of staff, volunteers, members of the Board of Directors, and outsiders for maintaining and documenting the storage and destruction of the Council’s documents and records. You can use this as guide for your own policy.

Every organization exempt under Section 501(c)(3) of the Internal Revenue Code is required to disclose certain information to the public:

Tax-exempt organizations must make annual returns and exemption applications filed with the IRS available for public inspection and copying upon request. In addition, the IRS makes these documents available. These FAQS relate to the public disclosure and availability of documents filed by tax-exempt organizations with the IRS.

The Internal Revenue Code provides excise tax penalties that can be imposed by the Internal Revenue Service whenever unreasonable or excessive compensation is paid to high-level employees of charitable organizations.

The Council receives numerous inquiries each year about the amount of compensation paid to directors or trustees (members of the governing board) of foundations. Since 1969, board members of private foundations have been subject to excise tax penalties for receiving unreasonable compensation. In 1996, Congress passed the “intermediate sanction” rules that enable the Internal Revenue Service to apply similar penalties for excessive compensation paid by public charities.

Practice 1. The board (and investment committee and staff, if any) of a foundation should understand and fulfill their respective fiduciary responsibilities and duties under applicable law and the governing documents of the foundation and stay informed regarding any relevant changes in law, duties, or responsibilities.

Practice Tips:

The Council's Board of Directors released this guidance memorandum in March 2010 and strongly recommends that when reviewing and approving foundation investment policies and procedures practices, all foundations—private and public-consider these best practices in foundation investment management.

Things to do NOW – “An Ounce of Prevention...”

Grantmakers searching for more detailed information about the charitable status of their potential grantees may find the answers they need in the IRS’ Select Check tool.

This IRS online search tool allows the user to:

(1) search the IRS public charity list, known as IRS Publication 78, for data to determine if an organization is charitable,

(2) determine if an organization has filed a Form 990-N (required for smaller charities), or

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