{"id":23029,"date":"2024-11-01T23:00:00","date_gmt":"2024-11-02T06:00:00","guid":{"rendered":"http:\/\/localhost:10053\/what-is-a-private-foundation\/"},"modified":"2025-06-30T14:56:01","modified_gmt":"2025-06-30T21:56:01","slug":"what-is-a-private-foundation","status":"publish","type":"post","link":"https:\/\/www.insidephilanthropy.com\/explainers\/what-is-a-private-foundation","title":{"rendered":"What is a Private Foundation?"},"content":{"rendered":"\n<div style=\"margin-bottom:2%\" class=\"wp-block-genesis-blocks-gb-container explainer-heading gb-block-container\"><div class=\"gb-container-inside\"><div class=\"gb-container-content\">\n<div class=\"wp-block-genesis-blocks-gb-columns gb-layout-columns-3 gb-3-col-equal\"><div class=\"gb-layout-column-wrap gb-block-layout-column-gap-2 gb-is-responsive-column\">\n<div class=\"wp-block-genesis-blocks-gb-column gb-block-layout-column gb-is-vertically-aligned-top\"><div class=\"gb-block-layout-column-inner\">\n<figure class=\"wp-block-image size-full is-resized\"><img loading=\"lazy\" decoding=\"async\" width=\"500\" height=\"400\" src=\"https:\/\/www.insidephilanthropy.com\/wp-content\/uploads\/2024\/03\/learning-center-icon-new.png\" alt=\"\" class=\"wp-image-23311\" style=\"width:150px\" srcset=\"https:\/\/www.insidephilanthropy.com\/wp-content\/uploads\/2024\/03\/learning-center-icon-new.png 500w, https:\/\/www.insidephilanthropy.com\/wp-content\/uploads\/2024\/03\/learning-center-icon-new-300x240.png 300w\" sizes=\"auto, (max-width: 500px) 100vw, 500px\" \/><\/figure>\n<\/div><\/div>\n\n\n\n<div class=\"wp-block-genesis-blocks-gb-column gb-block-layout-column gb-is-vertically-aligned-top\"><div class=\"gb-block-layout-column-inner\"><div class=\"wp-block-image\">\n<figure class=\"aligncenter size-full is-resized\"><img loading=\"lazy\" decoding=\"async\" width=\"750\" height=\"381\" src=\"https:\/\/www.insidephilanthropy.com\/wp-content\/uploads\/2024\/03\/explainer-logo-for-detail-page.png\" alt=\"\" class=\"wp-image-23078\" style=\"width:300px\" srcset=\"https:\/\/www.insidephilanthropy.com\/wp-content\/uploads\/2024\/03\/explainer-logo-for-detail-page.png 750w, https:\/\/www.insidephilanthropy.com\/wp-content\/uploads\/2024\/03\/explainer-logo-for-detail-page-300x152.png 300w\" sizes=\"auto, (max-width: 750px) 100vw, 750px\" \/><\/figure><\/div><\/div><\/div>\n\n\n\n<div class=\"wp-block-genesis-blocks-gb-column gb-block-layout-column gb-is-vertically-aligned-top\"><div class=\"gb-block-layout-column-inner\" style=\"text-align:center\">\n<p><\/p>\n<\/div><\/div>\n<\/div><\/div>\n<\/div><\/div><\/div>\n\n\n\n<div class=\"wp-block-genesis-blocks-gb-container gb-block-container\"><div class=\"gb-container-inside\"><div class=\"gb-container-content\">\n<p>A private foundation is mostly a&nbsp;grantmaking organization. Typically a donor (which might be an individual, family or corporation) establishes a private foundation to give money (and sometimes other resources) to nonprofits engaged in charitable activities. The donor or donors that give to a private foundation tend to have a large degree of control over how the money is spent.&nbsp;&nbsp;&nbsp;<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>A nongovernmental, nonprofit 501c3 organization that gives money.<\/li>\n\n\n\n<li>Usually funded by a single individual, family or corporation.<\/li>\n\n\n\n<li>Typically managed by a board of trustees that makes grant decisions.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<\/li>\n\n\n\n<li>Required to pay out at least 5% of the value of its assets every year.<\/li>\n\n\n\n<li>Exempt from federal income tax.<\/li>\n<\/ul>\n\n\n\n<p>A private foundation has to pay out at least 5% of the fair market value of its assets every year. This 5% includes both grants and the foundation\u2019s operating expenses. Some foundations choose to give out more than 5%, but at least 5% is required. A private foundation can be set up to exist in perpetuity, or to spend all its money by a certain date.&nbsp;&nbsp;&nbsp;<\/p>\n\n\n\n<p>Most private foundations are managed by a board of trustees, which makes final grant decisions. Many private foundations\u2014especially the larger ones\u2014are staffed by philanthropic professionals and people with expertise in the sector\/s the foundation aims to support. These staff members handle foundation operations and make grant recommendations to the board.&nbsp;&nbsp;&nbsp;<\/p>\n\n\n\n<p>Private foundations do not solicit funds from the public. A person, family or corporation starts a foundation by making a tax-deductible contribution, which becomes the foundation\u2019s <a href=\"https:\/\/www.insidephilanthropy.com\/explainers\/what-is-an-endowment\" target=\"_blank\" rel=\"noreferrer noopener\">endowment<\/a>\u2014basically, the pot of money. They can keep making tax-deductible contributions to the foundation as long as they like (subject to some IRS limits based on a percentage of income).&nbsp;<\/p>\n\n\n\n<p>The donor(s) can then establish the foundation\u2019s mission, choose a board of trustees, determine <a href=\"https:\/\/www.insidephilanthropy.com\/explainers\/what-is-impact-investing\" target=\"_blank\" rel=\"noreferrer noopener\">how the endowment will be invested,<\/a> and decide how funds will be given away. While there are some restrictions on these choices, the donor or donors have a lot of decision-making power. That is, if they want it. Some donors set up foundations with the clear intention of shaping the foundation\u2019s mission, board, giving, and impact, and some choose a more hands-off approach. Some of the more progressive among them choose to put <a href=\"https:\/\/www.insidephilanthropy.com\/explainers\/debate-who-should-decide-what-gets-funded\" target=\"_blank\" rel=\"noreferrer noopener\">decision-making power into others\u2019 hands<\/a>, for example, the hands of people directly impacted by the issues the foundation aims to address. But these remain in the minority.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>What is the difference between a private foundation and a public charity?<\/strong><\/h2>\n\n\n\n<p>The major difference between the two centers on how they&#8217;re funded. Private foundations do not solicit funds from the public, while public charities do so in order support grantmaking initiatives. According to the <a href=\"https:\/\/www.irs.gov\/charities-non-profits\/eo-operational-requirements-private-foundations-and-public-charities\" target=\"_blank\" rel=\"noreferrer noopener\">IRS<\/a>, any organization that falls under Section 501c3 of IRS code as tax-exempt is considered private unless it may be categorized differently. Private foundations are exempt from federal income tax, though they are subject to small (1\u20132%) excise taxes on investment income. Private foundations are required to disclose all grantees and grant amounts in a yearly 990-PF form. Since most foundations don\u2019t have websites, those forms are often the only way to learn what these institutions are doing.\u00a0<\/p>\n\n\n\n<p>Typically, a public charity receives substantial support in the form of grants or contributions from governmental units, private foundations, the public, as well as other public charities. Public charities also have a diversified board of directors. Public charities can also file for different versions of Form 990 depending on how much annual revenue has been generated. In addition to receiving money from the public, public charities can also accept funds from private foundations. <\/p>\n\n\n\n<p>In contrast, in a private foundation, a person, family or corporation starts a foundation by making a tax-deductible contribution, which becomes the foundation\u2019s <a href=\"https:\/\/www.insidephilanthropy.com\/explainers\/what-is-an-endowment\">endowment<\/a>\u2014or pot of money. They can keep making tax-deductible contributions to the foundation as long as they like (subject to some IRS limits based on a percentage of income).&nbsp;Private foundations sometimes support public charities. <\/p>\n\n\n\n<p>The donor(s) of a private foundation establish the foundation\u2019s mission, choose a board of trustees, determine how the endowment will be invested, and decide how funds will be given away. While there are some restrictions on these choices, the donor or donors have a lot of decision-making power. That is, if they want it. Some donors set up foundations with the clear intention of shaping the foundation\u2019s mission, board, giving, and impact, and some choose a more hands-off approach. Some of the more progressive among them choose to put decision-making power into others\u2019 hands, for example, the hands of people directly impacted by the issues the foundation aims to address. But these remain in the minority.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>What are the different types of private foundations?<\/strong><\/h2>\n\n\n\n<p>According to the <a href=\"https:\/\/www.irs.gov\/charities-non-profits\/eo-operational-requirements-private-foundations-and-public-charities\" target=\"_blank\" rel=\"noreferrer noopener\">IRS<\/a>, a private foundation, which is often controlled by a family or smaller group of individuals, derives funds from fewer sources, as well as from investment income. That said, the term \u201cprivate foundation\u201d actually applies to many kinds of organizations.\u00a0Private foundations can give to 501c3 nonprofits working on pretty much any issue, anywhere.\u00a0While there are many different <a href=\"https:\/\/www.irs.gov\/charities-non-profits\/private-foundations\/types-of-foundations#:~:text=In%20general%2C%20a%20private%20foundation,apply%20to%20all%20private%20foundations.\">types of foundations<\/a>, private foundations can refer to: <strong>legacy or &#8220;independent&#8221; foundations, family foundations, corporate foundations <\/strong>or<strong> artist-endowed private foundations.<\/strong><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>There are the large <strong>legacy institutions<\/strong> like the Ford and Rockefeller Foundations \u2014 generations-old organizations with endowments in the billions, large staffs and highly professionalized grantmaking operations. These are also known as \u201c<strong>independent foundations<\/strong>,\u201d as they are not governed by an individual benefactor or the benefactor\u2019s family. There are also smaller independent foundations that may have a very low public profile, minimal staff, or no staff at all.\u00a0<\/li>\n\n\n\n<li>Some more recently established private foundations are essentially giving vehicles for a living donor or couple. This includes multi-billion-dollar foundations like the Gates Foundation or Bloomberg Philanthropies, as well as much smaller entities with a living donor or couple intent on giving while living. Closely related are <strong>family foundations,<\/strong> where the original donor is no longer living or involved in charitable work, but their children or other family members are, as is the case with the Conrad N. Hilton Foundation, Surdna Foundation, and many others.&nbsp;&nbsp;<\/li>\n\n\n\n<li>There are also private <a href=\"https:\/\/www.insidephilanthropy.com\/explainers\/what-is-a-corporate-foundation\">corporate foundations<\/a> established by corporations as a way to give back, often in issue areas related to their business. <\/li>\n\n\n\n<li>And there is a growing number of artist-endowed private foundations funded by the sizable estates of individual artists\u2014for instance, the Louise Bourgeois, Mike Kelley, and Joan Mitchell Foundations\u2014which are becoming important in the field of <a href=\"https:\/\/www.insidephilanthropy.com\/find-a-grant\/arts-culture-grants\">arts philanthropy.<\/a>&nbsp;<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>No legal definition of a foundation, but there are tax classifications<\/strong><\/h2>\n\n\n\n<p>There is no legal definition of a \u201cfoundation,\u201d but there are some relevant U.S. tax classifications. All 501c3s are considered \u201cprivate foundations\u201d by the <a href=\"https:\/\/www.irs.gov\/charities-non-profits\/charitable-organizations\/private-foundations\">IRS<\/a> unless they qualify as public charities by proving that at least one-third of contributions <em>to<\/em> the foundation are given by donors who give less than 2% of the organization\u2019s overall funding. So a private foundation is one with a single or a few funders, and where control of the foundation is also held among a few, while a public charity is funded by many funders.\u00a0\u00a0\u00a0<\/p>\n\n\n\n<p>Private foundations are exempt from federal income tax, though they are subject to small (1\u20132%) excise taxes on investment income. Private foundations are required to disclose all grantees and grant amounts in a yearly 990-PF form. Since most foundations don\u2019t have websites, those forms are often the only way to learn what these institutions are doing.&nbsp;<\/p>\n\n\n\n<p>Moreover, there\u2019s an entity called a <strong>private operating foundation<\/strong>, which engages in charitable programs or direct services itself. This text is about <strong><em>non-operating<\/em> private foundations<\/strong>, whose primary activity is grantmaking.<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<h2 class=\"wp-block-heading\">You might also want to check out:<\/h2>\n\n\n\n<p><a href=\"https:\/\/www.insidephilanthropy.com\/explainers\/what-is-a-community-foundation\">What is a community foundation?<\/a><\/p>\n\n\n\n<p><a href=\"https:\/\/www.insidephilanthropy.com\/explainers\/what-is-a-corporate-foundation\">What is a corporate foundation?<\/a><\/p>\n\n\n\n<p><a href=\"https:\/\/www.insidephilanthropy.com\/explainers\/what-is-an-endowment\">What is an endowment?<\/a><\/p>\n\n\n\n<p><a href=\"https:\/\/www.insidephilanthropy.com\/explainers\/how-do-foundations-make-grantmaking-decisions\">How do foundations make grantmaking decisions?<\/a><\/p>\n<\/div><\/div><\/div>\n","protected":false},"excerpt":{"rendered":"<p class=\"\">A private foundation is mostly a grantmaking organization. Typically a donor (which might be an individual, family or corporation) establishes a private foundation to give money (and sometimes other resources) to nonprofits engaged in charitable activities. The donor or donors that give to a private foundation tend to have a large degree of control over how the money is spent.<\/p>\n","protected":false},"author":470,"featured_media":131,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_genesis_hide_title":false,"_genesis_hide_breadcrumbs":false,"_genesis_hide_singular_image":true,"_genesis_hide_footer_widgets":false,"_genesis_custom_body_class":"","_genesis_custom_post_class":"","_genesis_layout":"content-sidebar","footnotes":""},"categories":[26779],"tags":[26780],"ppma_author":[32648],"class_list":{"0":"post-23029","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-explainers","8":"tag-ip-explainer","9":"author-ipstaff","10":"entry"},"featured_image_src":null,"featured_image_src_square":null,"author_info":{"display_name":"IP Staff","author_link":"https:\/\/www.insidephilanthropy.com\/author\/ipstaff"},"authors":[{"term_id":32648,"user_id":470,"is_guest":0,"slug":"ipstaff","display_name":"IP Staff","avatar_url":"https:\/\/secure.gravatar.com\/avatar\/?s=96&d=mm&r=g","author_category":"","first_name":"IP Staff","writer-profile":"","last_name":"","user_url":"","job_title":"","linkedin":"","instagram":"","twitter":"","facebook":"","description":""}],"_links":{"self":[{"href":"https:\/\/www.insidephilanthropy.com\/wp-json\/wp\/v2\/posts\/23029","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.insidephilanthropy.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.insidephilanthropy.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.insidephilanthropy.com\/wp-json\/wp\/v2\/users\/470"}],"replies":[{"embeddable":true,"href":"https:\/\/www.insidephilanthropy.com\/wp-json\/wp\/v2\/comments?post=23029"}],"version-history":[{"count":6,"href":"https:\/\/www.insidephilanthropy.com\/wp-json\/wp\/v2\/posts\/23029\/revisions"}],"predecessor-version":[{"id":216242,"href":"https:\/\/www.insidephilanthropy.com\/wp-json\/wp\/v2\/posts\/23029\/revisions\/216242"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.insidephilanthropy.com\/wp-json\/wp\/v2\/posts\/131"}],"wp:attachment":[{"href":"https:\/\/www.insidephilanthropy.com\/wp-json\/wp\/v2\/media?parent=23029"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.insidephilanthropy.com\/wp-json\/wp\/v2\/categories?post=23029"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.insidephilanthropy.com\/wp-json\/wp\/v2\/tags?post=23029"},{"taxonomy":"author","embeddable":true,"href":"https:\/\/www.insidephilanthropy.com\/wp-json\/wp\/v2\/ppma_author?post=23029"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}