What are the Two Types of Private Foundations?

A private foundation, is typically controlled by members of a family or by a small group of individuals, and derives much of its support from a small number of sources and from investment income. Because they are less open to public scrutiny, private foundations are subject to various operating restrictions and to excise taxes for failure to comply with those restrictions.

Two Types of Private Foundations

Private Foundation: A private foundation doesn’t conduct its own operations. Instead, it gives money to other organizations so that they can do the work. Private foundations are often funded privately, typically by a business, family, or individual. Most Grantors who make grant donations are generally operating as Private Foundations.

Private Operating Foundation: This is a private foundation that conducts its own operations, like a public charity. However, it is still financed privately.

 A private foundation, on the other hand, is typically controlled by members of a family or by a small group of individuals, and derives much of its support from a small number of sources and from investment income. Because they are less open to public scrutiny, private foundations are subject to various operating restrictions and to excise taxes for failure to comply with those restrictions.

Under the tax law, a section 501(c)(3) organization is presumed to be a private foundation unless it requests, and qualifies for, a ruling or determination as a public charity.  Organizations that qualify for public charity status include churches, schools, hospitals, medical research organizations, publicly-supported organizations (i.e., organizations that receive a specified portion of their total support from public sources), and certain supporting organizations.

Source: Learn more at: https://www.irs.gov/charities-non-profits/eo-operational-requirements-private-foundations-and-public-charities