{"id":15,"date":"2017-04-11T22:27:42","date_gmt":"2017-04-11T22:27:42","guid":{"rendered":"http:\/\/digitaltransactions.club\/nvcausa\/?page_id=15"},"modified":"2020-12-29T22:55:16","modified_gmt":"2020-12-29T22:55:16","slug":"private-foundations","status":"publish","type":"page","link":"https:\/\/nvcausa.com\/products\/private-foundations\/","title":{"rendered":"Private Foundations"},"content":{"rendered":"\r\n\r\n\t
<\/a>Tax exempt organizations fall into two broad categories, Private Foundations and Public Charities. In either case, a tax exempt organization is a permanent fund established and maintained by contributions for charitable, educational, religious, research, or other benevolent purposes. See the list of Approved Charitable Organizations.<\/p>\r\n Every organization that qualifies for tax exemption as an organization described in section 501(c)(3) of the Internal Revenue Code is a private foundation unless it falls into one of the categories specifically excluding it from the definition of private foundation. In general, purposes having humanitarian and\/or charitable causes may qualify your organization as tax exempt under the Internal Revenue Code.<\/p>\r\n In order to choose the type of charitable organization that best suits your specific circumstances you need to understand how your organization intends to operate on a day-to-day basis, where your financial support is derived and how you intend to provide funding or services to other non-profit organizations and the public.<\/p>\r\n A private foundation is a non-profit entity that is controlled by and receives most of its funding from a single individual, family or business. It is organized exclusively for charitable, educational, religious, scientific and literary purposes under Section 501(c)(3) of the Internal Revenue Code.<\/p>\r\n Public charities are generally, a large class of organizations excluded under IRC 509(a)(1) and all organizations excluded under IRC 509(a)(2) depend upon a support test. A support test is used to assure a minimum percentage of broad-based public support in the organization’s total support pattern.<\/p>\r\n\r\n An organization is considered as typically meeting the One-Third Support Test for its current tax year and the next tax year if the organization met the One-Third Support Test on a cumulative basis for the previous 4 tax years before the current tax year. For new organizations, there is a special computation period.<\/p>\r\n\r\n If an organization fails to meet the One-Third Support Test, it may still be treated as a publicly-supported organization if it typically receives a substantial part of its support from direct or indirect contributions from the general public, governmental units or a combination thereof.<\/p>\r\n An organization typically meets the requirements of the Facts and Circumstances Test for its current year and the next tax year if, for the 4 previous tax years before the current tax year, the organization meets the Ten-Percent-of-Support Requirement and the Attraction of Public Support Requirement on an cumulative basis and satisfies a sufficient combination of the Public Support Factors. For new organizations, there is a special computation period.<\/p>\r\n <\/a>There are many issues to take into consideration when choosing between Private and Public organization types. The sections below discuss both types of organizations.<\/p>\r\n Private foundations are required to distribute at least 5% of the previous year’s average net assets for charitable purposes. This amount can include certain administrative expenses incurred by the foundation.<\/p>\r\n Foundations can conduct their charitable program as long as its program meets the non-profit charitable requirements. A foundation may directly conduct its own program and treat its related expenses such as, supplies, salary and rent. This arrangement is effectively the same as a grant to a public charity.<\/p>\r\n Self-dealing is situation where a position within a foundation is used for personal gain. People within a Foundation are considered “disqualified persons” and cannot transact with the foundation other than to make donations to it, or under limited circumstances, receive fair market value compensation for personal services.<\/p>\r\n Contributions to a private foundation may be used for charitable purposes and certain administrative expenses. Allowed distributions from the foundation include grants to public charities, administrative expenses and equipment used to accomplish the foundation’s charitable purpose, direct charitable activities and program-related investments. Investment management fees, custodial fees and salaries or board meeting expenses to oversee investments do not count toward the foundation’s minimum distribution requirement.<\/p>\r\n Typically, donations to a private foundation are tax deductible up to 30% of adjusted gross income for cash, and up to 20% for appreciated securities, with a five-year carry forward. Other types of assets, including real estate, can be donated to the foundation, but are subject to limitations. To avoid self-dealing penalties, ensure that property is not donated to the foundation by a disqualified person.<\/p>\r\n Private foundations typically perform their philanthropy by making grants to recognized public charities. This includes religious, educational, scientific and cultural institutions; poverty relief agencies; or any other organization qualifying as a 501(c)(3) charity. Federal, state and local governments are treated as the equivalent of a public charity if the donated funds are used strictly for charitable purposes. Private foundations also can provide scholarships and make grants directly to individuals for hardship, emergency assistance and medical distress providing they meet certain criteria<\/p>\r\n\r\n .<\/p>\r\n An organization must be organized and operated in a manner to attract new and additional public or governmental support on a continuous basis. In most cases public charities have a fund-raising committee that structures the internal and external efforts to solicit donations for the organization.<\/p>\r\n An organization meets this requirement if it maintains a continuous and bona fide program for solicitation of funds from the general public, community, or membership group involved, or if it carries on activities designed to attract support from governmental units or other charitable organizations described in IRC 509(a)(1).<\/p>\r\n\r\n A private foundation establishes a legacy of giving and humanitarian care that can carry the family name and supports causes important to you. This structure promotes charitable activities into the future.<\/p>\r\n\r\n Private foundations provide the greatest control of any planned philanthropic mechanism. You decide which charities are supported and how the assets are invested. There is a wide array of the types of assets you can donate to the foundation.<\/p>\r\n\r\n A private foundation enables you to involve your family in humanitarian work and to pass core values on to future generations.<\/p>\r\n\r\n You can take an immediate tax deduction for contributed assets, even if the foundation does not make charitable grants until a later date. You are also able to remove taxable assets from your estate, without incurring capital gains taxes.<\/p>\r\n\r\n You maintain full granting control for the foundation decisions made. You have greater flexibility on the types of grant making by the foundation, which includes grants to individuals, scholarships and international grant making.<\/p>\r\n Public charities are exempt from paying state and federal income taxes on most activities associated with the Charity’s mission.<\/p>\r\n\r\n Public charities are structured to solicit for funds to support the humanitarian purposes that they publicly support. Fund-raising from public and private sources is a core requirement and provides a tax deduction to persons and businesses donating to the charity.<\/p>\r\n\r\n As a function of the formation of the entity which contains the charity operation officers, board members and trustees are provided indemnification to provide them with personal liability protection. As such, these officers usually cannot be held personally liable as long as they are acting lawfully.<\/p>\r\n\r\n By providing necessary services to the charity officers can receive usual and customary salaries based upon the work they provide to the charity.<\/p>\r\n <\/a>The tax compliance issues for Private Foundations and Public Charities are very similar and in general are provided in part in the sections below. However, the intricacies of the issues are very complex and advice from an experienced charitable organization CPA and\/or legal counsel should be obtained to ensure your charity’s regulatory compliance.<\/p>\r\n\r\n\r\n Internal Revenue Code Section 6104(d) requires charitable entities to retain a copy of its tax-exempt determination letter, Form 1023, with all attachments, and any related correspondence with the IRS in its permanent records. The charity must make the foregoing documents available for inspection at its principal office for anyone requesting to view the documents.<\/p>\r\n\r\n Public charities must keep detailed records of each contribution and payment it receives, as well as all other income, to ensure it has the information required to demonstrate its publicly supported organization status.<\/p>\r\n\r\n Public charities must file IRS Form 990 or 990-EZ, including Schedule A, for each year in which its average annual gross receipts are at least $25,000. The average annual gross receipts are calculated on the basis of a three-year rolling average, taking into account the current year and the two preceding years.<\/p>\r\n Form 990-EZ may be filed for any year in which the charity’s gross receipts are less than $100,000 and its total assets at the end of the year are less than $250,000. Otherwise, the organization must file Form 990. If a public charity is in its start-up year, it must file Form 990 or 990-EZ only if its gross receipts in its initial year are at least $37,500. For the second year, it must file Form 990 or 990-EZ only if its average annual gross receipts (for the first two years) are at least $30,000.<\/p>\r\n For any year in which a public charity is not required to file Form 990 or 990-EZ, it must file the Form 990-N, which is an electronic notice. Regardless of which tax return it is required to file, it must be filed by May 15th of each year. An extension of time to file may be requested by filing Form 2758 no later than May 15th.<\/p>\r\n Each return filed by a public charity must be made available for public inspection for three years after the filing date under the same terms as the determination letter and application for exemption. Each Form 990 or 990-EZ subject to public inspection is also subject to the requirement that copies be provided when requested.<\/p>\r\n\r\n The internal revenue code contains several substantiation requirements with respect to providing receipts for charitable contributions. The most common of these apply to gifts of at least $250, and to “quid pro quo contributions” of at least $75. Additional requirements apply with respect to non-cash gifts of property whose value is at least $500.<\/p>\r\n\r\n\r\n For more information about our services and prices, please contact us so we can discuss your specific needs.<\/p>\r\n\t\t\t\r\n\t\t\t\t\t\t\tMORE INFORMATION\r\n\t\t\t\t\t<\/a>\r\n Inner Page Heading Information regarding Private Foundations and Public Charities is provided in the following sub-sections: Description Features Choosing to implement a Private or Public Non-Profit Organization Typical Uses Tax Compliance Pricing DESCRIPTION Tax exempt organizations fall into two broad categories, Private Foundations and Public Charities. In either case, a tax exempt organization is a …<\/p>\nFEATURES<\/h3>\r\n\r\n
PRIVATE FOUNDATIONS<\/h4>\r\n
PUBLIC CHARITIES<\/h4>\r\n
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ONE-THIRD SUPPORT TEST<\/h4>\r\n
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FACTS AND CIRCUMSTANCES TEST<\/h4>\r\n
PUBLIC SUPPORT CONSIDERATIONS<\/h4>\r\n
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– When an organization generally provides facilities or services directly for the general public’s benefit on a continuing basis is evidence that the organization is publicly supported.<\/ul>\r\n<\/li>\r\n<\/ul>\r\n
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Examples:<\/ul>\r\n<\/li>\r\n<\/ul>\r\n
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CHOOSING TO IMPLEMENT A PRIVATE OR PUBLIC NON-PROFIT ORGANIZATION<\/h3>\r\n
PRIVATE FOUNDATION<\/h4>\r\n
TAX DEDUCTIONS FOR DONATIONS TO THE PRIVATE FOUNDATION<\/h4>\r\n
GRANTS FROM THE PRIVATE FOUNDATION<\/h4>\r\n
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PUBLIC CHARITY<\/h4>\r\n\r\n
TYPICAL USES<\/h3>\r\n\r\n
PRIVATE FOUNDATIONS<\/h4>\r\n\r\n
PUBLIC CHARITIES<\/h4>\r\n\r\n
TAX COMPLIANCE<\/h3>\r\n
PRICING<\/h3>\r\n
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