Life Cycle of a Private Foundation - Private Letter Rulings
The IRS will rule on the tax consequence of proposed changes to a foundation's purposes or activities. Thus, if you are unsure about whether proposed changes are consistent with your status as a section 501(c)(3) organization, you may want to request a private letter ruling or determination letter. Revenue Procedure 2013-4 (or latest update) provides procedures for such requests.
In some areas, the law requires that an organization notify the Internal Revenue Service or receive an advance determination before undertaking a transaction resulting in certain tax consequences. Thus, a foundation must request a private letter ruling or determination with respect to the following issues:
- Advance approval of scholarship programs, and certain other grant-making procedures, of private foundations (Internal Revenue Code section 4945(g))
- Certain determinations regarding application of the neighborhood land rule (Code section 514(b)(3))
- Status as an exempt operating foundation (Code section 4940(d))
- Establishment of a set-aside (Code section 4942(g)(2))
- Extension of disposal period for certain excess business holdings (Code section 4943(c)(7))
- Advance approval of private foundation voter registration activities (Code section 4945(f))
- Certain changes in an organization's accounting methods and periods (see Publication 4221-PF, for a general discussion of accounting methods and periods)
A foundation must also notify the IRS when it intends to terminate its private foundation status voluntarily under Code section 507(a)(1).