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Private operating foundation - income test

To qualify as an operating foun­dation, the organization must make qualifying distributions directly for the active conduct of its exempt activities equal to substantially all (at least 85 percent) of the lesser of its:

If a private foundation’s qualifying distribu­tions exceed its minimum investment return for the tax year, but are less than its adjusted net income, substantially all of the total qualified distributions must be made directly for the active conduct of the foundation’s exempt activities. However, if the foundation’s minimum invest­ment return is less than its adjusted net income and its qualified distributions equal or exceed the adjusted net income, only that part of the qualified distributions equal to substantially all of the foundation’s adjusted net income must be made directly for the active conduct of the foundation’s exempt activities.


Return to Life Cycle of a Private Foundation
Page Last Reviewed or Updated: 05-Nov-2013