Definition of Exempt Operating Foundation


To qualify as an exempt operating foundation for a tax year, a private foundation must meet all the following requirements:

  1. It has been publicly supported for at least ten tax years or was a private operating foundation on January 1, 1983,
  2. Its governing body, at all times during the tax year, consists of individuals fewer than 25 percent of whom are disqualified individuals, and is broadly representative of the general public, and
  3. It has no officer who is a disqualified individual at any time during the tax year.

Determination letter required. A foundation want­ing recognition of exempt operating foundation status must obtain a determination letter from the Inter­nal Revenue Service determining that it has met the specific requirements of this special status. To claim exemption from the tax on net invest­ment income, the foundation should attach a copy of this determination letter to its annual returns, Forms 990-PF, for tax years for which the claim for exemption is made.

To obtain the determination letter, the foundation should submit a completed Form 8940, Request for Miscellaneous Determination and pay the required user fee. The current user fee amount can be found in Appendix A, Schedule of User Fees, of Revenue Procedure 2023-5, (updated annually). Supporting documents and materials with the ruling request must demonstrate that requirements (1) through (4), listed at the beginning of this discussion, are met. Specifically, for purposes of requirements (3) and (4), the foundation must list all its officers and members of its governing body for the current year and identify any that are disqualified individuals.