Information For...

For you and your family
Standard mileage and other information

Forms and Instructions

Individual Tax Return
Instructions for Form 1040
Request for Taxpayer Identification Number (TIN) and Certification
Request for Transcript of Tax Return


Employee's Withholding Allowance Certificate
Employer's Quarterly Federal Tax Return
Employers engaged in a trade or business who pay compensation
Installment Agreement Request

Popular For Tax Pros

Amend/Fix Return
Apply for Power of Attorney
Apply for an ITIN
Rules Governing Practice before IRS

Determination of compliance with operating foundation tests

Determining whether the income test and one of the three remaining tests are met depends on whether the tests are met in a foundation's normal and regular operation over a period of years, rather than on a given day during the year or on a year-by-year basis. A foundation may qualify as an operating foundation if it meets the income test and either the assets, endowment, or sup­port test for any three years during a four-year period (three-out-of-four year method), or based on a combination of all pertinent amounts of income or assets held, received, or distributed during the four-year period (four-year combination method). The four-year period consists of the tax year in question and the three years immediately preceding that year.  A foundation may not use one method for satisfying the income test and the other method for satisfying one of the other tests.

For example, if the income test is satisfied on the three-out-of-four-year basis, the foundation may not use the four-year combination method to satisfy one of the other tests.  However, that the founda­tion uses one method to satisfy the tests in a particular year will not prevent it from using the other method to satisfy the tests in a later year.  If a foundation fails to satisfy the income test and either the assets, endowment, or support test for a particular tax year under either the three-out-of-four-year method or the combination method, it will be treated as a nonoperating foundation for the tax year and for all later tax years until it satisfies the tests.


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