Life Cycle of a Private Foundation - Ongoing Compliance


In addition to annual return requirements, private foundations are required to file certain returns and reports and make disclosures.

Private Foundation Excise Taxes

Private foundations are subject to excise taxes on certain prohibited transactions, and must pay a tax on their net investment income. The prohibited transaction excise taxes include taxes on the following:

Jeopardizing Exemption

A private foundation will jeopardize its exemption if it ceases to be operated exclusively for exempt purposes. A foundation will be operated exclusively for exempt purposes only if it engages primarily in activities that accomplish the exempt purposes specified in section 501(c)(3). A foundation will not be so regarded if more than an insubstantial part of its activities does not further an exempt purpose and must not operate for the primary purpose of conducting a trade or business that is not related to its exempt purpose, such as a school's operation of a factory

Public Disclosure

Private foundations must allow for public inspection and copying of their exemption applications and annual returns. The IRS also makes certain documents available for public inspection and copying. For more information, see Public Disclosure.

Employment Taxes

Every employer, including an organization exempt from federal income tax, who pays wages to employees is responsible for withholding, depositing, paying, and reporting federal income tax, social security and Medicare (FICA) taxes, and federal unemployment tax (FUTA), unless that employer is specifically excepted by law from those requirements or if the taxes clearly do not apply. For more information, see Employment Taxes.

Charitable Contribution Reporting

The Internal Revenue Code applies substantiation requirements for donors, and disclosure requirements for charitable organizations, including private foundations, in connection with charitable contributions.

Help from the IRS

You can get help with questions about ongoing compliance requirements, including annual filings, through the IRS Exempt Organizations Division.

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