Life Cycle of a Private Foundation - Private Letter Rulings


Associate Chief Counsel (Tax Exempt and Government Entities) will generally rule on whether a proposed change to an organization's purpose or activities would further an exempt purpose. Thus, if you are unsure about whether proposed changes would further an exempt purpose, you may want to request a private letter ruling. See Revenue Procedure 2023-1 (updated annually).

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))
  • Terminations of private foundation status under § 507(b)(1)(B)
  • 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-PFPDF, for a general discussion of accounting methods and periods. See also Code section 446(e).)
  • Status as an organization described in section 501(c)(3), 501(c)(9), or 501(c)(17) (Code section 508(a)

A foundation must also notify the IRS when it intends to terminate its private foundation status voluntarily under Code section 507(a)(1).

Additional information

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