Most tax-exempt organizations that end their operations, either through shutting down, transferring their assets or merging with another tax-exempt organization, must inform the IRS about the details of the action.
Filing the final annual return
For the tax year in which your foundation is fully liquidated, dissolved, or terminated, you must file a final Form 990-PF, Return of Private Foundation. You should check the Final Return box in the header area on page 1 of the return, answer "Yes" to question 5 in Part VII-A whether the foundation had a liquidation, termination, dissolution or substantial contraction during the year, and provide the information set forth in General Instruction T of the Form 990-PF instructions. This information includes the following:
- A statement attached to the return explaining the termination,
- A certified copy of any liquidation plan, resolution, etc., and all amendments or supplements that were not previously filed,
- A list of the names and addresses of all recipients of assets, and
- An explanation of the nature and fair market value of assets distributed to each recipient.
You also must consider the special rules that apply to termination of private foundation status.
When the final return is due
In case of a complete liquidation, dissolution or termination, file the Form 990-PF by the 15th day of the 5th month following complete liquidation, dissolution or termination. For example, a foundation that has a calendar year tax period and terminates at the end of the calendar year must file the final return by May 15th of the year after the year in which the termination occurs. If the same foundation terminates on August 31, it must file the return on or before the 15th day of the fifth month (i.e., 4 months and 15 days) from the date on which the termination occurs.
- Publication 4779, Facts About Terminating or Merging Your Exempt Organization
- Terminating or Merging an Exempt Organization
- Form 990-PF, Return of Private Foundation