In general, a private operating foundation is a private foundation that devotes most of its resources to the active conduct of its exempt activities.
A private foundation may qualify for treatment as a private operating foundation. These foundations generally are still subject to the tax on net investment income and to the other requirements and restrictions that generally apply to private foundation activity. However, operating foundations are not subject to the excise tax on failure to distribute income. Also, contributions to private operating foundations described in Internal Revenue Code section 4942(j)(3) are deductible by the donors to the extent of 50 percent of the donor’s adjusted gross income, whereas contributions to all other private foundations (except those discussed under Private Pass-through Foundation ) are generally limited to 30 percent of the donor’s adjusted gross income. In addition, a private operating foundation may receive qualifying distributions from a private foundation if the private foundation does not control it.