B.1. Voluntary Section 507(a)(1) Terminations

(1) In order to terminate its private foundation status an organization must submit a

statement to the IRS of its intent to terminate its private foundation status under Section 507(a)(1). A statement of intent to voluntarily terminate private foundation status must set forth in detail the computation and amount of tax

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imposed under Section 507(c) – unless the organization requests abatement of such tax pursuant to Section 507(g):

a. Full payment of the tax must be made when the statement is filed, less any

amount that is the subject of an abatement request.

b. If a request for abatement is denied, the tax due must be paid in full upon

notification of the denial. See Treas. Reg. 1.507-1(b)(1).

(2) A Section 507(a)(1) termination does not relieve a private foundation, or any

disqualified person, of tax liability under Chapter 42 for acts or failures to act prior to termination or for any additional taxes imposed for failures to correct such acts or failures to act. See Treas. Reg. 1.507-1(b)(2).

(3) After a Section 507(a)(1) termination, an organization wishing to be treated as

described in 501(c)(3) must apply for recognition of exemption under Section 501(c)(3) in accordance with Section 508(a). See Treas. Reg. 1.507-1(b)(3).

(4) For purposes of the disallowance of charitable deductions under Section

508(d), the IRS will give public notice that it has received from a private foundation a notice of intent to terminate its status under Section 507(a)(1). See Treas. Reg. 1.507-1(b)(5).

(5) A transfer of assets described in Section 507(b)(2) to one or more other private

foundations (or one or more other private foundations and one or more Sections 509(a)(1), (a)(2), (a)(3), or (a)(4) organizations), will not be a voluntary termination under Section 507(a)(1) unless such private foundation voluntarily gives notice pursuant to Section 507(a)(1). See Treas. Regs.1.507-1(b)(6) and 1.507-3(c).

(6) Neither a transfer of all of the assets of a private foundation, nor a significant

disposition of its assets, will be deemed to result in a termination of the transferor’s private foundation status under Section 507(a)(1) unless the transferor elects to terminate pursuant to Section 507(a)(1), or unless Section 507(a)(2) is applicable. See Treas. Reg. 1.507-1(b)(7).

(7) If a transfer of all the assets of a private foundation or a significant disposition of

its assets (Treas. Reg. 1.507-3(c)(2)) results in Chapter 42 tax liability, or Chapter 42 tax liability was incurred prior to the transfer by the transferor, transferee liability may be applied against the transferee organization for payment of such liability. Any Chapter 42 tax liability incurred for failure to correct a past Chapter 42 tax liability will be deemed incurred on the date on which the act or failure to act giving rise to the initial tax liability occurred. See Treas. Reg. 1.507-1(b)(8).

(8) A private foundation which transfers all of its net assets must file the annual

information return required by Section 6033, the Form 990-PF, Return of Private Foundation or Section 4947(a)(1) Nonexempt Charitable Trust Treated as a Private Foundation, and the foundation managers are required to file the annual report of a private foundation required by Section 6056, Health Insurance Coverage Form, for the taxable year in which the transfer occurs.

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However, neither return is required for any taxable year following the taxable year in which the last of any such transfers occurred, if the organization has neither legal nor equitable title to any assets or engages in no activity during the subsequent years. See Treas. Reg. 1.507-1(b)(9).