Background/History

(1) Every organization that qualifies for tax exemption as an organization described

in Section 501(c)(3) is a private foundation unless it falls into one of the categories specifically excluded from the definition of that term, referred to in Section 509(a). In addition, certain nonexempt charitable trusts are also treated as private foundations. Even if an organization falls within one of the categories excluded from the definition of private foundation, it will be presumed to be a private foundation, with some exceptions, unless it gives timely notice to the IRS that it is not a private foundation. If an organization is required to file the notice, it generally must do so within 27 months from the end of the month in which it was organized. Generally, organizations use Form 1023, Application for Recognition of Exemption, for this purpose.

(2) Section 508(b) provides that an organization described in Section 501(c)(3)

must notify the IRS as provided by regulations that it is not a private foundation, or it will be presumed to be a private foundation. It does not specify a timeframe for notification. Revenue Ruling (Rev. Rul.) 73-504, 1973-2 C.B. 190 discusses an organization which failed to notify the IRS within the deadline in the Income Tax Regulations but was permitted to establish a public charity status.

(3) If a public charity no longer qualifies as a public charity under Section 509(a)(1),

(a)(2), (a)(3), or (a)(4), then it becomes a private foundation. An organization which is a private foundation on October 9, 1969, or becomes one on any subsequent date, can terminate that status only by one of the methods described in Section 507.

(4) If the private foundation status was erroneously determined, then the

organization can make a correction. An organization that erroneously determined that it was a private foundation (for example, by erroneously classifying an item or items in its calculation of public support) and wishes to correct the error can request a determination letter classifying it as a public charity by showing that it continuously met the public support tests during the relevant periods. See Revenue Procedure (Rev. Proc.) 2024-5, 2024-1 I.R.B. 262 (updated annually).

4