(1) The status of an organization as a private foundation will be terminated only if:
a. The organization notifies the IRS of its intent to accomplish such
termination, or
b. With respect to the organization there have been either willful repeated acts
(or failures to act), or a willful or flagrant act (or failure to act), giving rise to
tax liability under Chapter 42; and the IRS notifies the organization that it is
therefore liable for Section 507(c) taxes. See Treas. Reg. 1.507-1(a).
(2) Private foundation status exists independent of exempt status. Private
foundation status may exist where an organization described in Section
501(c)(3):
a. Has not yet applied for exemption,
b. Has had its exempt status revoked (taxable private foundation), or
c. Where it has applied for exemption under sections other than Section
501(c)(3).
(3) An organization cannot avoid private foundation status because its activities are
such that the organization could qualify under a section of the Internal Revenue
Code (IRC) other than Section 501(c)(3), where it no longer qualifies under
Section 501(c)(3). Additionally, if an organization, which is a private foundation,
ceases to be described in Section 501(c)(3), it will not lose its private foundation
status. It will become a taxable private foundation. A taxable private foundation
is still subject to Chapter 42 and must meet the requirements of Section 507 if it
wishes to terminate its private foundation status. See Section 509(b), Treas.
Reg. 1.509(b)-1.
(4) Rev. Proc. 2024-5, 2024-1 I.R.B. 262 (updated annually) discusses the process
an organization should use when terminating its private foundation status under
Section 507(b)(1)(B). This includes both the advance and final ruling requests.
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