Organizations Qualifying as Distributees

(1) A foundation may terminate its private foundation status if it distributes its net

assets to one or more public charities. The distribution of net assets must be to one or more organizations described in Section 170(b)(1)(A)(i) - (vi) and (ix), in effect Section 509(a)(1) organizations. Section 509(a)(1) excludes these organizations from the definition of private foundations. Briefly, the types of organizations that generally qualify as distributees are:

a. Churches or conventions or associations of churches (Section

170(b)(1)(A)(i)).

b. Schools (Section 170(b)(1)(A)(ii)).

c. Hospitals (Section 170(b)(1)(A)(iii)).

d. Medical research organizations operated in conjunction with a hospital

(Section 170(b)(1)(A)(iii)).

e. Organizations receiving substantial public support or governmental support

(exclusive of income received from the exercise or performance of their exempt function) and operated for the benefit of a college or university owned or operated by a governmental unit (Section 170(b)(1)(A)(iv)).

f. Governmental units described in Section 170(c)(1) (Section 170(b)(1)(A)(v)).

g. Organizations that normally receive a substantial part of their support

(exclusive of income received from the exercise or performance of their exempt function) from the public or the government (Section 170(b)(1)(A)(vi)).

h. An agricultural research organization directly engaged in the continuous

active conduct of agricultural research (as defined in section 1404 of the National Agricultural Research, Extension, and Teaching Policy Act of 1977) in conjunction with a land-grant college or university or a non-land grant college of agriculture, and during the calendar year in which the contribution is made such organization is committed to spend such contribution for such research before January 1 of the fifth calendar year which begins after the date such contribution is made (Section 170(b)(1)(A)(ix)).

Note: Section 170(b)(1)(A)(ix) was added by Consolidated Appropriations Act 2016, Public Law 114-113, 129 Stat. 2241 (2015).

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(2) In addition, a distributee organization must have been in existence and must

have been so described for a continuous period of at least 60 calendar months immediately preceding the distribution. See Treas. Reg. 1.507-2(a)(1).

(3) A distributee organization in existence less than 60 months prior to receiving

distribution will qualify as a proper distributee where it was formed from the consolidation of two public charities each of which would have been in existence for 60 months at the time of distribution had they not been consolidated. See Rev. Rul. 75-289, 1975-2 C.B. 215.

(4) An organization that qualifies under Section 170(b)(1)(A)(i) - (vi) is not

precluded from being a qualified distributee merely because it also appears to meet the description of a Section 170(b)(1)(A)(vii), or (viii) organization. See Treas. Reg. 1.507-2(a)(3).

(5) If within a period of three years from the date of transfer, the transferee

organization becomes a private foundation, the transfer may be considered a transfer under Section 507(b)(2). See Treas. Reg. 1.507-3(e).