Private Foundations: Tax Law and Compliance, 4th Edition

Chapter ThirteenTermination of Foundation Status

1. § 13.1 Voluntary Termination
2. § 13.2 Involuntary Termination
3. § 13.3 Transfer of Assets to A Public Charity
   1. (a) Terms of Transfer
   2. (b) Reservation of Rights
   3. (c) Eligible Public Charity Recipients
4. § 13.4 Operation as a Public Charity
5. § 13.5 Mergers, Split-Ups, and Transfers Between Foundations
   1. (a) IRS Road Map for Reforming a Foundation
   2. (b) Questions Answered in Ruling
   3. (c) Unanswered Question
   4. (d) Non-Control, Complete Assets Transfer
6. § 13.6 Termination Tax
7. § 13.7 Abatement

Congress, in its deliberations that concluded with the Tax Reform Act of 1969, decided that private foundations should not be able to receive tax benefits in exchange for the promise of use of their assets for charitable purposes and, subsequently, avoid the carrying out of these responsibilities. The following is an explanation of the rationale underlying the termination requirements:

Under prior law, an organization was exempt if it met the requirements of the code, whether or not it sought an “exemption certificate” from the Internal Revenue Service.

If an organization did not continue to meet the requirements for exemption, if it committed certain specifically prohibited acts (sec. 503), or if it dealt in certain prohibited ways with its accumulated earnings (sec. 504), it lost its exempt status. This loss of exempt status might relate back to the time the organization first violated the code's requirements. However, if the violation occurred after the ...