Generally, it is possible for a private foundation with $5 million in assets, or the potential to reach $5 million in the future, to become a supporting organization of a community foundation. Besides easing the administrative and cost burdens of managing a private foundation, transferring it to a community foundation permits the private foundation to take advantage of many aspects of our public charity status.
Section 507 of the Internal Revenue Code permits termination of a private foundation in either trust or corporate form with distribution of its assets to a public charity. The two primary requirements for the termination of a private foundation are that the private foundation must distribute all of its net assets to one or more tax-exempt organizations and that each organization has been in existence for a continuous period of at least five years preceding the distribution. Our community foundation fulfills both of these requirements and the private foundation’s assets typically form a permanent donor advised fund under a similar name.
The supporting organization option requires careful consideration by your client and our Board of Directors. For further information on this option, or to discuss a particular client’s needs, please click here to contact us for more information.