What Is the Difference Between a Private Foundation and a Public Charity?

An Estate Planning FAQ with Mary E. Vandenack.

Private foundations and public charities are both tax exempt entities under section 501c3 of the Internal Revenue Code. The differences are that a public charity qualifies for a little more in terms of tax benefits. If you make a contribution to an organization that qualifies as a public charity, there is a little bit larger percentage that you can deduct in certain circumstances. The limitations aren’t as significant on the private foundation. The public charity is typically one that benefits the public at large rather than a smaller group. The private foundation is more typically formed by a smaller group and benefits a smaller group of individuals.

© 2014 Parsonage Vandenack Williams LLC

For more information, Contact Us


What Is a 501c3?

An Estate Planning FAQ with Mary E. Vandenack.

501(c)(3) is actually a section of the tax code that provides for the ability of an entity to fit into certain parameters and claim tax exempt status. In the section 501(c)(3) there are actually quite a few different types of organizations that will qualify for tax exempt status. The type that most people are familiar with is the public charity, so the American Red Cross and organizations like that are typically tax exempt entities and are actually subject to certain types of taxes but they have a general tax exempt status.

© 2014 Parsonage Vandenack Williams LLC

For more information, Contact Us

IRS Now Accepting Streamlined Form 1023-EZ

By M. Thomas Langan II.

The IRS is now accepting a new shorter tax-exempt application form intended to help small charities apply for 501(c)(3) tax-exempt status more easily. The form, 1023-EZ, is only 3 pages long compared to full form that is 26 pages. Most organizations with gross receipts of $50,000 or less and assets of $250,000 or less are eligible to use the form.  The IRS expects around 70% of all applicants will qualify to use the shorter form.  Form 1023-EZ must be filed online and there is a $400 filing fee.

The form can be viewed here: http://www.irs.gov/pub/irs-pdf/f1023ez.pdf

© 2014 Parsonage Vandenack Williams LLC

For more information, Contact Us

IRS to Offer Simplified Tax-Exempt Application

The IRS has announced plans to offer a much simpler form for many charities to apply for tax-exempt status. Most charities that expect to have no more than $200,000 in annual gross receipts and total assets of less than $500,000 will be eligible to use the form.  Whereas the current Form 1023 is 26 pages, the draft Form 1023-EZ is only 3 pages. The IRS’s goal is to streamline the application process while also freeing up resources to concentrate more on compliance with established charities. The IRS is currently accepting comments on the draft Form 1023-EZ and is expected to begin accepting them later this summer.

The draft Form 1023-EZ is available at: http://www.irs.gov/pub/irs-dft/f1023ez–dft.pdf

© 2014 Parsonage Vandenack Williams LLC

For more information, Contact Us

PVWLaw Private Foundations Video

If you have the desire to be actively involved in a charitable mission over time, you may want to consider establishing a private foundation. Our new video will give you basic information on the 3 main types of private foundations and the rules to follow in order to ensure your foundation maintains its tax exempt status.


Giving to charity is rewarding in many ways.  There are many approaches to making charitable gifts. The best approach for a particular individual is depends upon  the motivation for the charitable giving, the charities to be benefited, the type of charitable gift, and the size of the charitable gift.  Giving through a family foundation may enhance the rewards of charitable giving and create an ongoing legacy of charitable giving for a donor.


The family foundation makes sense for a donor who plans to make significant charitable gifts to more than one charity, desires to create a permanent fund for charitable giving, and wants the donor’s family to be actively involved in the charitable giving process on an ongoing basis.


An important benefit of charitable giving is that the donor can obtain significant tax deductions related to the donations.   The tax savings opportunities include income and estate tax deductions.   To the extent that assets remain in the family foundation, growth on the assets is tax-free, which avoids capital gains and estate taxes.


There are different types of family foundations for tax purposes.   Contributions to a family foundation are generally deductible but there are various limitations on contributions to a family foundation that do not apply to other types of charitable gifts.  There are various distribution requirements and excise taxes that apply.  A donor considering a family foundation should be well advised of the achievable tax benefits of each type of family foundation. 


While tax benefits are important to most donors, the family foundation is most often chosen by those who are interested in the non-tax benefits of this charitable vehicle.  The family foundation offers many non-tax benefits that cannot be achieved with other charitable gift techniques.


Many donors establish a family foundation to encourage family involvement in charitable giving. A family foundation offers the opportunity for family members to work together to benefit charitable causes.  Often, foundations are set up so that family members meet to discuss management of foundation investments and desirable charitable gifts.  The foundation may help perpetuate the family unit by creating the opportunity for ongoing interaction of a positive nature.


A family foundation may bear the name of the donor or his or her family.  The family foundation then serves as an enduring memorial to the founder.   The philanthropic efforts of the founder can continue beyond his or her life.  


The family foundation offers ongoing control and flexibility.  The foundation board can monitor charities change charitable beneficiaries when doing so makes sense.

Because there is significant expense and ongoing maintenance related to a family foundation, the foundation will make sense only for charitable donations of significant size.  There is no specific threshold as to the size of gift that makes sense.  Whether the approach makes sense for a particular donor depends on the overall facts of the donor’s estate and philanthropic desires.  The non-tax benefits must outweigh the ongoing cost and expense.


A family foundation is an excellent technique for achieving ongoing family involvement in the community.  A foundation may be funded during the life of a donor or upon the donor’s death.  The family foundation should be considered by any charitably inclined individual as part of the estate planning process.



© 2009 Parsonage Vandenack Williams LLC

For more information, contact info@pvwlaw.com