Every organization described in IRC Section 501(c)(3) has a foundation classification. The two main classifications are public charity and private foundation. Tip: Most organizations qualify as public charities. A public charity generally has a broad base of support, while a private foundation generally receives its support from a small number of large donors. The most common public charity classifications are: Section 509(a)(1) and 170(b)(1)(A)(vi) - a public charity which receives substantial support in the form of grants and contributions from governmental units, the general public, and other public charities. Section 509(a)(2) - a public charity which receives substantial revenues from a combination of contributions, membership fees, and gross receipts from activities that further its exempt purpose. If the organization does not qualify as a public charity, then they are a private foundation. A private foundation generally receives its support from a small number of (often large) donors. Note: Selecting the correct foundation classification is especially important because it determines which tax rules govern the organization's operations (including filing requirements) and which limitations apply to the donors' contributions. Continue to How to Apply for 501(c)(3) Status Additional information Read more about the differences between private foundations and public charities here. EO Operational Requirements: Private Foundations and Public Charities | Internal Revenue Service (irs.gov) Take our online course for more information on foundation classification. The Wonderful World of Foundation Classification | Stay Exempt (irs.gov)
