What are some key differences between a public charity and a private foundation?
The distinction between public charities and private foundations is a matter of federal tax law. Public charities, unlike private foundations, are heavily supported by the public. For this reason, public charities are more subject to public scrutiny, which can help ensure adherence to appropriate standards of conduct in the absence of the more strict rules and regulations governing private foundations. Since 1969, private foundations have been subject to stricter and more extensive federal rules than public charities, including strict prohibitions on self-dealing, and limits on the amount of stock they can hold in any one company. Examples of the various regulated private foundation activities include: • financial transactions between the foundation and its largest contributors, officers and other insiders • amounts paid out toward operating costs, grants, and charitable programs • reasonableness of the types and amounts of expenses incurred to operate the foundation • compensation of
