Private Foundation Conversion

From time to time, for any number of reasons, a private foundation must choose to terminate its activity. This is outlined under Section 507 of the Internal Revenue Code, which permits termination of a private foundation in either trust or corporate form and distribution of its assets to a public charity.

To terminate, a private foundation must meet two primary requirements:

• It must distribute all of its net assets to one or more tax-exempt organizations.
• Each organization must have been in existence for a continuous period of at least five years preceding the distribution.

The Chillicothe-Ross Community Foundation qualifies under both of these requirements. And, as part of the foundation, a private foundation’s assets can continue with the organization’s original charitable purpose as a permanent named fund.

This process is advantageous to the terminating foundation because it maintains and grows the charitable capital for the benefit of the community, and it eases the administration and costs of the fund. Also, as part of the Chillicothe-Ross Community Foundation, the new fund receives the benefit of the foundation’s tax-exempt status, resulting in greater tax benefits for donors. There is no excise tax or payout requirement or need for a separate audit as a fund of the foundation.