At bare minimum, here are the things a private foundation must do every year in order to remain a private foundation and stay out of trouble:
- Pay your annual excise tax of 2% (or 1% in certain cases) of the foundation’s net investment income through quarterly estimated payments.
- File your federal tax returns, and comply with state filing rules.
- Meet your annual minimum distribution requirement (5% payout) through grants and administrative expenses.
- Follow public disclosure rules which require foundations to make certain documents available for public inspection, including the 990-PF, the 990-T, the 1023 and all related correspondence.
- Uphold all laws relevant to private foundations, including avoiding the following activities:
- Acts of self-dealing
- Excess business holdings held past an allowable time period
- Imprudent investment decisions
- Making prohibited expenditures or permitted expenditures without following IRS-specified rules
- In addition, private foundations are subject to state laws.
Learn more in Legal Essentials for Small Foundations
and our Annual Board To-Dos.