Private Foundations
Credit: Canva
Licence: The Everett Collection
| Giver: | Registered Organization |
|---|---|
| Receiver: | Registered Organization |
| Gift: | Money |
| Approach: | Philanthropy |
| Issues: | 10. Reduced Inequalities |
| Included in: | Industrial Revolutions, Private Foundations |
Private foundations are charitable vehicles that are typically funded by an individual donor, family or corporation and do not rely on public support or fundraising. The history of private foundations is largely tied to the economic boom of the Industrial Revolution in the United States when wealthy industrialists were looking for ways to protect their money—before tax policies on income and estates were established. The first private family foundations in the U.S. include the Russell Sage Foundation (1907) with a mission to fund social issues; the Carnegie Corporation of New York (1911) funding education, democracy, peace and international development; the Rockefeller Foundation (1913) supporting the well-being of humanity worldwide, and the Ford Foundation (1936) established to advance human welfare through various fields of interest.
Prior to the Tax Reform Act of 1969, private foundations lacked definition in the U.S. Internal Revenue Service (IRS) Code. Part of the act more clearly defined private foundations as tax-exempt organizations that do not rely on broad public support and annually distribute income for charitable purposes.
The Tax Reform Act of 1969 also imposed certain restrictions and requirements on private foundations, such as excise taxes, payout rules, self-dealing prohibitions and disclosure obligations. Additionally, the Act further defined three types of private foundations: family foundations, private operating foundations and corporate foundations. Family foundations are typically established—and funded—by an individual or family to support the charitable activities of their choice. They are also further defined as private non-operating foundations, as they issue grants but do not manage charitable programs themselves. Examples of private non-operating foundations in the U.S. include the Bill & Melinda Gates Foundation and the Chan Zuckerberg Initiative. Private operating foundations run their own charitable programs or activities with their investment income. (This can include institutions such as zoos, libraries and research facilities.) Corporate foundations are established by corporations to support charitable causes related to their business or community.
For individuals and families with great wealth, private foundations remain a popular choice and have grown in complexity over time. Today, large, well-staffed foundations may actively participate in research and data-driven decision making to address problems faced by the global community. Foundations can influence public policy, lead scientific breakthroughs and organize larger charitable giving efforts for the greater good. At the same time, private foundations face challenges and criticisms, including concerns over excessive influence on social policies, lack of accountability, political interference or self-serving agendas for their companies.
According to the IRS Exempt Organization Business Master File, there were 118,724 private foundations recognized as 501(c)(3) public charities as of December 2019. In the same year, total giving from private foundations topped $70 billion to issue areas including health, public education and human services.
Contributor: Dion McDougal
| Source type | Full citation | Link (DOI or URL) |
|---|---|---|
| Publication |
Brakman Reiser, Dana and Steven A. Dean. For-Profit Philanthropy: Elite Power and the Threat of Limited Liability Companies, Donor-Advised Funds, and Strategic Corporate Giving. New York: Oxford University Press, 2023 |
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| Publication |
“History of Philanthropy 8.25.” Philanthropy New York. Accessed February 19, 2023. |
https://philanthropynewyork.org/sites/default/files/resources/History%20of%20Philanthropy.pdf |
| Publication |
Moran, Michael. Private foundations and development partnerships: American philanthropy and global development agendas. Routledge, 2014. |
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| Publication |
Troyer, Thomas A. “The 1969 Private Foundation Law: And Historical Perspective.” New York University School of Law National Center on Philanthropy and the Law Annual Conference on Private Foundations (1999). |
https://ncpl.law.nyu.edu/wp-content/uploads/pdfs/1999/Conf1999_Troyer_Final.pdf4 |
| Publication |
IssueLab, Candid. “Key Facts on U.S. Nonprofits and Foundations – Issuelab.” IssueLab, April 2020. |
https://www.issuelab.org/resources/36381/36381.pdf |
