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What is the difference between a private foundation and a public charity?

Private foundations

Foundation Center defines a private foundation as a nongovernmental, nonprofit organization having a principal fund managed by its own trustees or directors. Private foundations maintain or aid charitable, educational, religious, or other activities serving the public good, primarily through the making of grants to other nonprofit organizations.

Every U.S. and foreign charity that qualifies under Section 501(c)(3) of the Internal Revenue Service Code as tax-exempt is a "private foundation" unless it demonstrates to the IRS that it has met the public support test. Broadly speaking, organizations that are not private foundations are public charities as described in the Internal Revenue Service Code.

Public charities

Public charities generally derive their funding or support primarily from the general public, receiving grants from individuals, government, and private foundations. Although some public charities engage in grantmaking activities, most conduct direct service or other tax-exempt activities. A private foundation, on the other hand, usually derives its principal fund from a single source, such as an individual, family, or corporation, and more often than not is a grantmaker. A private foundation does not solicit funds from the public.

Why should grantseekers know the difference?

Examining a funder's giving history is an important part of researching foundation prospects. Past grants can reveal the funder's preferred subjects, organization types, and ranges of grant amounts.

This data is easier to get from a private foundation, which must disclose all grantees and grant amounts in its IRS Form 990-PF. However, a grantmaking public charity isn't subject to this disclosure requirement, so access to its grants data will depend on how much the funder is willing to share with the public, via its Form 990, website, or other communication channels.

If a grantmaking public charity doesn't provide a grants list in its Form 990, explore its website or search the Internet for the funder's name to find any related news or press releases, some of which may be about grants that it made.

A word about "foundation"

Don't assume that an organization with "foundation" in its name is a grantmaker. (Example: Foundation Center.) The word "foundation" has no legal definition. 

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