Most foundations are set up to have a perpetual lifespan, spending out only the interests from their investments while keeping the initial endowment intact. Other foundations choose to have a limited lifespan. Regardless of the reason for the dissolution, foundations dissolve by "spending down" their assets in compliance with both state and federal law.

To begin with, foundations need to notify the state in which they incorporated (typically the Attorney General's office) about the organization's impending change in status. Each state will have varying regulations in terms of filing procedures which may depend upon what type of entity the foundation is (a trust, a fund, etc.). Find your state government's website

The IRS will require additional documentation, including a final Form 990-PF. The method of distributing ("spending down") the foundation's remaining assets will be an important consideration.

Learn more about IRS rules on dissolving a private foundation.

See also our related Knowledge Base articles:

• What are the different types of nonprofits and foundations?
• How do I start a grantmaking foundation?
• What is a "payout requirement" for a private foundation?

Life Cycle of a Private Foundation
IRS

The IRS provides information, explanations, guides, forms, and publications on all of these subjects - they are available through this IRS Web site. The illustration below provides an easy-to-use way of linking to the documents most foundations will need

Life Cycle of a Private Foundation - Termination of Foundation Under State Law
IRS

For the short tax year in which your foundation is fully liquidated, dissolved, or terminated, you must file a final Form 990-PF, Return of Private Foundation.

The Insider’s Guide to Spend Down
Philanthropy Roundtable

A few years ago, the John M. Olin Foundation began the process of spending down its assets in preparation for closing its doors. We are now well along this path, and we have learned a few lessons along the way.

Operation as a Public Charity
IRS

Explains how a private foundation can terminate its current status in order to operate as a public charity.

Facts about Terminating or Merging Your Exempt Organization
IRS Publication 4779

Most tax-exempt organizations that end their operations, either through shutting down, transferring their assets or merging with another tax-exempt organization, must inform the IRS about the details of the action.