How do I learn about dissolving a private foundation?
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.
Beyond IRS compliance around dissolving your foundation, you may also be wondering about how to spend down effectively. Candid Learning for Funders (formerly GrantCraft), published “Doing Spend Down Right,” a blog series chronicling lessons from the Andrea and Charles Bronfman Philanthropies. Candid Learning for Funders has a robust section of articles, blogs, and guides that address the idea of spending down.
See also our related Knowledge Base articles:
- What is a foundation?
- How do I start a grantmaking foundation?
- A foundation I'm researching has reported giving amounts greater than its assets. How is this possible?
- What is a "payout requirement" for a private foundation?
Have a question about this topic? Ask us!
Candid's Online Librarian service will answer your questions within two business days.Ask us
Explore resources curated by our staff for this topic:
IRS Publication 4779
Facts about Terminating or Merging Your Exempt Organization
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.
Life Cycle of a Private Foundation
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
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.
Operation as a Public Charity
Explains how a private foundation can terminate its current status in order to operate as a public charity.
The Insider’s Guide to Spend Down
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.