Grant Making and Operating Foundations

At Gammon & Grange, P.C., our attorneys provide experienced and knowledgeable guidance to nonprofits and other organizations responsible for the creation and execution of a foundation. There are specific criteria that nonprofits must follow regarding private foundations, including grant-making and private operating foundations. Our firm assists these organizations in staying in compliance of those requirements and avoiding legal issues now and in the future.

Operating Foundations Vs. Grant-Making Foundations

The private foundation category is broken down into two main types of foundations: private operating foundations and grant-making foundations. An operating foundation has a clearly defined goal and uses the endowment to achieve that goal directly through its own operations. Grant-making foundations, however, are structured to issue grants to other organizations that align with the goals of the foundation or organization, using funds from the endowment.

Operating foundations have an advantage in tax benefits in that individual donors can contribute a greater percentage of income, where as grant-making foundations are capped at 5 percent, per the minimum distribution requirement. A private operating foundation can generally receive up to 50 percent of a donor's gross income.

Our firm will assist in making sure that your foundation is in compliance of the tests and criteria used to classify operating and grant-making foundations. This includes a thorough review of:

  • Organizing documents and bylaws
  • Operations of the organization
  • Policies regarding tax matters, deductibility and exemptions.
  • Employment issues, including the employer identification number
  • Charitable registration and solicitation

For more information about the services we provide to nonprofit and charitable organizations with grant-making or private operating foundations, please contact our law offices today at toll free 866-896-7682 or 703-873-7349.