Private Foundations and For-Profit OrganizationsPrivate Foundations and For-Profit Organizations

Although it’s well known that a private foundation (PF) can freely make grants to Internal Revenue Code Section 501(c)(3) public charities, many are surprised to learn that a PF may make a grant to a for-profit organization (FPO)¹ by satisfying certain requirements.² Due to the potential for the enrichment of private interests, however, a PF must contend with an added layer of complexity when granting to an FPO. The PF needs to conduct a private benefit analysis, as the presence of a substantial private benefit can subject the PF to a 20% penalty on the grant. Here’s an analytical framework to help a practitioner gauge whether the private benefit concern posed by a PF’s grant to an FPO poses a threat and, if so, guidance as to how it mig...