The process of changing anything relating to an organization’s tax exempt status can be very confusing. A public charity can be automatically converted to a private foundation by the IRS if they don’t meet the minimum public support percentage requirement. Public charity status is generally the more desirable status, but there may be a situation where a public charity actually voluntarily wishes to convert to a private foundation. In this case, the process of converting is fairly simple as follows:
- Download IRS Form 8940 (Request for Miscellaneous Determination) from IRS.gov.
- Fill out Part I of the form 8940, Identification of Organization.
- For Box 7 of Part I, follow the instructions at the top of the form. A user fee is required.
- Check Box 8g in Part II, Reclassification of Foundation Status, including a voluntary request from a public charity for private foundation status.
- Sign and date IRS Form 8940 and print signer’s name and title.
- Attach a request indicating your current public charity classification and the public charity classification to which you are requesting reclassification. Also, provide a statement describing any adverse impact if you do not receive the requested status.
- Send IRS Form 8940, attached request, and check to:
Internal Revenue Service
P.O. Box 12192
Convington, KY 41012-0192
Once the IRS receives the Form 8940, formal change request, and user fee, they will either approve or deny the request. If approved, the organization will receive a letter that formally approves the organization’s reclassification from a public charity to a private foundation. The organization should also begin filing the Form 990-PF (rather than Form 990) annually.
It is important to note that there are many “rules” to be aware of as a private foundation and appropriate consideration should go into changing from public to private.
By David Woods