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Just What Are Public Charities and Private Foundations, Anyway?

Note: The following discussion is provided for informational purposes only and is not intended to serve as legal or tax advice. For specific information about public charities and private foundations ("charitable organizations"), consult your attorney or tax adviser.

It can be so confusing … private nonoperating foundations … private operating foundations … public charities … public charities that act as foundations. What are
they, and how do you tell which is which?

Charitable organizations—the organizations in the GuideStar database—fall under Section 501(c)(3) of the U.S. Tax Code. The Internal Revenue Service divides charitable organizations into two groups: private foundations and public charities. With the exception of religious organizations and nonprofits whose gross receipts are less than $5,000, the IRS usually defines every charitable organization as a private foundation, unless the nonprofit specifically requests classification as a public charity.