[In response to LGH is technically a “Public Charity”]
The reason the IRS distinguishes between the two is that tax laws are far more advantageous to public charities.
Private foundations must refrain from acts of self-dealing (IRC 4941), meet minimum distribution requirements (IRC 4942), abstain from “excess business holdings” (IRC 4943) and “jeopardizing investments” (IRC 4944), and refrain from making certain expenditures (IRC 4945), while public charities are not subject to the provisions of IRC chapter 42.
Public charities enjoy an exemption from the IRC 4940 tax on net investment income to which most private foundations are subject, have less burdensome reporting requirements (the annual information return that private foundations must complete, Form 990-PF, is more complex than the information returns filed by public charities (Forms 990 and Form 990-EZ), are exempt, in the case of certain public charities, from various federal excise taxes, and have additional fundraising opportunities, such as higher dollar limits for contributions.
While there’s no such thing as a “public foundation” in the tax code, LGH meets the common dictionary definition of a foundation: an institution financed by a donation or legacy to aid research, education, the arts, etc. Using the term “public foundation” for what the IRS calls a “public charity” is sloppy, but hardly a serious error. Saying that there’s no real difference in the tax code between public charities and private foundations, on the other hand, might lead a reader to commit a rather unfortunate error in his tax planning.
Boy, quibbling readers (and I admit to being one) are a real annoyance, aren’t they? I’m glad I got out of newspaper publishing while readers still had to get out paper and pen, and hunt up a stamp.
Editor: On the contrary, “quibbling readers” are a blessing. The public needs to hear from persons with expertise. Editors and reporters are not a repository of all embracing knowledge and wisdom. NewsLanc seeks to be a forum for public discussion.
