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- Until 1969, the term private foundation was not defined in the United States Internal Revenue Code. Since then, every U.S. charity that qualifies under Section 501(c)(3) of the Internal Revenue Service Code as tax-exempt is a "private foundation" unless it demonstrates to the IRS that it falls into another category such as public charity. Unlike nonprofit corporations classified as a public charity, private foundations in the United States are subject to a 1.39% excise tax or endowment tax on any net investment income. The US-based Foundation Center uses a more specific definition of private foundation which hinges in part on the existence of an endowment: a private foundation is a nongovernmental, nonprofit organization, which has a principal fund managed by its own trustees or directors. Hopkins (2013) listed four characteristics that make up a private foundation, also including an endowment as a condition for private foundations:
* It is a charitable organization and thus subject to the rules applicable to charities generally;
* Its financial support came from one source, usually an individual, family, or company;
* Its annual expenditures are funded out of earnings from an endowment or investment assets, rather than from an ongoing flow of contributions;
* It makes grants to other organizations for charitable purposes, rather than to its own programs. (en)
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