The following foundations are set up under
common law legal systems:
Canada In
Canada, the
Canada Revenue Agency is a branch of the Canadian government which regulates all foundations. Under Canadian law, since 1967, a private foundation is controlled by a single donor or family through a board that is made up of a majority (more than 50%) of directors at non-arm's length. It is a legally registered charity with the Canada Revenue Agency. A public foundation is governed by a board that is made up of a majority of directors at arm's length. A private foundation is not allowed to engage in any business activity, but it can operate its own charitable program. The Canada Revenue Agency designates the application as a "charitable organization", a "public foundation", or a "private foundation", depending on its structure, its source of funding and its operation. The
Income Tax Act requirements are different, depending on the type of charity (
Income Tax Act, R.S.C. 1985 (5th supp.) c. 1, para. 149.1(4)(a)).
The Bahamas Foundations were first introduced in
The Bahamas in December 2004 following the Foundations Act.
United States A private foundation, in the United States, is a
charitable organization described in the
Internal Revenue Code by section 509. A private foundation is necessarily a
501(c)(3) exempt organization (or a former such entity). It is defined by a negative definition: by what it is not. A private foundation is not a
public charity, as described in section 170(b)(1)(A) (i) through (vi). Neither is it a section 509(a)(2) organization, nor a
supporting organization. Private foundations are subject to 1.39%
excise taxes found in section 4940 through 4945 of the internal revenue code. Once a charity becomes a private foundation, it retains that status unless it follows the difficult termination rules of section 507. Every organization that qualifies for tax exemption as an organization described in section 501(c)(3) is a private foundation unless it falls into one of the categories specifically excluded from the definition of that term (referred to in section 509(a)). In addition, certain nonexempt charitable trusts are also treated as private foundations. Organizations that fall into the excluded categories are institutions such as hospitals or universities and those that generally have broad public support or actively function in a supporting relationship to such organizations. In the United States, there are several restrictions and requirements on private foundations, including: • restrictions on self-dealing between private foundations and their substantial contributors and other disqualified persons; • requirements that the foundation annually distribute income for charitable purposes; • limits on their holdings in private businesses; • provisions that investments must not jeopardize the carrying out of exempt purposes; and • provisions to assure that expenditures further exempt purposes. Violations of these provisions give rise to taxes and penalties against the private foundation and, in some cases, its managers, its substantial contributors, and certain related persons. Most private foundations are much smaller. Out of the 84,000 private foundations that filed with the IRS in 2008, approximately 66% have less than $1 million in assets, and 93% have less than $10 million in assets. ==Civil law==