State Filing Requirements for Private Foundations

Choosing a State of Incorporation

Many donors choose to incorporate their private foundations in their home states. However, if the reporting obligations of a donor’s home state pose a challenge and the private foundation does not conduct activities that might trigger a filing in that state, it might be advantageous to incorporate elsewhere. This article provides a general primer on state filing requirements and describes important criteria in selecting a state of incorporation.

One of the most important considerations in a private foundation’s choice of location is the registration and reporting requirements of the state. States regulate charitable organizations, whether formed as corporations or trusts. The state attorney general, commonly charged with this regulation, may require private foundations to register if holding assets in state, incorporated or formed in that state, or authorized to do business there. In addition, some states’ tax authorities, such as the California Franchise Tax Board and Texas Comptroller, require that foundations apply for state level tax exemption (a simple application along the lines of IRS Form 1023, Application for Recognition of Exemption) and those agencies will then issue a state level determination letter (similar to the IRS Determination Letter).

Once organized in a state, ongoing filings will be mandatory during the life of the private foundation. Keeping a private foundation in compliance with its state of incorporation includes both corporate and tax considerations.

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