Glossary

The word "foundation" itself has no legal status. Any organization can call itself a foundation or use the word as part of its name without necessarily operating as a grant-making or philanthropic entity. True charitable or philanthropic foundations, on the other hand, are usually organized under the Internal Revenue Service tax code that allows them to accumulate, invest and hold assets tax-free (called the "corpus") as long as they make charitable grants or contributions amounting to at least 5% of the corpus value each year. So a philanthropic foundation with $100 million in assets can invest and grow those assets tax-free, but must contribute at least $5 million a year to qualifying charitable organizations in order to maintain its tax-exempt status.

Charitable and philanthropic foundations come in all shapes, sizes and varieties, from the very small, single-purpose family-run foundations to the multibillion-dollar, multipurpose international foundations. The only feature that all such foundations share in common is the IRS's 5% contributions requirement.