What is a substantial contributor for private foundations?

A substantial contributor is any person (individual or legal entity) who contributes an aggregate amount of more than $5,000 to a private foundation if such amount is more than 2% of the total contributions the foundation has received from its inception through the end of the year in which the contributions are received. This calculation requires detailed contribution tracking from the foundation’s inception, which in practice is frequently difficult to obtain. A substantial contributor is a type of disqualified person, which interconnects with the self-dealing rules.

The original founder(s) and funder(s) of a private foundation are almost always substantial contributors. For a private foundation set up as a trust, the trust creator is automatically a substantial contributor regardless of any contribution amounts. Married couples are essentially treated as one unit—each spouse is considered to have made all contributions of the other spouse during their marriage (including bequests made upon one spouse’s death). Once a person meets the definition of substantial contributor, the status is generally permanent regardless of future contributions by other people (but the status can end in some very limited exceptions that are beyond the scope of this article).

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