Until 1969, the term private foundation was not defined in the 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. Private foundations in the United States are generally subject to a 1% or 2 xcise tax on net investment income. According to the Foundation Center, 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:

• 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 investment assets, rather and from an ongoing flow of contributions;
• It makes grants to other organizations for charitable purposes, rather than to its own programs.