In general, permitted holdings include the following. Please note, we reference incorporated businesses, but a partnership or trust may be substituted in place of a corporation:
The 2% de minimis. A private foundation isn’t treated as having an excess business holding in any corporation in which it, together with related foundations, owns 2% or less of the voting stock and 2% or less of the value of all shares outstanding.
The 20% permitted holding level. A private foundation can hold up to 20% of the voting stock of an incorporated business enterprise; however, the 20% must be reduced by each percentage of voting stock owned by disqualified persons. If disqualified persons together own less than 20% of voting stock the private foundation may hold nonvoting stock.
The aggregate 35% threshold. If one or more persons who are outsiders, not disqualified persons, effectively control an incorporated business enterprise, the foundation may hold 35% of the voting stock of the corporation. This amount is reduced by the percentage owned by disqualified persons.