Dissolution of Nonprofit Foundations

By Natalie Glitz Grumhaus

There are many reasons that a nonprofit foundation may feel the need to dissolve.^[1] When James and Charlotte Brooks Foundation decided to fully dissolve in 2015, only five years after its founding in 2010, they donated most of the Brooks’ artwork to a local art museum, the Parrish, as a way to further the Foundation’s purpose as an artist-endowed institution, dedicated to the Long Island arts community.^[2] Another organization, the Urban Institute of Contemporary Arts in Grand Rapids, Michigan, dissolved in 2014, so that it was no longer a distinct organization and merged with Ferris State University due to unsustainable funding shortages.^[3]The Holt Smithson Foundation, which is currently in operation, is a unique example of a nonprofit organization with a termination date written into the founding documents: it is set to terminate in 2038, one century after the wife-husband team of artists Nancy Holt (1938-2014) and Robert Smithson (1938-1973) were born.^[4] Knowing how and when to dissolve a foundation is often even more important than setting one up so as to make the most of all assets owned by the foundation and fulfill the requirements of state and federal law.^[5]

This article will explore the process of dissolving a nonprofit foundation in the US, including the legal and regulatory requirements, as well as some best practices for ensuring a smooth and ethical dissolution. In order to better understand our case studies, this article will specifically examine New York’s and Michigan’s state processes.

State and Federal Forms and Processes to Dissolve Nonprofit Organizations