Understanding the Excise Tax Although private foundations are exempt from the federal income tax, each private foundation must pay an annual excise tax on its net investment income. Congress imposed this tax in 1969, arguing that the income was necessary to pay for the costs of auditing and monitoring private foundations. Historically, the tax was... Read More
Here are the things a private foundation must do every year to remain a private foundation and stay out of trouble: Pay your annual excise tax on the foundation’s net investment income through quarterly estimated payments. File your federal tax returns and comply with state filing rules. Meet your annual minimum distribution requirement through grants... Read More
Even for nonprofit foundations with few or no employees, the risk of litigation is real—and rising. Why D&O insurance? Once assumed to be costly and once excluded from many nonprofit budgets as a result, D&O liability insurance has evolved into a broad, affordable, and important form of coverage for any foundation. Even if you have... Read More
In 1964, Congress enacted mandatory distribution rules to prevent private foundations from receiving gifts and investing the assets—yet never spending funds for charitable purposes. Congress thought it unfair to allow a charitable deduction when, in some cases, funds were not being directed to charity. A private foundation must make annual charitable expenditures, called qualifying distributions, equal... Read More
It’s December and your foundation wants to fulfill its payout requirement within the calendar year. What can you do? Ask your local community foundation, association of grantmakers, or giving circles for information about community needs and nonprofits they support. Consult with members of the faith community. Ask your government social services agencies, United Way, or... Read More
Although attending fundraisers and similar events may not seem like a benefit to you, the Internal Revenue Service (IRS) may see it differently: as self-dealing, an act in which a trustee, staff member, or other “disqualified person” receives direct, personal benefit. To avoid falling afoul of laws to prevent self-dealing, many private foundation boards establish... Read More