08 January 2020

Private Foundation Excise Tax


Private foundations are required to pay an annual excise tax on their net investment income. For years, these foundations have labored with a complex excise tax formula that, in effect, penalized discrete grants under extraordinary circumstances, from grants for disaster relief to grants for an unplanned, compelling project.

In 2019, ACR and our allies in Washington, DC, and around the country notched a big win by successfully lobbying congress to eliminate that complex formula and substitute it with a flat excise tax rate of 1.39 percent

Under the previous system, foundations were devoting resources to staff and outside auditors to help manage levels and timing of grants to avoid the higher of the two-tier rate. Now, the single level of tax for all private foundations has eliminated the uncertainty and complexity of tax filing, allowing foundations to devote more resources to mission work.

Moving forward we’ll have to protect that law change, but for now, it goes in the “Win” column.

To see previous updates about the private foundation excise tax, click here.