Private Foundation Excise Tax Simplification Seems Possible

Tuesday, November 5, 2019

MCF and the broader philanthropic field have long been advocates for simplifying the private foundation excise tax to a flat rate. This long-time priority has moved into the realm of the possible -- our national partners and the field have united around simplifying the private foundation excise tax to a revenue-neutral 1.39%.  

The current two-tiered rate (1 and 2%) has been a challenge for private foundations for two primary reaons: 1) the complexity and administrative burden of determining the rate each year and 2) the disincentive it creates to give more in times of greater need. For example, if a private foundation chose to give significantly more after a natural disaster and then returned to its normal level of giving the following years, the foundation would likely be penalized for its additional generosity by paying at the 2% tax rate for the next several years. Moving to a flat rate will address both of these concerns and it is revenue neutral.

In the past, some have advocated for bringing the flat rate down to 1%, but that is not currently viable. The philanthropic community has come together and unified to support the revenue-neutral rate of 1.39%.

It is anticipated that the House will include the private foundation excise tax simplification in the year-end budget bill. If there is just a continuing resolution passed, it is less likely to be included, but if a budget bill is passed, it is anticipated that it will be included. The outcome in the Senate is less certain than the House, but our national partners are feeling good about the prospects in the Senate. There's a sense of cautious optimism among advocates in the field that this will get done this year.

The Minnesota Council on Foundations has consistently educated Minnesota's Congressional delegation on this important issue, encouraging them to support a flat rate excise tax for private foundations.

 

 

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