Tax Planning in Private Foundations
CLIENT ADVISORY
Keeping an eye on what matters most
Summary: Managing the federal excise tax rate on investment income should not detract from what usually matters most to philanthropic organizations – effective grantmaking. However, simply monitoring the payout figure that qualifies a foundation for a 1 percent, rather than a 2 percent, excise tax rate may facilitate the decision to make some spending decisions before the end of the fiscal year, or not.
Overview: Ideally, foundation trustees would reserve the highest possible percentage of a foundation’s investment income for doing good. Planning to pay less in excise taxes may mean a slight increase in funds available for grants. But the thought of tracking and planning expenditures to qualify the foundation to pay a 1 percent, rather than 2 percent, excise tax can seem like an added management burden and certainly not as interesting to most trustees as strategic thinking and site visits with interesting grantees.
At GMA Foundations, our finance staff actually enjoys the challenge of strategic tax planning. In this client advisory, Pamela Labonte Maksy describes how the GMA finance team monitors the numbers and helps clients think about the timing of expenditures Continue Reading »
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