Qualifying for the 1% Tax Rate


Categories: Starting a Foundation

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Private Foundation Excise Tax

Typically, private foundations pay a federal excise tax of 2% on their net investment income. With proactive planning, it is possible to qualify for a reduced tax rate of 1% for any year in which the foundation pays out enough in grants (and other qualifying distributions) to reach a target amount. This target is calculated afresh each year. Click the button below to learn how. This articles includes important definitions, such as:

  • Annual Minimum Payout
  • Qualifying Distributions
  • Net Investment Income
  • Historical Ratio

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