Private Foundation Excise Taxes on Undistributed Income
To help ensure private foundations carry out their charitable purposes, the IRS requires that most private foundations spend a certain amount of their income each year on charitable purposes, or pay a 30% excise tax on the income they should have distributed but didn't. How many private foundations each year owe this excise tax on undistributed income?
Of the 48,440 non-operating private foundations we have data on (and that gave away any money last year), only 1,034 (2.1%) had to pay an excise tax on undistributed income from the previous year. In contrast, 34,252 (70.7%) of non-operating private foundations gave away more money than the IRS minimally requires.
Which private foundations owe excise taxes on undistributed income?
Of the 48,440 non-operating private foundations we analyzed, 1,034 (2.1%) had to pay an excise tax on undistributed income from the previous year. The undistributed income subject to tax was on average $23,061, but ranged from $2 to $1,038,069, with a median of $4,801. Here's a breakdown of the types of grantees these private foundations gave to, the years they were formed, and how much they held in investable assets:
Types of grant recipients that private foundations owing excise taxes give to
| Grantee type | Number of nonprofits | |
|---|---|---|
| Religious organizations |
90
| |
| Universities |
74
| |
| Private foundations |
68
| |
| Animal shelters |
65
| |
| School foundations |
59
| |
| International humanitarian organizations |
58
| |
| Public foundations |
57
| |
| Christian organizations |
57
| |
| Homeless shelters |
53
| |
| High schools |
50
| |
| Jewish organizations |
50
| |
| Food banks |
48
| |
| Historical societies |
47
| |
| Specialty hospitals |
46
| |
| Community foundations |
46
| |
Investable asset sizes of private foundations that owe excise taxes
| Investable assets | Number of nonprofits | |
|---|---|---|
| < $100k |
265
| |
| $100k to $500k |
353
| |
| $500k to $1M |
160
| |
| $1M to $5M |
227
| |
| $5M to $10M |
30
| |
| $10M+ |
36
| |
Which private foundations paid excess distributions?
Almost 35,000 non-operating private foundations -- 70.7% -- gave more money away (paid excess distributions in IRS-speak) this past year than they were required to by the IRS. This is a good thing, and the IRS does not punish it in any way. The excess distributions were on average $1,297,446, but ranged from $2 to $2,145,238,015, with a median of $113,917. Here's a breakdown of the characteristics of these private foundations:
Types of grant recipients that private foundations that paid excess distributions
| Grantee type | Number of nonprofits | |
|---|---|---|
| Universities |
5,092
| |
| Religious organizations |
4,341
| |
| Animal shelters |
3,938
| |
| Private foundations |
3,923
| |
| School foundations |
3,673
| |
| High schools |
3,607
| |
| International humanitarian organizations |
3,588
| |
| Food banks |
3,411
| |
| Community foundations |
3,370
| |
| Christian organizations |
3,313
| |
| Public foundations |
3,180
| |
| Jewish organizations |
3,049
| |
| Homeless shelters |
2,976
| |
| Multiservice human service organizations |
2,764
| |
| Art museums |
2,641
| |
Investable asset sizes of private foundations that paid excess distributions
| Nonprofit type | Investable assets | |
|---|---|---|
| < $100k |
7,597
| |
| $100k to $500k |
9,437
| |
| $500k to $1M |
4,993
| |
| $1M to $5M |
8,242
| |
| $5M to $10M |
1,760
| |
| $10M+ |
2,223
| |
Are excise taxes on undistributed income common?
Excise taxes on undistributed income are not common, with only about 2% of private foundations subject to them each year. Furthermore, the amount of undistributed income subject to the taxes is not much compared to the size of assets held by the foundations. Far more common are private foundations giving away more money than legally required by law, with the vast majority of private foundations doing this.
