January 21, 2020
Authored by: Keith Kehrer
Section 4940 of the Code imposes an excise tax on the “net investment income” of private foundations. Historically, the excise tax was 2%, with an opportunity for reduction to 1% for a year in which the foundation’s qualifying distributions exceeded a certain amount calculated pursuant to a complicated formula. Recent tax legislation simplifies the two-tiered system by replacing it with a flat rate of 1.39%. The new rate is effective for tax years beginning after the date of enactment; which would be 2020 for calendar year private foundations.