On May 20th, Congressman Erik Paulsen (R-MN-3) introduced H.R. 4691, a bill that would simplify the private foundation excise tax to a flat rate of 1 percent. The bill is co-sponsored by Congressman Danny Davis (D-IL-7).
As outlined in a release by the Council on Foundations, the single, flat rate of 1 percent will simplify compliance for private foundations, improve efficiencies, and remove grantmaking disincentives. Private foundations dedicate valuable time and resources to managing the complex, two-tiered tax—resources that would be better spent addressing the needs of communities across America. And, the tax can actually serve to disincentivize increased grantmaking in a calendar year. Any increase in annual giving, relative to a foundation’s assets, will increase the five-year average payout used to calculate the tax liability. This is particularly devastating when late-year emergencies or disasters occur, and foundations step in to help communities in need.