The Failure of Private Foundations to Increase Qualifying Distributions to Qualify for a Fifty-Percent Tax Rate Reduction

Abstract:     
This study investigates the trade‐off costs faced by private foundations. Findings indicate that foundations perceive distributing funds for charitable purposes as costly and sometimes choose to pay a higher tax rate on net investment income rather than pay higher amounts of qualifying distributions. Foundations also perceive qualifying distributions as more costly in a 'bear' market, which is troublesome given philanthropic need may be the greatest during bear markets. Finally, distributions are perceived as more costly when current year income is insufficient and for older foundations. Policy implications associated with these findings are discussed.

Keywords: Private Foundations, Qualifying Distributions

JEL Classifications: L31, M40

Working Paper Series