Foundation Payout Increase Policy
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The endowment payout rate of private foundations for charitable purposes has been 5% since last established in the Economic Recovery Tax Act of 1981. Despite other tax policies having been reassessed in that time, this portion of the tax code has been untouched for almost 30 years, during which the needs of the nonprofit sector have changed drastically. A small number of private foundations have increased their payout rate to give more immediate funding to the organizations that they support, but the vast majority give at or near the minimum 5% required. This policy recommends increasing the private foundation payout rate from 5% to 8% to account for higher indirect costs at nonprofits and the immediacy of many societal issues. While this policy is modest in scope, for the nonprofit field, having a 3% increase in available annual charitable giving could have significant and lasting positive impact on the field.