A payout requirement is the minimum amount that private foundations must spend each year for charitable purposes. This amount is paid in the form of qualifying distributions, which include grants and, within certain limits, the administrative cost of making grants. Generally, a private foundation must meet or exceed an annual payout requirement of five percent of the average market value of its net investment assets in order to avoid paying excise taxes.
By knowing how much a private foundation holds in assets, you can roughly estimate how much it should pay in grants each year to meet its payout requirement. Look at a private foundation’s Form 990-PF to learn about its assets and grants paid. To learn more about Form 990-PF and where to access them, see our articles on this topic.
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