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Abatement of private foundation termination taxes

The IRS can abate the un­paid part of private foundation termination tax if:

  1. The private foundation distributes all of its net assets to one or more charitable orga­nizations described in section 509(a)(1) that have been in existence and so de­scribed for at least 60 months, or
  2. The IRS receives effective assurance through corrective action taken in state proceedings that assets dedicated to chari­table purposes will, in fact, be used for charitable purposes.

Corrective action in state proceedings. The IRS may abate the section 507(c) tax if corrective action is taken in state proceedings.  For the tax to be abated, an appropriate state officer must certify that either a state officer or a recipient charitable organization has initiated corrective action under state law, as may be ordered or approved by a court of competent jurisdiction.  The state officer’s certification must be issued within a year from the date the IRS notifies state officials of the deficiency, pursuant to Code section 6104(c).

Corrective action is the vigorous enforce­ment of state laws sufficient to assure imple­mentation of the excise tax provisions of Chapter 42 and to ensure that foundation assets are preserved for charitable purposes.


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Page Last Reviewed or Updated: 29-Apr-2014