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Taxes on Private Foundation Failure to Distribute Income

Initial tax.  An excise tax of 30 percent is imposed on the undistributed income of a private foundation that has not been distributed before the first day of the second (or any succeeding) tax year following the year earned, if the first day falls within the taxable period.  A short tax year is considered a tax year.

The initial tax may be abated if the foundation can show that the failure was due to reasonable cause and not to willful neglect, and that the failure to distribute was corrected within the correction period.

Additional tax.  If the initial tax is imposed and the undistributed income has not been distributed by the end of the taxable period, an additional tax of 100 percent of the amount remaining undistributed will be imposed.  The tax will not be assessed, or if assessed will be abated, if the undistributed income is reduced to zero during the correction period.

Payment of the excise tax is required in addition to, rather than instead of, making required distributions of undistributed income.


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Page Last Reviewed or Updated: 30-Apr-2013