Generally, the start-up period consists of the four tax years after the tax year in which the foundation was created (or otherwise became a private foundation). For this purpose, a foundation is considered created in the tax year in which its distributable amount first exceeds $500. The start-up period minimum amount - the amount that a private foundation must actually distribute during its start-up period - is not less than the sum of:
- 20 percent of its distributable amount for the first tax year of the start-up period,
- 40 percent of its distributable amount for the second year of the period,
- 60 percent of its distributable amount for the third year of the period and
- 80 percent of its distributable amount for the fourth year of the period.
The sum of these amounts must be distributed before the end of the start-up period. No part must be distributed in any particular tax year of the start-up period.
In general, only a distribution actually made during the start-up period is taken into account in determining whether the foundation has distributed the start-up period minimum amount. However a distribution actually made during the tax year in which the foundation was created (the year immediately preceding the foundation's start-up period) may be treated as made during the start-up period. Also, a distribution actually made within 5-1/2 months after the end of the start-up period will be treated as made during the start-up period if (a) the foundation was unable to determine its distributable amount for the fourth tax year of the start-up period until after the end of the period and (b) the foundation actually made distributions before the end of the start-up period based on a reasonable estimate of its distributable amount for that fourth tax year.