As you know, private foundations are generally exempt from federal income taxes. However, in certain circumstances, excise taxes may be imposed on the specific income of a private foundation. In two recent pronouncements, the IRS has identified two types of income that will no longer be subject to excise taxes.
Under these pronouncements, the IRS has stated that excise taxes will no longer apply to the net investment income you receive from an estate or trust. In addition, excise taxes imposed on your undistributed income will no longer apply to distributions you receive from a split-interest trust.
Depending on the amount of income you receive from these sources, you may be able to reduce your estimated tax payments. As these changes are effective retroactively, you may also be eligible to obtain a refund of excise taxes paid on these income types in a prior tax year.
If you wish to file a refund claim based on these pronouncements, you will need to prepare an amended return for the tax year in question. If you do not wish to prepare an amended return yourself, our office can assist you with preparing and filing the return.
If you have any questions about these pronouncements and how they affect the excise tax liability of your private foundation, or if you have any general questions about your private foundation status, contact us today.
