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Form 990-PF is used to figure the tax based on investment income, and to report charitable distributions and activities.
For tax years beginning after Dec. 20, 2019, foundations are generally subject to a flat 1.39% excise tax on their net investment income (e.g., interest, dividend, rents, royalties and capital gains). This tax is intended not to be punitive, but rather to pay the governments cost of regulating private foundations.
Private foundation taxable expenditures are grants or expenditures prohibited by the IRS.
Although private foundations are exempt from federal income tax, their investment income is subject to an excise tax of 1.39 percent, whereas growth of a donor-advised fund is not taxed.
Private foundations figure the estimated tax by multiplying their estimated net investment income by the 1.39% (0.0139) tax rate. Taxable private foundations and nonexempt charitable trusts treated as private foundations, see O.

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In fact, if the foundation uses the appreciated stock to make grants instead of cash, the foundation can avoid the excise tax on the stocks built-in gain entirely.

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