Administrative expenses included in 5% requirement?
While some philanthropists believe that their foundations should not live on in perpetuity, and they want to give away all their funds within a set period of time, many foundations were seen fighting H.R. 7 that would have disallowed them from continuing to include administrative expenses, too, in the 5% minimum that they're required by law to give away each year.
H.R. 7 passed the House of Representatives but only after a compromise on the administrative expenses:
- Reduces the excise tax on net investment income of private foundations to 1%.
- Increases the Section 4941(a)(1) excise tax penalty on self-dealing from 5% to 25%.
- Redefines the definition of what is allowed as an administrative expense and requires the Secretary of the Treasury to write regulations on this definition.
- Disallows compensation for "disqualified persons" for that portion of the compensation that exceeds $100,000 per year.
- Disallows private and chartered air travel and any commercial air travel that exceeds coach class accommodations.