As the extended 990-PF filing deadline draws near, private foundations operating on a calendar year accounting period should take note. It is imperative that the leaders of such foundations verify that they have complied with the 1.39% net investment income excise tax. Moreover, this should be accurately accounted for on the foundation’s 2022 tax return. As reported by McGuireWoods LLP, this article serves to remind and assist foundation leaders in their calculation of net investment income excise tax and an overview of their payment obligations.
The investment income of a private foundation encompasses not only the income derived from its investments such as rent, interest, dividends, and royalties. It also includes the profits from the sale or other disposition of property—other than that which the foundation holds primarily for purposes aligned with its exempt purpose.
Most importantly, failing to pay the excise tax on net investment income can result in severe penalties. Hence, foundation leaders should be diligent in ensuring that correct calculations are made and reported, to prevent repercussions that can impact the foundation’s bottom line.
A key way to safeguard against any missteps is to consult qualified tax professionals who can assist in determining the foundation’s net investment income, calculating the excise tax due, and ensuring that it is paid timely. By making the necessary preparations, foundation leaders can avoid disruptions and ensure smooth operations and compliance.
Given the complexities intertwined in tax obligations, it is always advisable to liaise with tax professionals, enhancing the protection against potential oversights. This should be regarded as an essential plan of action, aiming to ensure the sustainability and longevity of a foundation’s efforts.