Estimated tax payments for private foundations.

• Author: Cornwell, Diane
• Position: Brief Article

Private foundations must make estimated tax payments of the excise tax on net investment income if that tax is $500 or more for the year (Sec. 6655(g)(3)). The tax imposed is 2% of net investment income (1%, in some cases). To avoid underpayment penalties in 1992, a foundation must timely pay amounts totaling 93% of the actual excise tax liability. The requirement increases to 94% for 1993 and 1994 and to 95% thereafter. Alternatively, a foundation may pay in an amount equal to the actual excise tax shown on its prior year Form 990-PF, Return of Private Foundation or Section 4947(a)(1) Charitable Trust Treated as a Private Foundation. (Foundations subject to the estimated tax rules applicable to "large" corporations may not be safe by using the prior year's tax.)

Private foundations that incur an annual excise tax liability of less than $500 are not required to make estimated tax payments. However, if estimated net investment income for the year is expected...