By the Private Foundation Services Team at PKF O’Connor Davies
Key Takeaways
1. Senate tax bill removes key provisions affecting private foundations.The U.S. Senate Finance Committee eliminated proposals such as the graduated tax rate on net investment income and adjustments related to fringe benefits and excess business holdings.
2. Provision expanding excess compensation tax remains unchanged.
While some private foundation-related measures were dropped, the proposal to expand the tax on excess compensation within tax-exempt organizations is still included in the bill.
3. Final outcome remains uncertain as legislative process continues.
The bill must still move through additional legislative steps before becoming law. Private foundations should continue to monitor developments and assess any potential impact.
Yesterday, Monday, June 16, the U.S. Senate Finance Committee released its version of “The One, Big, Beautiful Bill” (the tax bill). Most of the proposed provisions that would have directly impacted private foundations were removed. Below, we present a summary of those changes.
Pertinent Changes to the Bill
Under the U.S. Senate Finance Committee’s version, the following provisions were either removed or remained unchanged.
Removed:
- Graduated tax rate on net investment income based on a foundation’s assets (1.39% to 10.00%, based upon aggregate fair market value of all assets).
- Unrelated business taxable income increased by amount of certain fringe benefit expenses for which deduction is disallowed.
- Certain purchases of employee-owned stock disregarded for purposes of foundation tax on excess business holdings.
Unchanged:
- Expanding the application of the tax on excess compensation within tax-exempt organizations.
For more details on the original proposed provisions, please see our May 2025 Special Bulletin, House Bill Proposes Increase in Excise Tax for Certain Foundations, Among Other Provisions.
Not Out of the Woods Yet
While foundations may breathe a sigh of relief, the bill still has a few more hurdles to go through before final passage. We will continue monitoring developments out of Washington, D.C., and will keep you informed as updates become available.
Contact Us
We welcome the opportunity to answer any questions you may have related to this topic or any other accounting, audit, tax or advisory matters relative to private foundations. Please call 212.286.2600 or email any of the Private Foundation Services team members below:
- Thomas F. Blaney, CPA, CFE
Partner, Co-Director of Foundation Services
tblaney@pkfod.com - Joseph Ali, CPA
Partner
jali@pkfod.com
Scott Brown, CPA
Partner
sbrown@pkfod.com - Anan Samara, EA
Partner
asamara@pkfod.com - Christopher D. Petermann, CPA
Partner, Co-Director of Foundation Services
cpetermann@pkfod.com
Michael R. Koenecke, CPA
Elizabeth Gousse Ballotte
Partner
eballotte@pkfod.com
Partner
mkoenecke@pkfod.com