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Estimated tax payments for private foundations.

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 to increase (e.g., through the sale of appreciated securities), a payment may be necessary.

The first quarter tax payment for calendar-year foundations is due April 15. Generally, certain foundations might consider paying the entire estimated tax due for the year with the first quarter voucher, to avoid the administrative inconvenience of making additional quarterly payments during the year (otherwise due June 15, September 15 and December 15 for calendar-year foundations). Payments must be deposited with a bank authorized to receive Federal tax deposits with a Federal Tax Deposit Coupon (Form 8109 or 8109-B), at a qualified Federal tax depository bank.

From Djane Cornwell, CPA, Louisville, Ky., and Daniel D. Ceko, Esq., Chicago, Ill.
COPYRIGHT 1992 American Institute of CPA's
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1992, Gale Group. All rights reserved. Gale Group is a Thomson Corporation Company.

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Author:Ceko, Daniel D.
Publication:The Tax Adviser
Article Type:Brief Article
Date:Nov 1, 1992
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