posted on: Monday, October 22, 2007

The question of foundation payout remains to be a highly contested issue in philanthropy. The minimum annual payout requirement under U.S. laws is 5 percent of foundation assets, and this amount can include both foundation grants and administrative costs. For over a decade, NCRP has been calling for a 6 percent all-grants minimum payout (see Recommendations for Reform of the United States Philanthropic Sector).

The Northern California Grantmakers and the New York Regional Association of Grantmakers adds to the dialogue with their recent report Beyond Five Percent: The New Foundation Payout Menu. The report looks at 13 foundations, each with assets sizes ranging from a few million to several billion dollars, and how they’ve gone beyond the traditional minimum payout rate and the variety of approaches they used as alternatives.

The case studies offer an interesting look at the different goals of these foundations, demonstrating how that the above-5 percent route is not necessarily limited to foundations seeking to spend down by a certain period of time. It also illustrates the actual and potential impact these foundations have on their grantee organizations and the communities these organizations serve.

Other foundations should look at Beyond Five Percent as a challenge and inspiration to become more responsive stewards of their tax-exempt assets.