Tuesday, August 31, 2021
The IRS Statistics of Income program has reported on its Domestic Private Foundation and Charitable Trust Statistics webpage the calendar year 2020 excise taxes reported by charities of all types on Form 4720, not just private foundations and trusts.. The largest amount by far is for the section 4960 tax on excess executive compensation, totaling more than $96 million. That figure represents almost 90 percent of all excise taxes reported, which totaled slightly more than $107 million. While more entities (524 versus 302) reported the section 4942 excise tax on private foundation undistributed income, the total amount of that tax reported was only a little over $5 million.
Interestingly, the section 4968 tax on the net investment income of private colleges and universities was paid by so few entities, and was such a small amount, that it is not separately listed but instead aggregated with three other excise taxes to prevent disclosure of specific taxpayer data. Only 9 entities reported any of those four excise taxes, which also included the tax on taxable distributions of sponsoring organizations, the tax on failure by hospitals to meet the section 501(r) requirements, and the tax on premiums paid on personal benefit contracts. The total tax reported for all four taxes was only a little over $3 million. While college and university endowments struggled in the fiscal year ending in June 2020, they still experienced positive returns. I wonder whether most colleges and universities with large endowments potentially exposed to this tax have found ways to minimize the investment income subject to tax or to avoid the tax entirely.