Senate Measure Seeks to Spur Foundations to Give More

That excise tax is reduced to 1 percent in any year that a foundation distributes more than the average percentage of assets it has given away over the five preceding tax years, a break that was intended as an incentive to give more.

But the increased spending naturally raises the five-year rolling average going forward. And that, says the Council on Foundations, means that a foundation that increases its payout, to address a crisis like Hurricane Katrina or the current economic implosion, will pay taxes at the reduced rate for one year but the higher rate for some time after that, unless it continues to make greater and greater payouts.