Tax-Policy Change Is Proposed for Charities

Foundations are required by law to distribute 5% of their assets annually. But if they significantly increase that distribution in a given year, it raises the five-year rolling average. That, in turn, makes it harder to exceed the average to get the tax dropped to 1%.

Nonprofit lobbyists have pushed to have the tax restructured, arguing the current system discourages foundations from making big payouts in any given year. "The need for charitable gifts is greater than ever, and we should be encouraging foundations to increase giving," Mr. Schumer said in a prepared statement. "Foundations play an important role in investing in our universities, the arts, community charities, and vital programs for those most in need."