November 5, 1998 | Read Time: 2 minutes
President Clinton has signed into law a bill that makes permanent a key tax break for donors who give appreciated stock to private foundations.
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New Tax Provisions That Affect Private Foundations
The tax provision, which was passed by Congress as part of a massive spending measure, also will make it much easier for the public to get information about foundations’ finances.
Until June 30 of this year, donors could deduct the full market value of appreciated stock that they gave to private foundations. But starting on July 1, such donors had been allowed to deduct only the amount they originally spent to buy the stock.
The new law not only renews the break and makes it retroactive to July 1, but also makes it permanent. That means that foundations will no longer have to return to Congress year after year to seek renewal of the provision, which has expired several times. Moreover, donors will no longer be confused about when they are eligible for the break.
The provision will cost the Treasury an estimated $732-million over nine years.
The appreciated-stock provision is packaged with a change in the disclosure rules for private foundations.
Under the requirement, foundations will have to provide their three most-recent informational tax returns, called Forms 990-PF, to anyone who requests them in person. Foundations will be given 30 days to send copies to people who make written requests for the forms.
Under previous law, a private foundation had to make its Forms 990-PF available only for inspection — not for photocopying — if the request for the form was made in person by a U.S. citizen within 180 days after the foundation had published a notice in a newspaper that it had filed the annual return with the government. The new law drops the requirement that private foundations publish notices.
The statute brings the disclosure requirements for foundations into line with those passed by Congress for charities two years ago.
Neither the foundation nor the charity requirements will take effect until after the Internal Revenue Service issues final regulations to explain how it will enforce the law.
Congress noted that the tax returns of many private foundations are lengthy and could be difficult to photocopy and mail. Thus, lawmakers said they expected the regulations on private foundations to deal with that issue by permitting people to request copies of portions of the returns or by coming up with other reasonable options.
The policy change had been supported by the Council on Foundations, Independent Sector, and the National Council of Nonprofit Associations.
