Washington, D.C.– The House Ways & Means Committee approved legislation authored by Congressman Erik Paulsen (MN-03) to modify and simplify the tax code for private charitable foundations. Currently, private foundations are subject to a two-tier tax structure that requires them to pay either a 1% or 2% excise tax depending on previous donations. To qualify for the lower rate, foundations must donate an amount greater than their average donations over the previous five years. This tax structure discourages large giving which is problematic in times of need – after natural disasters, terrorist attacks, or during tough economic times. Paulsen’s bill would eliminate the two-tier structure and replace it with a single rate set at 1%.

“Minnesota has consistently been a leader in helping others through charity,” said Paulsen. “However, our tax code currently discourages large giving even when it is needed the most. Not only that, a two-tier system creates confusion in a process that we should be making as simple as possible. Charitable giving decisions should be based on the needs of our communities, not the tax code.”       

Minnesota is home to over 1,400 charitable foundations that give more than $1 billion annually. Paulsen’s bill is endorsed by the Minnesota Council on Foundations. The legislation is expected to be brought up for a vote on the House floor next week.

For more information on Congressman Paulsen’s work in Congress visit paulsen.house.gov. 

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