Payout requirement
The rule that a private foundation must distribute roughly five percent of the average market value of its investment assets each year, or face an excise tax. It is why a foundation’s asset figure is a rough forecast of its future giving.
Part of the GrantTrove grant funding glossary — one entry for every field the catalogue stores.
Also called Five percent rule · Minimum distribution requirement
In detail
The five percent is a floor rather than a target, and it counts qualifying distributions — reasonable administrative expenses among them — rather than grants alone. Actual grantmaking is therefore usually below five percent of assets.
It is calculated on an average of asset values and paid over a two-year window, so a foundation can be compliant while giving unevenly across years.
Against actual giving
The requirement predicts roughly what a foundation must move. `giving_total` on a funder record is what a filing says it actually granted in a stated year, and the two are related but not equal. We publish the second, dated, and never the first, because a projected payout is a number no filing contains.
How GrantTrove stores it
- `assets_total` and `giving_total` appear together on a profile with `fiscal_year` and `data_year`, so the relationship between them is visible without being computed for you.
- We publish no forecast of future giving. A forecast would be our arithmetic presented among figures that came from filings.
Common questions
Does five percent of assets mean five percent in grants?
No. Qualifying distributions include some administrative costs, so grantmaking is usually lower.
Do you project next year’s giving?
Never. We publish what a filing states, with its year.
Does it apply to community foundations?
No. It is a private foundation rule.