Treasury Weighs Foundation Payout Rule — or Does It?

Was it a revelation — or a misunderstanding?

At a seminar last week on non-profit organizations and the government, a top Treasury Department official suggested that his agency is prepared to re-examine the rules mandating that private foundations distribute at least 5 per cent of their investment assets each year to non-profit groups.

“We have had some conversations,” Donald C. Lubick, assistant secretary for tax policy, said in response to a question.

But later, Treasury spokesman Daniel Israel told The Chronicle that Mr. Lubick hadn’t meant to suggest the rule is under review.

To be sure, raising the minimum rate is an explosive issue, one that bureaucrats tend to handle with extreme care. Many grant makers say ratcheting up the payout threshold, which was set in 1969, would threaten the financial underpinnings of foundations. But some policy makers have considered pushing for a higher payout rate. Mr. Lubick’s comments could signal that the Clinton Administration supports the idea.

But that depends on what Mr. Lubick said — or meant to say.

At last week’s seminar, sponsored by the Urban Institute, Mr. Lubick was asked a three-part question: Do the Treasury Department or Congress have an interest in changing the payout rate? Does the department want the informational tax returns filed by private foundations to be governed by the same disclosure rules that apply to tax forms filed by other kinds of non-profit groups? And what is Congress’s view of tax-overhaul legislation proposed by Sen. Dan Coats, an Indiana Republican?

After answering the Coats question, Mr. Lubick said: “On the other questions, on the status of private foundations and the regulation of private foundations, we have had some conversations. It’s been really about 30 years since that’s been looked at thoroughly, and I think it would contribute to simplification if there were some greater conformity of rules applicable to private foundations.” He added: “I think those are questions that we’re really willing to explore, and we’ve talked some about it.”

Mr. Israel said that Mr. Lubick wasn’t referring to the payout rate, but rather to “the rules for foundations in general.”

“He himself has not had conversations about the payout rate,” the spokesman said of Mr. Lubick. “It’s not to say that no one here has.”