Can site visit expenses count toward our 5% distribution requirement?

Yes. According to federal tax law, qualifying distributions include reasonable administrative expenses necessary for conducting a foundation’s charitable activities (e.g., staff salaries, insurance, training, travel, rent). Reasonable site visit expenses qualify here.

Other qualifying distributions include:

  • Most grants for charitable purposes to public charities, noncharities, and eligible individuals (e.g., scholarships) if specific IRS rules are followed; one important exception is the case of grants to certain supporting organizations
  • Direct charitable activities (e.g., providing technical assistance, conducting research, publishing reports)
  • Qualified set-asides with IRS approval; in such cases, the IRS determines the charitable merit of accumulating money or property for a specific long-term project (e.g., constructing a building, launching a research program)
  • PRIs, which are investments made by foundations with the primary purpose of accomplishing charitable goals, not producing income (e.g., below-market loans to an environmental group, stock investments in a minority-owned bank)

The following expenses do not count as qualifying distributions:

  • Expenses related to ongoing investment management, such as investment consultant fees, custodial fees, or fees for attending investment conferences
  • Portions of salaries or meeting expenses related to overseeing investments
  • Purchase of assets used to conduct and manage investment activity (e.g., new computer to track investments, office space for staff monitoring investments)
  • Expenditures made to correct prior years’ deficiencies
  • Grants to certain supporting organizations; although these grants are allowed if foundations exercise expenditure responsibility, they will not count as qualifying distributions under any circumstances

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