What is Undistributed Income?

• Undistributed income refers to the amount of income that a private foundation has not yet distributed to fulfill its distributable amount threshold by the end of its tax year. 

• Foundations are required to make certain qualifying distributions each year. If they fail to do so, the undistributed income carries forward and may be subject to penalties or excise taxes. 

• Specifically, if a private foundation doesn’t distribute enough income to meet IRS requirements (typically 5% of its non-charitable use assets), this undistributed income can result in excise taxes.