ABSTRACT
After 1981, when Congress relaxed payout1 requirements to a minimum 5% of net investment assets, the ratio of grants payout to assets for the universe of foundations fell precipitously from about 8% in 1981 to about 6% by the end of the decade (see figure 7.1). In recent years, the ratio has declined further, falling below 5% in 1997. Such a low grants payout ratio may still meet the letter of the law because grants are not the only “qualifying distribution” that meets the legal requirement, and because foundations are allowed to average over five years. The question is whether such a low grants payout ratio is now economically sensible.
