Handbook of Research on Nonprofit Economics and Management
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Handbook of Research on Nonprofit Economics and Management

Second Edition

Edited by Bruce A. Seaman and Dennis R. Young

Building on the success of the first edition, this thoroughly revised and expanded edition explores (1) areas of general agreement from previous research; (2) areas of conflicting results and unexplored questions; (3) the relative roles of theory, data availability and empirical analysis in explaining gaps in our knowledge; and (4) what must be done to improve our knowledge and extend the literature. Selected original chapters addressing especially challenging topics include the value of risk management to nonprofit decision-making; nonprofit wages theory and evidence; the valuation of volunteer labor; property tax exemption for nonprofits; when is competition good for the third sector; and product diversification and social enterprise; international perspectives; the application of experimental research and the macroeconomic effects of the nonprofit sector.
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Chapter 3: Public policies and private foundations: payout rates and the (dreaded) excise tax

Patrick Rooney, Richard Sansing and Jon Bergdoll


This chapter provides an overview of private foundations and an in-depth discussion of the minimum distribution requirements for foundations. We conduct simulations under several scenarios to determine the effects of either higher payout requirements generally and/or a 2 percent supplemental payout during periods of economic downturns. These would help offset the macroeconomic and microeconomic losses during recessions. We conclude that foundations could easily sustain themselves with a supplemental 2 percent payout during recessions and that a permanent increase in rates would most likely lead to a decline in the value of the corpus over simulations of 50 and 100 years, but the likelihood of closure (asset values falling below $5000) is essentially zero for payout rates of 15 per cent or less over the next 50 years and 9 percent or less over the next 100 years. Finally, the excise tax needs to be either eliminated completely or fixed at 1 percent forever.

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