query, 5% rule William Campbell 15 Oct 1997 09:02 EST

Last night, during a proposal-writing workshop I was giving  to community
folks, I explained that foundations have to give away 5% of their assets each
year in order to remain foundations under IRS regulations.  Someone said that a
 local foundation is so small that it lets requests build up and gives grants
every other year; are they therefore in violation of this rule?  (They do file
1099's each year, apparently.)  I confess I was stumped.  And so I ask the
group--does anyone know?  Is there some sort of averaging principle which would
allow foundations to do this?  Some other arcane rule?

The principle remains the same, of course--they have to give away the money,
whether this year or next.  But I promised this person an answer, so I would
appreciate any information anyone can send me.

Regards, Bill Campbell
Director, Grants & Research
University of Wisconsin-River Falls