Part IX. Minimum Investment Return — 2025 Inst 990-PF (PDF)

Who must complete this section? All domestic foundations must complete Part IX.

Foreign foundations that checked Item D2 in the Heading section don’t have to complete Part IX unless claiming status as a private operating foundation.

Private operating foundations described in section 4942(j)(3) or 4942(j)(5) must complete Part IX in order to complete Part XIII.

Overview. A private foundation that isn't a private operating foundation must pay out, as qualifying distributions, its distributable amount, as determined in Part X. The distributable amount is the minimum investment return with certain adjustments. An organization’s minimum investment return, as determined in Part IX, is 5% of the total fair market value (less acquisition indebtedness) of its noncharitable-use assets.

Minimum investment return. In figuring the minimum investment return, include only those assets that aren't actually used or held for use by the organization for a charitable, educational, or other similar function that contributed to the charitable status of the foundation. Cash on hand and on deposit is considered used or held for use for charitable purposes only to the extent of the reasonable cash balances reported in Part IX, line 4. See the instructions for lines 1b and 4, later.

Assets held for the production of income or for investment aren't considered to be used directly for charitable functions even though the income from the assets is used for charitable functions. It is a factual question whether an asset is held for the production of income or for investment rather than used or held for use directly by the foundation for charitable purposes.

For example, an office building used to provide offices for employees engaged in managing endowment funds for the foundation isn't considered an asset used for charitable purposes.

Dual-use property. When property is used both for charitable and other purposes, the property is considered used entirely for charitable purposes if 95% or more of its total use is for that purpose. If less than 95% of its total use is for charitable purposes, a reasonable allocation must be made between charitable and noncharitable uses.

30 Instructions for Form 990-PF (2025)

Excluded property. Certain assets are excluded entirely from the computation of the minimum investment return. These include pledges of grants and contributions to be received in the future and future interests in estates and trusts.

Line 1a. Average monthly fair market value of securities. If market quotations are readily available, a foundation may use any reasonable method to determine the average monthly fair market value of securities such as common and preferred stock, bonds, and mutual fund shares, as long as that method is consistently used. For example, a value for a particular month might be determined by the closing price on the first or last trading days of the month or an average of the closing prices on the first and last trading days of the month. Market quotations are considered readily available if a security is any of the following.

Listed on an exchange in which quotations appear on a daily basis, including foreign securities listed on a recognized foreign national or regional exchange.
Regularly traded in the national or regional over-the-counter market for which published quotations are available.
Locally traded, for which quotations can be readily obtained from established brokerage firms.

If securities are held in trust for, or on behalf of, a foundation by a bank or other financial institution that values those securities periodically using a computer pricing system, a foundation may use that system to determine the value of the securities. The system must be acceptable to the IRS for federal estate tax purposes.

The foundation may reduce the fair market value of securities only to the extent that it can establish that the securities could only be liquidated in a reasonable period of time at a price less than the fair market value because of:

The size of the block of the securities,
The fact that the securities held are securities in a closely held corporation, or
The fact that the sale of the securities would result in a forced or distress sale.

Any reduction in value allowed under these provisions may not be more than 10% of the fair market value (determined without regard to any reduction in value).

Also, see Regulations sections 53.4942(a)-2(c)(4)(i)(b), (c), and (iv)(a), relating to the rules summarized above and to the general rules for valuing other assets.

Line 1b. Average of monthly cash balances. Figure cash balances on a monthly basis by averaging the amount of cash on hand on the first and last days of each month. Include all cash balances and amounts that may be used for charitable purposes (see Line 4. Cash deemed held for charitable activities , later) or set aside and taken as a qualifying distribution (see Part XI. Qualifying Distributions, later).

Line 1c. Fair market value of all other assets. The foundation must report on line 1c the value of all assets other than charitable-use assets, publicly traded securities, cash, and certain “excluded assets” described in Regulations section 53.4942(a)-2(c)(2). The foundation must value the assets reported on line 1c annually, except that real estate may be valued every 5 years if the independent appraisal procedures discussed under 5-year valuation below are followed. Alternatively, an annual valuation may be made by private foundation employees or by any other person even if that person is a disqualified person. If the IRS accepts an annual valuation, it is valid only for the tax year for which it is made. A new valuation is required for the next tax year.

5-year valuation. A written, certified, and independent appraisal of the fair market value of any real estate, including any improvements, may be determined on a 5-year basis by a qualified person.

The qualified person may not be a disqualified person (see C. Definitions, earlier) with respect to the private foundation or an employee of the foundation.

Commonly accepted valuation methods must be used in making the appraisal. A valuation based on acceptable methods of valuing property for federal estate tax purposes will be considered acceptable.

The appraisal must include a closing statement that, in the appraiser's opinion, the appraised assets were valued according to valuation principles regularly employed in making appraisals of such property, using all reasonable valuation methods. The foundation must keep a copy of the independent appraisal for its records. If a valuation is reasonable, the foundation may use it for the tax year for which the valuation is made and for each of the 4 following tax years.

Any valuation of real estate by a certified, independent appraisal may be replaced during the 5-year period by a subsequent 5-year certified, independent appraisal or by an annual valuation as described above. The most recent valuation should be used to figure the foundation's minimum investment return.

If the valuation is made according to the above rules, the IRS will continue to accept it during the 5-year period for which it applies even if the actual fair market value of the property changes during the period. For specific rules, see Regulations section 53.4942(a)-2(c)(4)(iv)(b).

Valuation date. An asset required to be valued annually may be valued as of any day in the private foundation's tax year, provided the foundation values the asset as of that date in all tax years. However, a valuation of real estate determined on a 5-year basis by a certified, independent appraisal may be made as of any day in the first tax year of the foundation to which the valuation applies.

Assets held for less than 1 tax year. To determine the value of an asset held less than 1 tax year, divide the number of days the foundation held the asset by the number of days in the tax year. Multiply the result by the fair market value of the asset.

Line 1e. Reduction claimed for blockage or other factors. If the fair market value of any securities, real estate holdings, or other assets reported on lines 1a and 1c reflects a blockage discount, marketability discount, or other reduction from full fair market value because of the size of the asset holding or any other factor, enter on line 1e the aggregate amount of the discounts claimed. Attach an explanation that includes the following information for each asset or group of assets involved.

A description of the asset or asset group (for example, 20,000 shares of XYZ, Inc., common stock).
For securities, the percentage of the total issued and outstanding securities of the same class that is represented by the foundation's holding.
The fair market value of the asset or asset group before any claimed blockage discount or other reduction.
The amount of the discount claimed.
A statement that explains why the claimed discount is appropriate in valuing the asset or group of assets for section 4942 purposes.

In the case of securities, there are certain limitations on the size of the reduction in value that can be claimed. See the instructions for Part IX, line 1a.

Line 2. Acquisition indebtedness. Enter the total acquisition indebtedness that applies to assets included on line 1. For details, see section 514(c)(1).

Line 4. Cash deemed held for charitable activities. Foundations may exclude from the assets used in the minimum investment return computation the reasonable cash balances

Instructions for Form 990-PF (2025) 31

necessary to cover current administrative expenses and other normal and current disbursements directly connected with the charitable, educational, or other similar activities. The amount of cash that may be excluded is generally 1.5% of the fair market value of all assets (minus any acquisition indebtedness) as figured in Part IX, line 3. However, if under the facts and circumstances an amount larger than the deemed amount is necessary to pay expenses and disbursements, then you may enter the larger amount instead of 1.5% of the fair market value on line 4. If you use a larger amount, attach an explanation.

Line 6. Short tax periods. If the foundation's tax period is less than 12 months, determine the applicable percentage by dividing the number of days in the short tax period by 365 (or 366 in a leap year). Multiply the result by 5% (0.05). Then multiply the modified percentage by the amount on line 5 and enter the result on line 6.