The minimum amount that private foundation are required by the IRS to expend for charitable purposes.

This is related to the concept of "qualifying distribution," and is commonly referred to as the 5% spending rule. The 5% is calculated on the average monthly value of the fondation's investments over the preceding 12 months. Assets held by the foundation for charitable purposes (such as the foundation's office equipment or paintings on loan to a museum) are not included in the investment asset category. In general, payout requirement is satisfied through administrative expenses and grants. However, expenses to manage endowment investments do not count toward the 5% floor.

The minimum amount that a private foundation is required to expend for charitable purposes (includes grants and necessary and reasonable administrative expenses). By law, a private foundation must pay out annually approximately 5% of the average market value of its assets, which may be based on a three-year rolling average.