EXCISE TAX PLANNING

The Bradley Foundation is subject to a 2% excise tax on net investment income. Investment income normally includes interest, dividends and realized gains on investments.

Foundations can qualify for a reduced 1% excise tax if a foundation's payout ratio in the current tax year exceeds the average of the payout ratios for the preceding five years. For the years 1993 through 1997 the Bradley Foundation qualified for the reduced 1% excise tax rate.

The payout ratio is calculated as follows:

Qualifying Distributions [Grants paid + G&A Expenses +

Program Related Investments (PRIs)]

____________________________________________________________

Total non-charitable use assets

The Bradley Foundation's target payout ratio for 1998 is 6.6%. This would require the Foundation to make qualifying distributions in 1998 of approximately $39 million as follows:

Grant payments	$32,000,000

General and administrative

expenses	3,000,000

Program related investments

( PRI ) -- Stadium District

Payment	4,000,000

$39,000,000

The $4,000,000 PRI payment is actually not due until January 1, 1999. Tab 4 includes a further discussion regarding the Stadium Financing Commitment and the advance payment.

Based on preliminary estimates, the Foundation will have approximately $75,000,000 in net investment income subject to excise tax in 1998. This translates into an excise tax of $1,500,000 at a 2% rate and $750,000 a 1% rate.

The only practical way the Foundation can achieve the $39,000,000 threshold for qualifying distributions in 1998 is to make an advance payment of at least $4,000,000 on or before December 31, 1998 toward the Stadium Financing Commitment. This strategy would save the Foundation approximately $750,000 in excise taxes for 1998.

It is recommended that the Foundation make every effort to achieve the $39,000,000 qualifying distribution threshold, including the $4,000,000 payment to the Stadium District on or before December 31, 1998.