Income earned is normally assessed an overhead charge (tax) at the time of expenditure (in the ledger/class 22 fund) as endowment fund earnings are utilized. The current rate is 50%; however, half of the overhead collected is rebated to the Department for use at the discretion of the Chairman to defray departmental expenses.
If the funds placed in the endowment were from restricted or gift sources and were subsequently disendowed, the overhead would be paid on the ledger/class 22 account at the full rate in effect at the time the funds were spent. The disendowed funds, if investment type 5, would be placed in a gift account, ledger/class 22.
If the funds were from unrestricted sources (operations) they will be identified in the endowment fund as investment type 6. When disendowed, these funds the original investment, investment type 6, would not be subject to overhead on the grounds that the income was taxed as it was earned; however, the difference between the book value and the market value, the increase, would be taxed at the then current rate. These funds, when disendowed, are normally transferred to ledger/class 15.
The plowback (reinvested spending distributions) on all quasi-endowment funds would be taxed on disendowment at the current rate used for funds being spent as earned. The tax would be levied at the time of disendowment.