990-PF Excise Tax for Failure to Distribute Income

[gfizer]

I have inherited several 990-PF returns for non-exempt charitable trusts filing 990-PF in lieu of Form 1041. These trusts are administered by one of our local banks. The trusts are very small in nature - most have less than $1,500 in annual investment income. Problem is this, the fiduciary spends/distributes only the income from the trust which in most cases is pursuant to the direction of the trust instrument. This was not a problem when interest rates were good, but now earnings rates are so low that they are not meeting their required 5% annual investment return and are starting to get creamed by the 30% excise tax for failure to distribute income. Does anyone know where I might start looking for information about converting these back to filing Form 1041, or if that's even possible, or have any other ideas or suggestions. This is becoming a vicious cycle and it's only going to get worse because most, and sometimes all, of the income is now being used to pay tax so no distributions are being made for charitable purposes. I'm sort of at a loss as to what to do.