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505

" (B) any amount paid to acquire an asset used (or held for use) directly in carrying out one or more purposes described in section 1 7 0 (c)(2)(B). _ Post, p. 553. " (2) CERTAIN SET-ASIDES.—Subject to such terms and conditions as may be prescribed by the Secretary or his delegate, an amount set aside for a specific project which comes within one or more purposes described in section 170(c)(2)(B) may be treated as a qualifying distribution, but only if, at the time of the set-aside, the private foundation establishes to the satisfaction of the Secretary or his delegate that— " (A) the amount will be paid for the specific project within 5 years, and " (B) the project is one which can be better accomplished by such set-aside than by immediate payment of funds. For good cause shown, the period for paying the amount set aside may be extended by the Secretary or his delegate. " (3) CERTAIN CONTRIBUTIONS TO SECTION 501(C)(3) ORGANIZA-

TIONS.—For purposes of this section, the term 'qualifying distribution' includes a contribution to a section 501(c)(3) organization described in paragraph (1)(A)(i) or (ii) if— " (A) not later than the close of the first taxable year after its taxable year in which such contribution is received, such organization makes a distribution equal to the amount of such contribution and such distribution is a qualifying distribution (within the meaning of paragraph (1) or (2), without regard to this paragraph) which is treated under subsection (h) as a distribution out of corpus (or would be so treated if such section 501(c)(3) organization were a private foundation which is not an operating foundation), and " (B) the private foundation making the contribution obtains adequate records or other sufficient evidence from such organization showing that the qualifying distribution described in subparagraph (A) has been made by such organization. " (h) TREATMENT or QUALIFYING DISTRIBUTIONS.—

"(1) IN GENERAL.—Except as provided in paragraph (2), any qualifying distribution made during a taxable year shall be treated as made— " (A) first out of the undistributed income of the immediately preceding taxable year (if the private foundation was subject to the tax imposed by this section for such preceding taxable year) to the extent thereof, " (B) second out of the undistributed income for the taxable year to the extent thereof, and "(C) then out of corpus. For purposes of this paragraph, distributions shall be taken into account in the order of time in which made. " (2) CORRECTION OF DEFICIENT DISTRIBUTIONS FOR PRIOR TAXABLE YEARS, ETC.—In the case of any qualifying distribution which

(under paragraph (1)) is not treated as made out of the undistributed income of the immediately preceding taxable year, the foundation may elect to treat any portion of such distribution as made out of the undistributed income of a designated prior taxable year or out of corpus. The election shall be made by the foundation at such time and in such manner as the Secretary or his delegate shall by regulations prescribe.

o^^nlVn^^^' 26 USC 501.

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' ' (i) ADJUSTMENT OF DISTRIBUTABLE AMOUNT W H E R E DISTRIBUTIONS DURING PRIOR YEARS HAVE EXCEEDED INCOME.—

Post,

p. 55 2.

"(1) IN GENERAL.—If, for the taxable years in the adjustment period for which an organization is a private foundation— " (A) the aggregate qualifying distributions treated (under subsection (h)) as made out of the undistributed income for such taxable year or as made out of corpus (except to the extent subsection (g)(3) with respect to the recipient private foundation or section 170(b)(1)(E) (ii) applies) during such taxable years, exceed " (B) the distributable amounts for such taxable years (determined without regard to this subsection), then, for purposes of this section (other than subsection (h)), the distributable amount for the taxable year shall be reduced by an amount equal to such excess. " (2) TAXABLE YEARS I N ADJUSTMENT PERIOD.—For purposes of

2 ^usc ^^212 ^°'

paragraph (1), with respect to any taxable year of a private foundation the taxable years in the adjustment period are the taxable years (not exceeding 5) beginning after December 31, 1969, and immediately preceding the taxable year, "(j) OTHER DEFINITIONS.—For purposes of this section— "(1) TAXABLE PERIOD.—The term 'taxable period' means, with respect to the undistributed income for any taxable year, the period beginning with the first day of the taxable year and ending on the date of mailing of a notice of deficiency with respect to the tax imposed by subsection (a) under section 6212. " (2) CORRECTION PERIOD.—The term 'correction period'means,

26 USC 6213.

with respect to any private foundation for any taxable year, the period beginning with the first day of the taxable year and ending 90 days after the date of mailing of a notice of deficiency (with respect to the tax imposed by subsection (b)) under section 6212, extended by— " (A) any period in which a deficiency cannot be assessed under section 6213(a), and " (B) any other period which the Secretary or his delegate determines is reasonable and necessary to permit a distribution of undistributed income under this section. "(3) OPERATING FOUNDATION.—For purposes of this section, the term 'operating foundation' means any organization— " (A) which makes qualifying distributions (within the meaning of paragraph (1) or (2) of subsection (g)) directly for the active conduct of the activities constituting the purpose or function for which it is organized and operated equal to substantially all of its adjusted net income (as defined in subsection (f)); and " (B)(i) substantially more than half of the assets of which are devoted directly to such activities or to functionally related businesses (as defined in paragraph (5)), or to both, or are stock of a corporation which is controlled by the foundation and substantially all of the assets of which are so devoted, "(ii) which normally makes qualifying distributions (within the meaning of paragraph (1) or (2) of subsection (g)) directly for the active conduct of the activities constituting the purpose or function for which it is organized and operated in an amount not less than two-thirds of its minimum investment return (as defined in subsection (e)), or

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"(iii) substantially all of the support (other than gross investment income as defined in section 509(e)) of which is normally received from the general public and from 5 or more exempt organizations which are not described in section 4946 (a)(1)(H) with respect to each other or the recipient foundation; not more than 25 percent of the support (other than gross investment income) of which is normally received from any one such exempt organization; and not more than half of the support of which is normally received from gross investment income. "(4) ALLOWABLE DISTRIBUTION PERIOD.—The t^rm 'allowable distribution period' means, with respect to any private foundation, the period beginning with the first day of the first taxable year following the taxable year in which the incorrect valuation (described in subsection (a)(2)) occurred and ending 90 days after the date of mailing of a notice of deficiency (with respect to the tax imposed by subsection (a)) under section 6212 extended " (A) any period in which a deficiency cannot be assessed under section 6213(a), and " (B) any other period which the Secretary or his delegate determines is reasonable and necessary to permit a distribution of undistributed income under this section. "(5) FUNCTIONALLY RELATED BUSINESS.—The term 'functionally related business' means— " (A) a trade or business which is not an unrelated trade or business (as defined in section 513), or " (B) an activity which is carried on within a larger aggregate of similar activities or within a larger complex of other endeavors which is related (aside from the need of the organization for income or funds or the use it makes of the profits derived) to the exempt purposes of the organization. "SEC. 4943. TAXES ON EXCESS BUSINESS HOLDINGS.

507 Ante,

p. 496.

Definition.

68A Stat. 770. 26 USC 6:212.

Definition.

P o s t, pp. 541, 542.

" (a) INITIAL T A X. —

" (1) IMPOSITION.—There is hereby imposed on the excess business holdings of any private foundation in a business enterprise during any taxable year which ends during the taxable period a tax equal to 5 percent of the value of such holdings. " (2) SPECIAL RULES.—The tax imposed by paragraph (1) —

" (A) shall be imposed on the last day of the taxable year, but " (B) with respect to the private foundation's holdings in any business enterprise, shall be determined as of that day during the taxable year when the foundation's excess holdings in such enterprise were the greatest. "(b) ADDITIONAL T A X. — I n any case in which an initial tax is imposed under subsection (a) with respect to the holdings of a private foundation in any business enterprise, if, at the close of the correction period with respect to such holdings, the foundation still has excess business holdings in such enterprise, there is hereby imposed a tax equal to 200 percent of such excess business holdings. "(c) EXCESS BUSINESS HOLDINGS.—For purposes of this section— "(1) IN GENERAL.—The term 'excess business holdings' means, with respect to the holdings of any private foundation in any business enterprise, the amount of stock or other interest in the enterprise which the foundation would have to dispose of to a person other than a disqualified person in order for the remaining

Definition.

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holdings of the foundation in such enterprise to be permitted holdings. "(2)

PERMITTED HOLDINGS I N A CORPORATION.—

" (A) IN GENERAL.—The permitted holdings of any private foundation in an incorporated business enterprise are— " (i) 20 percent of the voting stock, reduced by "(ii) the percentage of the voting stock owned by all disqualified persons. I n any case in which all disqualified persons together do not own more than 20 percent of the voting stock of an incorporated business enterprise, nonvoting stock held by the private foundation shall also be treated as permitted holdings. " (B) 3 5 PERCENT RULE WHERE THIRD PERSON HAS EFFECTIVE CONTROL o r ENTERPRISE.—If

"(i) the private foundation and all disqualified persons together do not own more than 35 percent of the voting stock of an incorporated business enterprise, and "(ii) it is established to the satisfaction of the Secretary or his delegate that effective control of the corporation IS in one or more persons who are not disqualified persons with respect to the foundation, then subparagraph (A) shall be applied by substituting 35 percent for 20 percent. " (C) 2 PERCENT DE MINIMIS RULE.—A private foundation shall not be treated as having excess business holdings in any corporation in which it (together with all other private foundations which are described in section 4946(a)(1)(H)) owns not more than 2 percent of the voting stock and not more than 2 percent in value of all outstanding shares of all classes of stock. "(3) PERMITTED HOLDINGS IN PARTNERSHIPS, ETC.—The permitted holdings of a private foundation in any business enterprise which is not incorporated shall be determined under regulations prescribed by the Secretary or his delegate. Such regulations shall be consistent in principle with paragraphs (2) and (4), except that— " (A) in the case of a partnership or joint venture, 'profits interest' shall be substituted for 'voting stock', and 'capital interest' shall be substituted for 'nonvoting stock', " (B) in the case of a proprietorship, there shall be no permitted holdings, and " (C) in any other case, 'beneficial interest' shall be substituted for 'voting stock'. "(4)

PRESENT HOLDINGS.—

" (A)(i) I n applying this section with respect to the holdings of any private foundation in a business enterprise, if such foundation and all disqualified persons together have holdings in such enterprise in excess of 20 percent of the voting stock on May 26, 1969, the percentage of such holdings shall be substituted for '20 percent,' and for '35 percent' (if the percentage of such holdings is greater than 35 percent), wherever it appears in paragraph (2), but in no event shall the percentage so substituted be more than 50 percent. "(ii) If the percentage of the holdings of any private foundation and all disqualified persons together in a business enterprise (or if the percentage of the holdings of the private foundation in such enterprise) decreases for any reason, clause (i) and subparagraph (D) shall, except as provided

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in the next sentence, be applied for all periods after such decrease by substituting such decreased percentage for the percentage held on May 26, 1969, but in no event shall the percentage substituted be less than 20 percent. For purposes of this clause, any decrease in percentage holdings attributable to issuances of stock (or to issuances of stock coupled with redemptions of stock) shall be determined only as of the close of each taxable year of the private foundation unless the aggregate of the percentage decreases attributable to the issuances of stock (or such issuances and redemptions) during such taxable year equals or exceeds 1 percent, "(iii) The percentage substituted under clause (i), and any percentage substituted under subparagraph (D), shall be applied both with respect to the voting stock and, separately, with respect to the value of all outstanding shares of all classes of stock. "(iv) I n the case of any merger, recapitalization, or other reorganization involving one or more business enterprises, the application of clauses (i), (ii), and (iii) shall be determined under regulations prescribed by the Secretary or his delegate. " (B) Any interest in a business enterprise which a private foundation holds on May 26, 1969, if the private foundation on such date has excess business holdings, shall (while held by the foundation) be treated as held by a disqualified person (rather than by the private foundation) — " (i) during the 20-year period beginning on such date, if the private foundation has more than a 95 percent voting stock interest on such date, "(ii) except as provided in clause (i), during the 15-year period beginning on such date, if the foundation and all disqualified persons have more than a 75 percent voting stock interest (or more than a 75 percent profits or beneficial interest in the case of any unincorporated enterprise) on such date or more than a 75 percent interest in the value of all outstanding shares of all classes of stock (or more than a 75 percent capital interest in the case of a partnership or joint venture) on such date, or "(iii) during the 10-year period beginning on such date, in any other case. " (C) The 20-year, 15-year, and 10-year periods described in subparagraph (B) for the disposition of excess business holdings shall be suspended during the pendency of any judicial proceeding by the private foundation which is necessary to reform, or to excuse such foundation from compliance with, its governing instrument or any other instrument (as in effect on May 26, 1969) in order to allow disposition of such holdings. " (D)(i) If, at any time during the second phase, all disqualified persons together have holdings in a business enterprise in excess of 2 percent of the voting stock of such enterprise, then subparagraph (A)(i) shall be applied by substituting for '50 percent' the following: '50 percent, of which not more than 25 percent shall be voting stock held by the private foundation'. "(ii) If, immediately before the close of the second phase, clause (i) of this subparagraph did not apply with respect to a business enterprise, then for all periods after the close of the

509

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second phase subparagraph (A)(i) shall be applied by substituting for '50 percent' the following: '35 percent, or if at any time after the close of the second phase all disqualified persons together have had holdings in such enterprise which exceed 2 percent of the voting stock, 35 percent, of which not more than 25 percent shall be voting stock held by the private foundation'. " (iii) For purposes of this subparagraph, the term 'second phase' means the 15-year period immediately following the 20-year, 15-year, or 10-year period described in subparagraph (B), whichever applies, as modified by subparagraph (C). " (E) Clause (li) of subparagraph ^B) shall not apply with respect to any business enterprise if before January 1, 1971, one or more individuals who are substantial contributors (or members of the family (within the meaning of section 1946 (d)) of one or more substantial contributors) to the private foundation and who on May 26, 1969, held more than 15 percent of the voting stock of the enterprise elect, in such manner as the Secretary or his delegate may by regulations prescribe, not to have such clause (ii) apply with respect to such enterprise. "(5)

HOLDINGS ACQUIRED BY TRUST OR WILL.—Paragraph

(4)

(other than subparagraph (B)(i)) shall apply to any interest in a business enterprise which a private foundation acquires under the terms of a trust which was irrevocable on May 26, 1969, or under the terms of a will executed on or before such date, which are in effect on such date and at all times thereafter, as if such interest were held on May 26, 1969, except that the 15-year and 10-year periods prescribed in clauses (ii) and (iii) of paragraph (4)(B) shall commence with respect to such interest on the date of distribution under the trust or will in lieu of May 26, 1969. "(6)

5-YEAR PERIOD TO DISPOSE OF GIFTS, BEQUESTS, E T C. — E x c e p t

as provided in paragraph (5), if, after May 26, 1969, there is a change in the holdings in a business enterprise (other than by purchase by the private foundation or by a disqualified person) which causes the private foundation to have— " (A) excess business holdings in such enterprise, the interest of the foundation in such enterprise (immediately after such change) shall (while held by the foundation) be treated as held by a disqualified person (rather than by the foundation) during the 5-year period beginning on the date of such change in holdings; or " (B) an increase in excess business holdings in such enterprise (determined without regard to subparagraph (A)), subparagraph (A) shall apply, except that the excess holdings immediately preceding the increase therein shall not be treated, solely because of such increase, as held by a disqualified person (rather than by the foundation). " (d) DEFINITIONS; SPECIAL RULES.—For purposes of this section— "(1) BUSINESS HOLDINGS.—In computing the holdings of a

private foundation, or a disqualified person (as defined in section 4946) with respect thereto, in any business enterprise, any stock or other interest owned, directly or indirectly, by or for a corporation, partnership, estate, or trust shall be considered as being owned proportionately by or for its shareholders, partners, or beneficiaries. The preceding sentence shall not apply with respect to an income or remainder interest of a private foundation m a trust described in section 4947(a)(2), but only if, in the case of

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property transferred in trust after May 26, 1969, such foundation holds only an income interest or only a remainder interest in such trust. "(2) TAXABLE PERIOD.—The term 'taxable period' means, with respect to any excess business holdings of a private foundation in a business enterprise, the period beginning on the first day on which there are such excess holdings and ending on the date of mailing of a notice of deficiency with respect to the tax imposed by subsection (a) under section 6212 in respect of such holdings. "(3) CORRECTION PERIOD.—The term 'correction period' means, with respect to excess business holdings of a private foundation in a business enterprise, the period ending 90 days after the date of mailing of a notice of deficiency (with respect to the tax imposed by subsection (b)) under section 6212, extended by— " (A) any period in which a deficiency cannot be assessed under section 6213(a), and " (B) any other period which the Secretary or his delegate determines is reasonable and necessary to permit orderly dis. position of such excess business holdings. "(4) BUSINESS ENTERPRISE.—The term ''business enterprise' does not include— " (A) a functionally related business (as defined in section 4942(j)(5)),or " (B) a trade or business at least 95 percent of the gross income of which is derived from passive sources. For purposes of subparagraph (B), gross income from passive sources includes the items excluded by section 512(b)(1), (2), (3), and (5), and income from the sale of goods (including charges or costs passed on at cost to purchasers of such goods or income received in settlement of a dispute concerning or in lieu of the exercise of the right to sell such goods) if the seller does not manufacture, pjroduce, physically receive or deliver, negotiate sales of, or maintain inventories in such goods. "SEC. 4944. TAXES ON INVESTMENTS WHICH JEOPARDIZE CHARITABLE PURPOSE. " (a) INITIAL TAXES.— "(1) O N THE PRIVATE FOUNDATION.—If

a private foundation invests any amount in such a manner as to jeopardize the carrying out of any of its exempt purposes, there is hereby imposed on the making of such investment a tax equal to 5 percent of the amount so invested for each year (or part thereof) in the taxable period. The tax imposed by this paragraph shall be paid by the private foundation. "(2) O N THE MANAGEMENT.—In any case in which a tax is imposed by paragraph (1), there is hereby imposed on the participation of any foundation m a n a ^ r in the making of the investment, knowing that it is jeopardizing the carrying out of any of the foundation's exempt purposes, a tax equal to 5 percent of the amount so invested for each year (or part thereof^ in the taxable period, unless such participation is not willful and is due to reasonable cause. The tax imposed by this paragraph shall be paid by any foundation manager who participated in the making of the investment.

"(b)

ADDITIONAL TAXES.—

" (1) O N THE FOUNDATION.—In any case in which an initial tax is imposed by subsection (a)(1) on the making of an investment and such investment is not removed from jeopardy within the correction period, there is hereby imposed a tax equal to 25 percent of

511

26^sc 62n°

fe*use 5^12^'

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[83 STAT.

the amount of the investment. The tax imposed by this paragraph shall be paid by the private foundation. "(2) O N THE MANAGEMENT.—In any case in which an additional tax is imposed by paragraph (1), if a foundation manager refused to agree to part or all of the removal from jeopardy, there is hereby imposed a tax equal to 5 percent of the amount of the investment. The tax imposed by this paragraph shall be paid by any foundation manager who refused to agree to part or all of the removal from jeopardy. "(c) EXCEPTION FOR PROGRAM-RELATED INVESTMENTS.—For purposes of this section, investments, the primary purpose of which is to accomplish one or more of the purposes described in section 170(c) ^2)(B), and no significant purpose of which is the production of income or the appreciation of property, shall not be considered as investments which jeopardize the carrying out of exempt purposes. " (d) SPECIAL RULES.—For purposes of subsections (a) and (b) — "(1) JOINT AND SEVERAL LIABILITY.—If more than one person is liable under subsection (a)(2) or (b)(2) with respect to any one investment, all such persons shall be jointly and severally liable under such paragraph with respect to such investment. " (2) L I M I T FOR MANAGEMENT.—With respect to any one invest-

68A Stat. 770. 26 USC 6212.

ment, the maximum amount of the tax imposed by subsection (a) (2) shall not exceed $5,000, and the maximum amount of the tax imposed by subsection (b)(2) shall not exceed $10,000. "(e) DEFINITIONS.—For purposes of this section— "(1) TAXABLE PERIOD.—The term 'taxable period' means, with respect to any investment which jeopardizes the carrying out of exempt purposes, the period beginning with the date on which the amount is so invested and ending on whichever of the following is the earlier: (A) the date of mailing of a notice of deficiency with respect to the tax imposed by subsection (a)(1) under section 6212, or (B) the date on which the amount so invested is removed from jeopardy. " (2) REMOVAL FROM JEOPARDY.—An investment which jeopardizes the carrying out of exempt purposes shall be considered to be removed from jeopardy when such investment is sold or otherwise disposed of, and the proceeds of such sale or other disposition are not investments which jeopardize the carrying out of exempt purposes. "(3) CORRECTION PERIOD.—The term 'correction period' means, with respect to any investment which jeopardizes the carrying out of exempt purposes, the period beginning with the date on which such investment is entered into and ending 90 days after the ddte of mailing of a notice of deficiency with respect to the tax imposed by subsection (b)(1) under section 6212, extended by— " (A) any period in which a deficiency cannot be assessed under section 6213(a), and " (B) any other period which the Secretary or his delegate determines is reasonable and necessary to bring about removal from jeopardy. "SEC. 4945. TAXES ON TAXABLE EXPENDITURES. " (a) INITIAL TAXES.—

"(1) O N THE FOUNDATION.—There is hereby imposed on each taxable expenditure (as defined in subsection (d)) a tax equal to 10 percent of the amount thereof. The tax imposed by this paragraph shall be paid by the private foundation.

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"(2) O N THE MANAGEMENT.—There is hereby imposed on the agreement of any foundation manager to the making of an expenditure, knowing that it is a taxable expenditure, a tax equal to £1/^ percent of the amount thereof, unless such agreement is not willful and is due to reasonable cause. The tax imposed by this paragraph shall be paid by any foundation manager who agreed to the making of the expenditure. " (b) ADDITIONAL TAXES.—

" (1) O N THE FOUNDATION.—In any case in which an initial tax is imposed by subsection (a)(1) on a taxable expenditure and such expenditure is not corrected within the correction period, there is hereby imposed a tax equal to 100 percent of the amount of the expenditure. The tax imposed by this paragraph shall be paid by the private foundation. " (2) O N THE MANAGEMENT.—In any case in which an additional tax is imposed by paragraph (1), if a foundation manager refused to agree to part or all of the correction, there is hereby imposed a tax equal to 50 percent of the amount of the taxable expenditure. The tax imposed by this jjaragraph shall be paid by any foundation manager who refused to agree to part or all of the correction. "(c) SPECIAL RULES.—For purposes of subsections (a) and (b)— "(1) JOINT AND SEVERAL LIABILITY.—If more than one person is liable under subsection (a)(2) or (b)(2) with respect to the making of a taxable expenditure, all such persons shall be jointly and severally liable under such paragraph with respect to such expenditure. " (2) L I M I T FOR MANAGEMENT.—With respect to any one taxable

expenditure, the maximum amount of the tax imposed by subsection (a)(2) shall not exceed $5,000, and the maximum amount of the tax imposed by subsection (b)(2) shall not exceed $10,000. " (d) TAXABLE EXPENDITURE.—For purposes of this section, the term 'taxable expenditure' means any amount paid or incurred by a private foundation— "(1) to carry on propaganda, or otherwise to attempt, to influence legislation, within the meaning of subsection (e), "(2) except as provided in subsection (f), to influence the outcome of any specific public election, or to carry on, directly or indirectly, any voter registration drive, " (3) as a grant to an individual for travel, study, or other similar purposes by such individual, unless such grant satisfies the requirements of subsection (g), " (4) as a grant to an organization (other than an organization described in paragraph (1), (2), or (3) of section 509(a)), unless the private foundation exercises expenditure responsibility with respect to such grant in accordance with subsection (h), or " (5) for any purpose other than one specified in section 170(c) (2)(B). (e) ACTIVITIES W I T H I N SUBSECTION

" (d)(1).—For purposes of subsection (d)(1), the term 'taxable expenditure' means any amount paid or incurred by a private foundation for— "(1) any attempt to influence any legislation through an attempt to affect the opinion of the general public or any segment thereof, and "(2) any attempt to influence legislation through communication with any member or employee of a legislative body, or with any other government official or employee who may participate in the formulation of the legislation (except technical advice or

^"'^' P- ^^e.

Posf, p. 553.

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assistance provided to a governmental body or to a committee or other subdivision thereof in response to a written request by such body or subdivision, as the case may be), other than through making available the results of nonpartisan analysis, study, or research. Paragraph (2) of this subsection shall not apply to any amount paid or incurred in connection with an appearance before, or communication to, any legislative body with respect to a possible decision of such body which might affect the existence of the private foundation, its powers and duties, its tax-exempt status, or the deduction of contributions to such foundation. "(f)

^^^stat_ 163.

Anfe, p. 496. Post, p. 553.

NONPARTISAN ACTIVITIES CARRIED ON BY CERTAIN ORGANIZA-

TIONS.—Subsection (d)(2) shall not apply to any amount paid or incurred by any organization— "(1) which is described in section 501(c)(3) and exempt from taxation under section 501(a), " (2) the activities of which are nonpartisan, are not confined to one specific election period, and are carried on in 5 or more States, "(3) substantially all of the income of which is expended directly for the active conduct of the activities constituting the purpose or function for which it is organized and operated, "(4) substantially all of the support (other than gross investment income as defined in section 509(e)) of which is received from exempt organizations, the general public, governmental units described in section 170(c)(1), or any combination of the foregoing; not more than 25 percent of such support is received from any one exempt organization (for this purpose treating private foundations which are described in section 4946(a)(1)(H) with respect to each other as one exempt organization); and not more than half of the support of ^^hich is received from gross investment income, and "(5) contributions to which for voter registration drives are not subject to conditions that they may be used only in specified States, possessions of the United States, or political subdivisions or other areas of any of the foregoing, or the District of Columbia, or that they may be used in only one specific election period. I n determining whether the organization meets the requirements of paragraph (4) for any taxable year of such organization, there shall be taken into account the support received by such organization during such taxable year and during the immediately preceding 4 taxable years of such organization (excluding therefrom any preceding taxable year which begins before January 1, 1970). Subsection (d)(4) shall not apply to any grant to an organization which meets the requirements of this subsection. " (g) INDIVIDUAL GRANTS.—Subsection (d)(3) shall not apply to an individual grant awarded on an objective and nondiscriminatory basis pursuant to a procedure approved in advance by the Secretary or his delegate, if it is demonstrated to the satisfaction of the Secretary or his delegate that— "(1) the grant constitutes a scholarship or fellowship grant which is subject to the provisions of section 117(a) and is to be used for study at an educational institution described in section 151(e)(4), "(2) the grant constitutes a prize or award which is subject to the provisions of section 74(b), if the recipient of such prize or award is selected from the general public, or "(3) the purpose of the grant is to achieve a specific objective, produce a report or other similar product, or improve or enhance a literary, artistic, musical, scientific, teaching, or other similar capacity, skill, or talent of the grantee.

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" (h) ExPENDiTUEE EESPONSEBILITY.—The expenditure responsibility referred to in subsection (d)(4) means that the private foundation is responsible to exert all reasonable efforts and to establish adequate procedures— "(1) to see that the grant is spent solely for the purpose for which made, " (2) to obtain full and complete reports from the grantee on how the funds are spent, and "(3) to make full and detailed reports with respect to such expenditures to the Secretary or his delegate. "(i) OTHER DEFINITIONS.—For purposes of this section— "(1) CORRECTION.—The terms 'correction' and 'correct' mean, with respect to any taxable expenditure, (A) recovering part or all of the expenditure to the extent recovery is possible, and where full recovery is not possible such additional corrective action as is prescribed by the Secretary or his delegate by regulations, or (B) in the case of a failure to comply with subsection (h)(2) or (h)(3), obtaining or making the report in question. "(2) CORRECTION PERIOD.—The term 'correction period' means, with respect to any taxable expenditure, the period beginning with the date on which the taxable expenditure occurs and ending 90 days after the date of mailing of a notice of deficiency with respect to the tax imposed by subsection (b)(1) under section 6212, extended by—. . . . " (A) any period in which a deficiency cannot be assessed

515

fAfteiii'

under section J6213 (a), and

" (B) any other period which the Secretary or his delegate determines is reasonable and necessary to bring about correction of the taxable expenditure (except that such determination shall not be made with respect to any taxable expenditure within the meaning of paragraph (1), (2), (3), or (4) of subsection (d) because of any action by an appropriate State officer as defined in section 6104(c)(2)). ^°^'' P- ^^S"SEC. 4946. DEFINITIONS AND SPECIAL RULES. " (a) DISQUALIFIED PERSON.—

"(1) IN GENERAL.—For purposes of this chapter, the term 'disqualified person' means, with respect to a private foundation, a person who is— " (A) a substantial contributor to the foundation, " (B) a foundation manager (within the meaning of subsection (b)(1)), " (C) an owner of more than 20 percent of— " (i) the total combined voting power of a corporation, " (ii) the profits interest of a partnership, or "(iii) the beneficial interest of a trust or unincorporated enterprise, which is a substantial contributor to the foundation, " (D) a member of the family (as defined in subsection (d)) of any individual described in subparagraph (A), (B), or " (E) a corporation of which persons described in subparagraph (A), (B), (C), o r (D) own more than 35 percent of the total combined voting ^ w e r, " (F) a partnership in which persons described in subparagraph (A), (B), (C), or (D) own more than 35 percent of the profits interest,

�


text:
Page:United States Statutes at Large Volume 83.djvu/544

 516

PUBLIC LAW 91-172-DEC. 30, 1969

[83 STAT.

" (G) a trust or estate in which persons described in subparagraph (A), _(B), (C), or (D) hold more than 35 percent of the beneficial interest, " (H) only for purposes of section 4943, a private foundation— "(i) which is effectively controlled (directly or indirectly) by the same person or persons who control the private foundation in question, or "(ii) substantially all of the contributions to which were made (directly or indirectly) by the same person or persons described in subparagraph (A), (B), o r (C), o r members of their families (within the meaning of subsection (d)), who made (directly or indirectly) substantially all of the contributions to the private foundation in question, and " (I) only for purposes of section 4941, a government official (as defined in subsection (c)). " (2) SUBSTANTIAL CONTRIBUTORS.—For purposes of paragraph

Ante, p. 493. 26 USC 2 7^'

76 Stat. 1121; 52 Stat. 1115.

(1), the term 'substantial contributor' means a person who is described in section 507(d)(2). "(3) STOCKHOLDINGS.—For purposes of paragraphs (1)(C)(i) and (1)(E), there shall be taken into account indirect stockhold^^^^ which would be taken into account under section 267(c), except that, for purposes of this paragraph, section 267(c)(4) shall be treated as providing that the members of the family of an individual are the members within the meaning of subsection (d). "(4) PARTNERSHIPS; TRUSTS.—For purposes of paragraphs (l)(C) ( i i) and (iii), (1)(F), and (1)(G), the ownership of profits or beneficial interests shall be determined in accordance with the rules for constructive ownership of stock provided in section 267(c) (other than paragraph (3) thereof), except that section 267(c)(4) shall be treated as providing that the members of the family of an individual are the members within the meaning of subsection (d). "(b) FOUNDATION MANAGER.—For purposes of this chapter, the term 'foundation manager' means, with respect to any private foundation— "(1) an officer, director, or trustee of a foundation (or an individual having powers or responsibilities similar to those of officers, directors, or truste(s of the foundation), and "(2) with respec'. to any act (or failure to act), the employees of the foundation having authority or responsibility with respect to such act (or failure to act), "(c) GOVERNMENT OFFICIAL.—For purposes of subsection (a)(1)(I) and section 4941, the term 'government official' means, with respect to an act of self-dealing described in section 4941, an individual who, at the time of such act, holds any of the following offices or positions (other than as a 'special Government employee', as defined in section 202(a) of title 18, United States Code): "(1) an elective public office in the executive or legislative branch of the Government of the United States, " (2) an office in the executive or judicial branch of the Government of the United States, appointment to which was made by the President, "(3) a position in the executive, legislative, or judicial branch of the Government of the United States— " (A) which is listed in schedule C of rule VI of the Civil Service Rules, or

�


text:
Page:United States Statutes at Large Volume 83.djvu/545

 83 STAT. ]

PUBLIC LAW 91-172-DEC. 30, 1969

" (B) the compensation for which is equal to or greater than the lowest rate of compensation prescribed for GS-16 of the General Schedule under section 5332 of title 5, United States Code, "(4) a position under the House of Representatives or the Senate of the United States held by an individual receiving gross compensation at an annual rate of $15,000 or more, "(5) an elective or appointive public office in the executive, legislative, or judicial branch of the government of a State, possession of the United States, or political subdivision or other area of any of the foregoing, or of the District of Columbia, held by an individual receiving gross compensation at an annual rate oi $15,000 or more, or "(6) a position as personal or executive assistant or secretary to any of the foregoing. " (d) MEMBERS OF FAMILY.—For purposes of subsection (a)(1), the family of any individual shall include only his spouse, ancestors, lineal descendants, and spouses of lineal descendants. "SEC. 4947. APPLICATION OF TAXES TO CERTAIN NONEXEMPT TRUSTS. " (a) APPLICATION OF T A X. — "(1) CHARITABLE TRUSTS.—For

517

5 USC 5332 note.

pur{)oses of part II of subchapter F of chapter 1 (other than section 508(a), (b), and (c)) Ante, p. 492. and for purposes of this chapter, a trust which is not exempt from taxation under section 501(a), all of the unexpired interests in 26^50^50^^' which are devoted to one or more of the purposes described in section 1 7 0 (c)(2)(B), and for which a deduction was allowed under section 170, 545(b)(2), 556(b)(2), 642(c), 2055, 2106(a) ^^^^°1*;,ZlJ^-^(2), or 2522 (or the corresponding provisions of prior law), shall 558, 560-562. be treated as an organization described in section 501(c)(3). For purposes of section 509(a)(3)(A), such a trust shall be treated as if organized on the day on which it first becomes subject to this paragraph. "(2) SPLIT-INTEREST TRUSTS.—In the case of a trust which is not exempt from tax under section 501(a), not all of the unexpired interests in which are devoted to one or more of the purposes described in section 1 7 0 (c)(2)(B), and which has amounts in trust for which a deduction was allowed under section 170, 545 (b)(2), 556(b)(2), 642(c), 2055, 2106(a)(2), or 2522, section 507 (relating to termination of private foundation status), section 508(e) (relating to governing instruments) to the extent applicable to a trust described in this paragraph, section 4941 (relating to taxes on self-dealing), section 4943 (relating to taxes on excess business holdings) except as provided in subsection (b)(3), section 4944 (relating to investments which jeopardize charitable purpose) except as provided in subsection (b)(3), and section 4945 (relating to taxes on taxable expenditures) shall apply as if such trust were a private foundation. This paragraph shall not apply with respect to— " (A) any amounts payable under the terms of such trust to income beneficiaries, unless a deduction was allowed under sectionl70(f)(2)(B)j2055(e)(2)(B),or2522(c)(2)(B), " (B) any amounts in trust other than amounts for which a deduction was allowed under section 170, 545(b)(2), 556(b) (2), 642(c), 2055, 2106(a)(2), or 2522, if such other amounts are segregated from amounts for which no deduction was allowable, or " (C) any amounts transferred in trust before May 27, 1969.

31-100 O - 70 - 35

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text:
Page:United States Statutes at Large Volume 83.djvu/546

 518

PUBLIC LAW 91-172-DEC. 30, 1969

[83 STAT.

"(3) SEGREGATED AMOUNTS.—For purposes of paragraph (2)

(B), a trust with respect to which amounts are segregated shall separately account for the various income, deduction, and other items properly attributable to each of such segregated amounts. " (b) SPECIAL RULES.—

"(1) REGULATIONS.—The Secretary or his delegate shall prescribe such regulations as may be necessary to carry out the purposes of this section. " (2) L I M I T TO SEGREGATED AMOUNTS.—If any amounts in the

trust are se^egated within the meaning of subsection (a)(2)(B) of this section, the value of the net assets for purposes of subAnte, p. 492. sections (c)(2) and (g) of section 507 shall be limited to such segregated amounts. "(3) SECTIONS 4943 AND 4944.—Sections 4943 and 4944 shall not apply to a trust which is described in subsection (a)(2) if— " (A) all the income interest (and none of the remainder interest) of such trust is devoted solely to one or more of the Post, p. 553. purposes described in section 170(c)(2)(B), and all amounts in such trust for which a deduction was allowed under section 170, 545(b)(2), 556(b)(2), 642(c), 2055, 2106(a)(2), Post, pp. 549, or 2522 have an aggregate value not more than 60 percent of 558, 560-562. ^j^^ aggregate fair market value of all amounts in such trusts, or " (B) a deduction was allowed under section 170,545 (b)(2), 556(b)(2), 642(c), 2055, 2106(a)(2), or 2522 for amounts payable under the terms of such trust to every remainder beneficiary but not to any income beneficiary. "SEC. 4948. APPLICATION OF TAXES AND DENIAL OF EXEMPTION WITH RESPECT TO CERTAIN FOREIGN ORGANIZATIONS. " (a) TAX ON INCOME OF CERTAIN FOREIGN ORGANIZATIONS.—In

Post, p. 625.

lieu of the tax imposed by section 4940, there is hereby imposed for each taxable year on the gross investment income (within the meaning of section 4940(c)(2)) derived from sources within the United States (within the meaning of section 861) by every foreign organization which is a private foundation for the taxable year a tax equal to 4 percent of such income. " (b) CERTAIN SECTIONS INAPPLICABLE.—Section 507 (relating to

68A Stat. 163. 26 USC 501.

termination of private foundation status), section 508 (relating to special rules with respect to section 501(c)(3) organizations), and this chapter (other than this section) shall not apply to any foreign organization which has received substantially all 01 its support (other than gross investment income) from sources outside the United States. " (c) DENIAL OF EXEMPTION TO FOREIGN ORGANIZATIONS ENGAGED I N PROHIBITED TRANSACTIONS.— " (1) GENERAL RULE.—^A foreign organization described in sub-

Post,

p. 519.

section (b) shall not be exempt from taxation under section 501(a) if it has engaged in a prohibited transaction after December 31, 1969. "(2) PROHIBITED TRANSACTIONS.—For purposes of this subsection, the term 'prohibited transaction' means any act or failure to act (other than with respect to section 4942(e)) which would subject a foreign organization described in subsection (b), or a disqualified person (as defined in section 4946) with respect thereto, to liability for a penalty under section 6684 or a tax under section 507 if such foreign organization were a domestic organization.

�


text:
Page:United States Statutes at Large Volume 83.djvu/547

 83 STAT.] "(3)

PUBLIC LAW 9 1 - 1 7 2 - D E C. 30, 1969

519

TAXABLE YEARS AFFECTED.—

" (A) Except as provided in subparagraph (B), a foreign organization described in subsection (b) shall be denied Stat. 163. exemption from taxation under section 501(a) by reason of 68Au s e 501. 26 paragraph (1) for all taxable years beginning with the taxable year during which it is notified by the Secretary or his delegate that it has engaged in a prohibited transaction. The Pubiicati.3n in Secretary or his delegate shall publish such notice in the ^^'^^'^^^ Registe Federal Register on the day on which he so notifies such foreign organization. " (B) Under regulations prescribed by the Secretary or his delegate, any foreign organization described in subsection (b) which is denied exemption from taxation under section 501(a) by reason of paragraph (1) may, with respect to the second taxable year following the taxable year in which notice is given under subparagraph (A) (or any taxable year thereafter), file claim for exemption from taxation under section 501(a), If the Secretary or his delegate is satisfied that such organization will not knowingly again engage in a prohibited transaction, such organization shall not, with respect to taxable years beginning with the taxable year with respect to which such claim is filed, be denied exemption from taxation under section 501(a) by reason of any prohibited transaction which was engaged in before the date on which such notice was given under subparagraph (A). "(4)

DISALLOWANCE OF CERTAIN CHARITABLE DEDUCTIONS.—No

gift or bequest shall be allowed as a deduction under section 170, ^°^'i^^- ^'*^' 545(b)(2), 556(b)(2), 642(c), 2055, 2106(a)(2), or 2522, if ^^s, 560-562. made— " (A) to a foreign organization described in subsection (b) after the date on which the Secretary or his delegate publishes notice under paragraph (3)(A) that he has notified such organization that it has engaged in a prohibited transaction, and " (B) in a taxable year of such organization for which it is not exempt from taxation under section 501(a) by reason of paragraph (1)." (c) ASSESSABLE PENALTIES FOR REPEATED, OR W I L L F U L AND FLAGRANT, ACTS UNDER CHAPTER 42.—Subchapter B of chapter 68

(relating to assessable penalties) is amended by adding at the end thereof the following new section:

«„^f,^,^*f^^f^®'

80 Stat. 1560. "'"' 667126 USC 6683.

"SEC. 6684. ASSESSABLE PENALTIES WITH RESPECT TO LIABILITY FOR TAX UNDER CHAPTER 42. "If any person becomes liable for tax under any section of chapter 42 (relating to private foundations) by reason of any act or failure to act which is not due to reasonable cause and either— " (1) such person has theretofore been liable for tax under such chapter, or "(2) such act or failure to act is both willful and flagrant, then such person shall be liable for a penalty equal to the amount of such tax." (d)

p. 498.

INFORMATION RETURNS OF EXEMPT ORGANIZATIONS.—

(1) IN GENERAL.—Section 6033(a) (relating to information returns by exempt organizations) is amended to read as follows: "(a)

Ante,

ORGANIZATIONS REQUIRED To F I L E. —

" (1) IN GENERAL.—Except as provided in paragraph (2), every organization exempt from taxation under section 501(a) snail file an annual return, stating specifically the items of gross income,

SSA Stat. 741.

�


text:
Page:United States Statutes at Large Volume 83.djvu/548

 520

68A Stat. 134; 76 Stat. 809.

PUBLIC LAW 91-172-DEC. 30, 1969

receipts, and disbursements, and such other information for the purpose of carrying out the internal revenue laws as the Secretary or his delegate may by forms or regulations prescribe, and shall keep such records, render under oath such statements, make such other returns, and comply with such rules and regulations as the Secretary or his delegate may from time to time prescribe; except that, in the discretion of the Secretary or his delegate, any organization described in section 401(a) may be relieved from stating j^^ ^^^ retum any information which is reported in returns filed by the employer which established such organization. "(2)

Ante, p. 496.

68A Stat. 163.

Post, p. 550.

72^st^t^*i66r^'

[83 STAT.

EXCEPTIONS FROM FILING.— " (A) MANDATORY EXCEPTIONS.—Paragraph (1) shall not

apply to— " (i) churches, their integrated auxiliaries, and conventions or associations of churches, "(ii) any organization (other than a private foundation, as defined in section 509(a)) described in subparagraph (C), the gross receipts of which in each taxable year are normally not more than $5,000, or "(iii) the exclusively religious activities of any religious order. " (B) DISCRETIONARY EXCEPTIONS.—The Secretary or his delegate may relieve any organization required under paragraph (1) to file an information return from filing such a return where he determines that such filing is not necessary to the efficient administration of the internal revenue laws. " (C) CERTAIN ORGANIZATIONS.—The organizations referred to in subparagraph (A) (ii) are— "(i) a religious organization described in section 501 (c)(3);

"(ii) an educational organization described in section 170(b)(1)(A) ( i i); "(iii) a charitable organization, or an organization for the prevention of cruelty to children or animals, described in section 501(c)(3), if such organization is supported, in whole or in part, by funds contributed by the United States or any State or political subdivision thereof, or is primarily supported by contributions of the general public; "(iv) an organization described in section 501(c)(3), if such organization is operated, supervised, or controlled by or in connection with a religious organization described in clause (i); "(v) an organization described in section 501(c)(8); and "(vi) an organization described in section 501(c)(1), if such organization is a corporation wholly owned by the United States or any agency or instrumentality thereof, or a wholly-owned subsidiary of such a corporation." (^) ADDITIONAL INFORMATION.—Section 6033(b)

(relating to

certain organizations described in section 501(c)(3)) is amended— ^A) by striking out in paragraph (3) "out of income", (B) by striking out paragraphs (4), (5), (6), and (8), and by redesignating paragraph (7) as paragraph (4), and (C) by adding after paragraph (4) (as redesignated) the following new paragraphs: "(5) the total of the contributions and gifts received by it during the year, and the names and addresses of all substantial contributors.

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Page:Tom Swift and His Airship.djvu/170

 CHAPTER XVIII

BACK FOR VINDICATION

glanced around the restaurant. There were few persons in it save himself and Mr. Damon. The pretty waitress was still regarding the two curiously.

"We ought to take that paper along with us, to show to Mr. Sharp," said Tom, in a low voice to his friend. "I haven't had time to take it all in myself, yet. Let's go. I've had enough to eat; haven't you?"

"Yes. My appetite is gone now."

As they arose, to pay their checks the girl advanced.

"Can you tell me where I can get a copy of this paper?" asked Tom, as he laid down a generous tip on the table, for the girl. Her eyes opened rather wide.

"Yo' all are fo'gettin' some of yo' money." she said, in her broad, southern tones. Tom thought Rh

title: Page:Tom Swift and His Airship.djvu/170


text:
Page:United States Statutes at Large Volume 83.djvu/549

 83 STAT.]

PUBLIC LAW 9 1 - 1 7 2 - D E C. 30, 1969

521

"(6) the names and addresses of its foundation managers (within the meaning of section 4946(b)(1)) and highly compensated employees, and "(7) the compensation and other payments made during the year to each individual described in paragraph (6)." (3) A N N U A L REPORT.—Part III of subchapter A of chapter 61 (relating to information returns) is amended by adding after oe^s*^' '^^ subpart C, the following new subpart: 6053. "Subpart D—Information Concerning Private Foundations "Sec. 6056. Annual reports by private foundations. "SEC. 6056. ANNUAL REPORTS BY PRIVATE FOUNDATIONS.

" (a) GENERAL.—The foundation managers (within the meaning of section 4946(b)) of every organization which is a private foundation (within the meaning of section 509(a)) having at least $5,000 of assets at any time during a taxable year shall file an annual report as of the close of the taxable year at such time and in such manner as the Secretary or his delegate may by regulations prescribe. " (b) CONTENTS.—The foundation managers of the private foundation shall set forth in the annual report required under subsection (a) the following information: " (1) its gross income for the year, " (2) its expenses attributable to such income and incurred within the year, "(3) its disbursements (including administrative expenses) within the year, " (4) a balance sheet showing its assets, liabilities, and net worth as of the beginning of the year, " (5) an itemized statement of its securities and all other assets at the close of the year, showing both book and market value, " (6) the total of the contributions and gifts received by it during the year, "(7) an itemized list of all grants and contributions made or approved for future payment during the year, showing the amount of each such grant or contribution, the name and address of the recipient, any relationship between any individual recipient and the foundation's managers or substantial contributors, and a concise statement of the purpose of each such grant or contribution, " (8) the address of the principal office of the foundation and (if different) of the place where its books and records are maintained, "(9) the names and addresses of its foundation managers (within the meaning of section 4946(b)), and "(10) a list of all persons described in paragraph (9) that are substantial contributors (within the meaning of section 507 (d)(2)) or that own 10 percent or more of the stock of any corporation of which the foundation owns 10 percent or more of the stock, or corresponding interests in partnerships or other entities, in which the foundation has a 10 percent or greater interest. "(c) FORM,—The annual report may be prepared in printed, typewritten, or any other legible form the foundation chooses. The Secretary or his delegate shall provide forms which may be used by a private foundation for purposes of the annual report.

^"'®' P- S'^. ^"*®' P- '*-'^-

^"'e, p. 492.

" (d) SPECIAL RULES.—

"(1) The annual report required to be filed under this section is in addition to and not in lieu of the information required to be filed under section 6033 (relating to returns by exempt organizations) and shall be filed at the same time as such information.

ofi'^rl^^^n'^V 26 ""^''"'" ^^ 'u s e 6033.

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text:
Page:United States Statutes at Large Volume 83.djvu/550

 522

PUBLIC LAW 91-172-DEC. 30, 1969

Post, p. 523.

££^2) A copy of the notice required by section 6104(d) (relating to public inspection of private foundations' annual reports), together with proof of publication thereof, shall be filed by the foundation managers together with the annual report. "(3) The foundation managers shall furnish copies of the annual report required b j this section to such State officials and other persons, at such times and under such conditions, as the Secretary or his delegate may by regulations prescribe." (4)

79^stat*^385°^^' 26 USC 6652.

PENALTY

FOR

LATE

FILING

OF

CERTAIN INFORMATION

RETURNS.—Section 6652 (relating to failure to file certain information retums) is amended by relettering subsection (d) as subsection (e) and inserting immediately after subsection (c) the following new subsection: •'(d) RETURNS BY EXEMPT ORGANIZATIONS AND TRUSTS.— "(1) PENALTY ON ORGANIZATION OR TRUST.—In

Ante,

p. 519.

Post, p. 529.

Ante,

p. 521-

[83 STAT.

BY

CERTAIN

the case of a failure to file a return required under section 6033 (relating to returns by exempt organizations), section 6034 (relating to returns \yj certain trusts), or section 6043(b) (relating to exempt organizations), on the date and in the manner prescribed therefor (determined with regard to any extension of time for filing), unless it is shown that such failure is due to reasonable cause there shall be paid (on notice and demand by the Secretary or his delegate and in the same manner as tax) by the exempt organization or trust failing so to file, $10 for each day during which such failure continues, but the total amount imposed hereunder on any organization for failure to file any return shall not exceed $5,000. "(2) MANAGERS.—The Secretary or his delegate may make written demand upon an organization failing to file under paragraph (1) specifying therein a reasonable future date by which such filing shall be made, and if such filing is not made on or before such date, and unless it is shown that failure so to file is due to reasonable cause, there shall be paid (on notice and demand by the Secretary or his delegate and in the same manner as tax) by the person failing so to file, $10 for each day after the expiration of the time specified in the written demand during which such failure continues, but the total amount imposed hereunder on all persons for such failure to file shall not exceed $5,000. If more than one person is liable under this paragraph for a failure to file, all such persons shall be jointly and severally liable with respect to such failure. The term 'person' as used herein means any officer, director, trustee, employee, member, or other individual who is under a duty to perform the act in respect of which the violation occurs. " (3) A N N U A L REPORTS.—In the case of a failure to file a report required under section 6056 (relating to annual reports by private foundations) or to comply with the requirements of section 6104 (d) (relating to public inspection of private foundations' annual reports), on the date and in the manner prescribed therefor (determined with regard to any extension of time for filing), unless it is shown that such failure is due to reasonable cause, there shall be paid (on notice and demand by the Secretary or his delegate and in the same manner as tax) by the person failing so to file or meet the publicity requirement, $10 for each day during which such failure continues, but the total amount imposed hereunder on all such persons for such failure to file or comply with the requirements of section 6104(d) with regard to any one annual report shall not exceed $5,000. I f more than one person is liable under

�


text:
Page:United States Statutes at Large Volume 83.djvu/551

 83 STAT. ]

PUBLIC LAW 91-172-DEC. 30, 1969

523

this paragraph for a failure to file or comply with the requirements of section 6104(d), all such persons shall be jointly and severally liable with respect to such failure. The term 'person' as used herein means any officer, director, trustee, employee, member, or other individual who is under a duty to perform the act in respect of which the violation occurs." (e) PUBLICITY or INFORMATION REQUIRED BY CERTAIN EXEMPT ORGANIZATIONS.— (1) NAMES AND ADDRESSES OF CONTRIBUTORS.—Section 6104

(relating to publicity of information required from certain exempt organizations and certain trusts) is amended by inserting at the end of subsection (b), the following sentence: "Nothing in this subsection shall authorize the Secretary or his delegate to disclose the name or address of any contributor to any organization or trust (other than a private foundation, as defined in section 509(a)) which is required to furnish such information." (2)

^"^'^

^ | ^ ^*^'- ^5^-

26 USC 6104.

PUBLICATION TO STATE OFFICIALS.—Section 6104 is amended

by adding after subsection (b) the following new subsection: (c)

PUBLICATION TO STATE OFFICIALS.— " (1) GENERAL RULE.—In the case of any

organization which is described in section 501(c)(3) and exempt from taxation under 68A Stat. les. section 501(a), or has applied under section 508(a) for recogni- ^ ' ^ ' P '^^'^• tion as an organization described in section 501(c)(3), the Secretary or his delegate at such times and in such manner as he may by regulations prescribe shall— " (A) notify the appropriate State officer of a refusal to recognize such organization as an organization described in section 501(c)(3), or of the operation of such organization in j a manner which does not meet, or no longer meets, the requirements of its exemption, " (B) notify the appropriate State officer of the mailing of a notice of deficiency of tax imposed under section 507 or chapter42, and Ante, pp. 492, " (C) at the request of such appropriate State officer, make "^^^ available for inspection and copying such returns, filed statements, records, reports, and other information, relating to a determination under subparagraph (A) or (B) as are relevant to any determination under State law. "(2) APPROPRIATE STATE OFFICER.—For purposes of this subsection, the term 'appropriate State officer' means the State attorney general. State tax officer, or any State official charged with overseeing organizations of the type described in section 501(c)(3)." (3) ANNUAL REPORTS.—Section 6104 is amended by adding after subsection (c), as added by paragraph (2) of this subsection, the following new subsection: "(d)

PUBLIC

INSPECTION

OF

PRIVATE

FOUNDATIONS'

ANNUAL

REPORTS.—The annual report required to be filed under section 6056 (relating to annual reports by private foundations) shall be made available by the foundation managers for inspection at the principal office of the foundation during regular business hours by any citizen on request made within 180 days after the publication of notice of its availability. Such notice shall be published, not later than the day prescribed for filing such annual report (determined with regard to any extension of time for filing), in a newspaper having general circulation in the county in which the principal office of the private foundation is located. The notice shall state that the annual report of the private foundation is available at its principal office for inspection during

^"'^' P 521.

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text:
Page:United States Statutes at Large Volume 83.djvu/552

 524

PUBLIC LAW 91-172-DEC. 30, 1969

[83 STAT.

regular business hours by any citizen who requests it within 180 days after the date of such publication, and shall state the address of the private foundation's principal office and the name of its principal manager." (4)

68A Stat. 828; 80 Stat. 1560.

Ante, p. 521. Ante, p. 523.

76^sfat^'83i*^^'

W I L L F U L FAILURE TO PROVIDE INFORMATION REGARDING PRI-

VATE FOUNDATIONS.—Subchapter B of chapter 68 (relating to assessablc penalties) is amended by adding after section 6684 (added by subsection (c) of this section) the following new section: "SEC. 6685. ASSESSABLE PENALTIES WITH RESPECT TO PRIVATE FOUNDATION ANNUAL REPORTS. "In addition to the penalty imposed by section 7207 (relating to fraudulent returns, statements, or other documents), any person who ig required to file the report and the notice required under section 6056 (relating to annual reports by private foundations) or to comply with the requirements of section 6104-(d) (relating to public inspection of private foundations' annual reports) and who fails so to file or comply, if such failure is willful, shall pay a penalty of $1,000 with respect to each such report or notice." (5) Section 7207 (relating to fraudulent returns, statements, or other documents) is amended by striking out "section 6047(b) or (c) " and inserting in lieu thereof "sections 6047(b) or (c), 6056, or 6104(d)". (f) P E T I T I O N APPLICABLE.—

68A Stat. 770.

Ante, p. 498.

TO

TAX

COURT;

DEFICIENCY

PROCEDURES

MADE

(1) Section 6211(a) (relating to definition of a deficiency) is amended— (A) by striking out "and gift taxes" and inserting in lieu thereof "gift, and excise taxes,", (B) by striking out "subtitles A and B," and inserting in lieu thereof "subtitles A and B, and chapter 42,", and (C) by striking out "subtitles A or B " and inserting in lieu thereof "subtitle A or B or chapter 42". (2) Section 6212(c)(1) (relating to further deficiency letters restricted) is amended by striking out "or" before "of estate tax" and by inserting after "the same decedent," the following: "of section 4940 tax for the same taxable year, or of chapter 42 tax (other than under section 4940) with respect to any act (or failure to act) to which such petition relates,". (3) Section 6213 (relating to restrictions applicable to deficiencies; petition to Tax Court) is amended by relettering subsection (e) as subsection (f) and inserting immediately after subsection (d) the following new subsection: "(e)

SUSPENSION OF F I L I N G PERIOD FOR CERTAIN CHAPTER 42 TAXES.—

The running of the time prescribed by subsection (a) for filing a petition in the Tax Court with respect to the taxes imposed by section 4941 (relating to taxes on self-dealing), 4942 (relating to taxes on failure to distribute income), 4943 (relating to taxes on excess business holdings), 4944 (relating to investments which jeopardize charitable purpose), or 4945 (relating to taxes on taxable expenditures) shall be suspended for any period during which the Secretary or his delegate has extended the time allowed for making correction under section 4941(e)(4),4942(j)(2),4943(d)(3),4944(e)(3),or4945(h)(2)."

�


text:
Page:United States Statutes at Large Volume 83.djvu/553

 83 STAT. ]

PUBLIC LAW 91-172-DEC. 30, 1969

525

(g) LIMITATIONS ON ASSESSMENT AND COLLECTION.—

(1) Section 6501 is amended by adding at the end thereof the „^t^ Stat.soa; a ^\

' •

1

i'

J

ts

go Stat. 1151.

lollowing new subsection: " (n) SPECIAL RULE FOR CHAPTER 42 TAXES.—

" (1) IN GENERAL.—For purposes of any tax imposed by chapter 42 (other than section 4940), the return referred to in this section shall be the return filed by the private foundation for the year in which the act (or failure to act) giving rise to liability for such tax occurred. For purposes of section 4940, such return is the return filed by the private foundation for the taxable year for which the tax is imposed. "(2) CERTAIN CONTRIBUTIONS TO SECTION soi (c)(3) ORGANIZATIONS.—In the case of a deficiency of tax of a private foundation making a contribution in the manner provided in section 4942 (g)(3) (relating to certain contributions to section 501(c) ^3) organizations) attributable to the failure of a section 501(c)(3) organization to make the distribution prescribed by section 4942 (g)(3), such deficiency may be assessed at any time before the expiration of one year after the expiration of the period within which a deficiency may be assessed for the taxable year with respect to which the contribution was made." (2) Section 6501(c) is amended by adding the following new paragraph at the end thereof:

Ante, p. 498.

68A Stat. 163. ^^ ^^^ ^^^'

" (7) TERMINATION OF PRIVATE FOUNDATION STATUS.—In the

case of a tax on termination of private foundation status under section 507, such tax may be assessed, or a proceeding in court for the collection of such tax may be begun without assessment, at any time." (3) Section 6501(e)(3) is amended by adding at the end thereof the following sentence: "In determining the amount of tax omitted on a return, there shall not be taken into account any amount of tax imposed by chapter 42 which is omitted from the return if the transaction giving rise to such tax is disclosed in the return, or in a statement attached to the return, in a manner adequate to apprise the Secretary or his delegate of the existence and nature of such item." (4) Section 6503 (relating to suspension of running of period of limitation) is amended by relettering subsection (h) as subsection (i) and inserting immediately after subsection (g) the following new subsection: " (h) SUSPENSION

PENDING

CORRECTION.—The

running

of

Ante, p. 492.

8° ^'^' ^ i^o.

the

periods of limitations provided in sections 6501 and 6502 on the making of assessments or the collection by levy or a proceeding in court in respect of any tax imposed by chapter 42 or section 507 shall be suspended for any period described in section 507(g^ (2) or during which the Secretary or his delegate has extended the time for making correction under section 4941(e)(4), 4942(j)(2), 4943(d)(3), 4944(e)(3), or 4945(h)(2)."

^SA Stat. 8O6.

(h) LIMITATIONS ON CREDITS OR EEFUNDS.—Section 6511 (relating

to limitations on credits or refunds) is amended by relettering subsection (f) as subsection (g) and inserting immediately after subsection (e) the following new subsection: "(f)

SPECIAL RULE FOR CHAPTER 42 TAXES.—For purposes of any

tax imposed by chapter 42, the return referred to in subsection (a) shall be the return specified in section 6501(n)(1)." ^P"^(i) CIVIL ACTION FOR EEFUND.—Section 7422 (relating to civil go^st^t^'fios'^' actions for refund) is amended by relettering subsection (g) as subsection (h) and by inserting immediately after subsection (f) the following new subsection:

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text:
Page:United States Statutes at Large Volume 83.djvu/554

 526

PUBLIC LAW 91-172-DEC. 30, 1969 "(g)

Ante. p. 498.

SPECIAL RULES FOK

CHAPTER

"(1)

CERTAIN EXCISE

[83 STAT.

TAXES IMPOSED BY

42.—

R I G H T TO BRING ACTIONS.—With respect to any

act

(or

failure to act) giving rise to liability under section 4941,4942,4943, 4944, or 4945, payment of the full amount of tax imposed under section 4941(a) (relating to initial taxes on self-dealing), section 4942(a) (relating to initial tax on failure to distribute income), section 4943(a) (relating to initial tax on excess business holdings), section 4944(a) (relating to initial taxes on investments which jeopardize charitable purpose), section 4945(a) (relating to initial taxes on taxable expenditures), section 4941(b) (relating to additional taxes on self-dealing), section 4942(b) (relating to additional tax on failure to distribute income), section 4943(b) (relating to additional tax on excess business holdings), section 4944(b) (relating to additional taxes on investments which jeopardize charitable purpose), or section 4945(b) (relating to additional taxes on taxable expenditures) shall constitute sufficient payment in order to maintain an action under this section with respect to such act (or failure to act). "(2) LIMITATION ON SUIT FOR REFUND.—No suit may be maintained under this section for the credit or refund of any tax imposed under section 4941, 4942, 4943, 4944, or 4945 with respect to any act (or failure to act) giving rise to liability for tax under such sections, unless no other suit has been maintained for credit or refund of, and no petition has been filed in the Tax Court with respect to a deficiency in, any other tax imposed by such sections with respect to such act (or failure to act). "(3) F I N A L DETERMINATION OF ISSUES.—For purposes of this section, any suit for the credit or refund of any tax imposed under section 4941, 4942, 4943, 4944, or 4945 with respect to any act (or failure to act) giving rise to liability for tax under such sections, shall constitute a suit to determine all questions with respect to any other tax imposed with respect to such act (or failure to act) under such sections, and failure by the parties to such suit to bring any such question before the Court shall constitute a bar to such question." (j) TECHNICAL, CONFORMING, AND CLERICAL AMENDMENTS.— 72 Stat. 1622 26 USC 101.

Post, p. 549.

68A Stat. 163.

(1) Section 101(b)(2)(B) (iii) (relating to nonforfeitable rights) is amended by striking out "section 503(b)(1), (2), or (3)" and inserting in lieu thereof "section 170(b)(1)(A) (ii) or (vi) or which is a religious organization (other than a trust). (2) Section 170(i) (relating to disallowance of deductions in certain cases) (as redesignated by section 201(a)(1)(A) of this Act) is amended— (A) by striking out paragraph (1), and (B) by striking out "(2) For disallowance" and inserting in lieu thereof "For disallowance". ^3^ Section 501(a) (relating to exemption from taxation) is amended by striking out "502, 503, or 504" and inserting in lieu thereof "502 or 503". (4) Section 501(b) (relating to tax on unrelated business income) is amended to read as follows: "(b)

TAX ON UNRELATED BUSINESS INCOME AND CERTAIN OTHER

ACTIVITIES.—An organization exempt from taxation under subsection (a) shall be subject to tax to the extent provided in parts II and III of this subchapter, but (notwithstanding parts II and III of this subchapter) shall be considered an organization exempt from income

�


text:
Page:United States Statutes at Large Volume 83.djvu/555

 83 STAT.]

PUBLIC LAW 9 ] - 1 7 2 - D E C. 30, 1969

taxes for the purpose of any law which refers to organizations exempt from income taxes." (5) Section 501(c) (16) (relating to list of exempt organizations) is amended by striking out "part III " and inserting in lieu thereof "part IV ". (6) Section 501(e) (relating to cooperative hospital service organizations) is amended by striking out in the last sentence thereof "section 503(b)(5)." and inserting in lieu thereof "section 170(b)(1)(A) (iii).". (7) Section 503(a)(1) (relating to general rule) is amended to read as follows: "(1)

527

26^scr5o\"' 82 Stat. 269.

74 Stat. 535.

GENERAL RULE. —

" (A) An organization described in section 501(c) (17) shall not be exempt from taxation under section 501(a) if it has engaged in a prohibited transaction after December 31, 1959. " (B) An organization described in section 401(a) shall not be exempt from taxation under section 501(a) if it has engaged in a prohibited transaction after March 1, 1954." (8) Section 503(a)(2) (relating to taxable years affected by denial of exemption) is amended by striking out "section 501(c) (3) or (17)" and inserting in lieu thereof "section 501(c) (17)". (9) Section 503(d) (relating to future status of organizations denied exemption) is amended by striking out "section 501(c)(3) or (17)" and inserting in lieu thereof "section 501(c) (17)". (10) Section 503(g) (relating to special rule for loans) is amended by striking out "subsection (c)(1), " and inserting in lieu thereof "subsection (b)(1),". (11) Section 503(h) (relating to special rules relating to lending by section 401(a) and section 501(c) (17) trusts to certain persons) is amended— (A) by striking out in the heading thereof "SPECIAL RULES RELATING TO LENDING BY SECTION 401(a) AND SECTION 501(c) (17) TRUSTS TO CERTAIN PERSONS.—", and inserting in lieu thereof "SPECIAL RULES.—"^ (B) by striking out "subsection (c)(1)," and inserting in lieu thereof "subsection (b)(1),", (C) by striking out "acquired by a trust described in section 401(a) or section 501(c) (17)", and (D) by striking out in paragraph (3) "subsection (c) " and inserting in lieu thereof "subsection (b)". (12) Section 503(i) (relating to loans with respect to which employers are prohibited from pledging certain assets) is amended— (A) by striking out "Subsection (c)(1) " and inserting in lieu thereof "Subsection (b)(1)", and (B) by striking out "suDsection (h) " and inserting in lieu thereof 'Subsection (e)". (13) Section 503(j)(1) (relating to prohibited transactions) is amended by striking out "subsection (c) " and inserting in lieu thereof "subsection (b) ". (14) Section 503 (relating to requirements of exemption) is amended by striking out subsections (b), (e), and (f) and by redesignating subsections (c), (d), (g), (h). (i), and (i) (as amended), as subsections (b), (c), (d), (e), (f), and (g), respectively. (15) Section 504 (relating to denial of exemption) is repealed.

74 Stat. 534. 68A Stat. 163.

68A Stat. 166.

72 Stat. 1629.

72 Stat. 1630.

76 Stat. 827.

es^AStat. les

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Page:United States Statutes at Large Volume 83.djvu/556

 528 e/st^u^yVs^^^' 26 USC 542.

68A^stat 232

^^AStat. 282;

68A Stat. 358.

Anfe, p. 518.

72 Stat. 1623. Post, p. 550.

73 Stat. 617.

PUBLIC LAW 91-172-DEC. 30, 1969

[83 STAT.

(16) Section 542(a)(2) (relating to stock ownership requirement) is amended— (A) by striking out in the second sentence "section 503 (b)" and inserting in lieu thereof "section 401(a), 501(c) (17), or 509(a)", and (B) by amending the third sentence to read as follows: "The preceding sentence shall not apply in the case of an organization or trust organized or created before July 1, 1950, if at all times on or after July 1, 1950, and before the close of the taxable year such organization or trust has owned all of the common stock and at least 80 percent of the total number of shares of all other classes of stock of the corporation." (17) Section 663(a)(2) (relating to charitable, etc., distributions) is amended by striking out "section 681" and inserting in lieu thereof "sections 508(d), 681, and 4948(c)(4)". (^^) Section 681(b) and (c) (relating to operations of trusts and accumulated income) is repealed. (19) Section 681(d) (relating to cross reference) is redesignated as subsection (b), and as so redesignated is amended by striking out "section 503(e) " and inserting in lieu thereof "sections 508(d) and 4948 (c)(4) ". ^20) Section 878 (relating to foreign educational, charitable, and certain other exempt organizations) is amended by— (A) striking out "unrelated business incoltne of", and (B) striking out "trusts, see section 512(a)" and inserting in lieu thereof "organizations, see sections 512(a) and 4948". (21) Section 884 (relating to cross references) is amended by striking out paragraph (1) and by redesignating paragraphs (2), (3), (4), (5), and (6) as paragraphs (1), (2), (3), (4), and (5), respectively. ^22) Section 1443 (relating to foreign tax-exempt organizations) is amended by— (A) inserting " (a) INCOME SUBJECT TO SECTION 511.—" before " I n the case of", and (B) adding subsection (b) to read as follows: "(b) INCOME SUBJECT TO SECTION 4948.—In the case of income of a forelgu organization subject to the tax imposed by section 4948(a), this chapter shall apply, except that the deduction and withholding shall be at the rate of 4 percent and shall be subject to such conditions as may be provided under regulations prescribed by the Secretary or his delesrate." (23) Section 2039(c)(3) (relating to exemption of annuities under certain trusts and plans) is amended by striking out "section 503(b)(1), (2), or (3)," and inserting in lieu thereof "section 1 7 0 (b)(1)(A) (ii) or (vi), or which is a religious organization (other than a trust),". (24) Section 2517(a)(3) (relating to general rule for certain annuities under qualified plans) is amended by striking out "section 503(b)(1), (2), -or (3)," and inserting in lieu thereof ""section 170(b)(1)(A) (ii) or (vi), or which is a religious organization (other than a trust),". (25) Section 4057(b) (relating to the definition of nonprofit educational organization) is amended by striking out "section 503(b)(2) " and inserting in lieu thereof "section 170(b)(1)(A) (ii)".

�


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Page:United States Statutes at Large Volume 83.djvu/557

 83 STAT. ]

PUBLIC LAW 91-172-DEC. 30, 1969

(26) Section 4221(d)(5) (relating to the definition of nonprofit educational organization) is amended by striking out "section 503(b)(2) " and inserting in lieu thereof "section 170(b)(1)(A) (ii)"(27) Section 4253(h) (relating to nonprofit hospitals) is amended by striking out "section 503(b)(5) " and inserting in lieu thereof "section 170(b)(1)(A) (iii)". (28) Section 4294(b) (relating to the definition of nonprofit educational organization) is amended by striking out "section 503(b)(2) " and inserting in lieu thereof "section 170(b)(1) (A)(ii)". (29) Section 5214(a)(3)(A) (relating to purposes for withdrawal of distilled spirits from bonded premises free of tax or without payment of tax) is amended by striking out "section 5 0 3 (b)(2) " and inserting in lieu thereof "section 170(b) (1,) (A)(ii)". (30) Section 6033(b)(4) (as redesignated by subsection (d) (2) of this section) (relating to certain balance sheet items on returns by exempt organizations) is amended by striking out "and" at the end thereof. (31) Section 6033(c) (relating to cross reference) is amended by inserting the following at the end thereof: "For reporting requirements as to certain liquidations, dissolutions, terminations, and contractions, see section 6043(b). For provisions relating to penalties for failure to file a return required by this section, see section 6652(d).'' (32) Section 6034 (relating to returns by certain trusts) is amended by striking out all of such section before paragraph (1) of subsection (a) and inserting in lieu thereof the following: "SEC. 6034. RETURNS BY TRUSTS DESCRIBED IN SECTION 4947(a) OR CLAIMING CHARITABLE DEDUCTIONS UNDER SECTION 642(c). " (a) GENERAL RULE.—Every trust described in section 4947(a) or

claiming a charitable, etc., deduction under section 642(c) for the taxable year shall furnish such information with respect to such taxable year as the Secretary or his delegate may by forms or regulations prescribe, including—". (33) Section 6034(a)(1) (relating to returns by certain trusts) is amended by striking out "(showing separately the amount of such deduction which was paid out and the amount which was permanently set aside for cnaritable, etc., purposes during such year)". (34) Section 6034 (relating to returns by certain trusts) is amended by adding the following new subsection at the end thereof:

529 72 Stat. 1282. 26 USC 4221.

Post,

p. 550.

Ante, p. 520

^"fe, p. 522, 68A Stat. 742.

Ante, p. 517. Post,

p. 558.

" (c) CROSS REFERENCE.—

"For provisions relating to penalties for failure to file a return required by this section, see section 6652(d)." (35) Section 6043 (relating to return regarding corporate dissolution or liquidation) is amended— (A) by striking out the heading and inserting in lieu thereof "RETURNS REGARDING LIQUIDATION, DISSOLUTION, TERMINATION, OR CONTRACTION.", (B) by striking out "Every corporation" and inserting in lieu thereof " (a) CORPORATIONS.—Every corporation", and

68A Stat. 746.

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text:
Page:United States Statutes at Large Volume 83.djvu/558

 530

PUBLIC LAW 91-172-DEC. 30, 1969

26 USC r*5o\"'

Ante, p. 496.

(C) by adding the following new subsections at the end thereof: "(b) EXEMPT ORGANIZATIONS.—Every organization which for any of its last 5 taxable years preceding its liquidation, dissolution, termination, or substantial contraction was exempt from taxation under section 501(a) shall file such return and other information with respect to such liquidation, dissolution, termination, or substantial contraction as the Secretary or his delegate shall by forms or regulations prescribe; except that— "(1) no return shall be required under this subsection from churches, their integrated auxiliaries, conventions or associations of churches, or any organization which is not a private foundation ^^g (j^fined in section 509(a)) and the gross receipts of which in each taxable year are normally not more than $5,000, and " (2) the Secretary or his delegate may relieve any organization from such filing where he determines that such filing is not necessary to the efficient administration of the internal revenue laws or, with respect to an organization described in section 401(a), where the employer who established such organization files such a return. "(c)

Ante,

p. 498.

[83 STAT.

CROSS EEFERENCE.—

"For provisions relating to penalties for failure to file a return required by subsection (b), see section 6652(d)." (36) Section 6104(b) (relating to inspection of annual information returns) is amended by striking out "sections 6033(b) and 6034," and inserting in lieu thereof "sections 6033, 6034, and 6056,". (37) Section 6161(b) (relating to the amount determined as a deficiency when granting an extension of time) is amended— (A) by striking out in paragraph (1) "chapter 1 or 12," and inserting in lieu thereof "chapter 1,12, or 42,", and (B) by striking out "chapter 1," the last time it appears and inserting in lieu thereof "chapter 1 or 42,". (38) Section 6201(d) (relating to deficiency proceedings) is amended by striking out "and gift taxes", and inserting in lieu thereof "gift, and chapter 42 taxes". (39) Section 6211(b)(2) (relating to the term "rebate") is amended by striking out "subtitles A or B " and inserting in lieu thereof "subtitle A or B or chapter 42". (40) Section 6212(a) (relating to notice of deficiency) is amended by striking out "subtitles A or B " and inserting in lieu thereof "subtitle A or B or chapter 42". (41) Section 6212(b)(1) (relating to address for notice of deficiency) is amended— (A) by striking out in the title thereof "AND GIFT TAXES" and inserting in lieu thereof "AND GIFT TAXES AND TAXES IMPOSED BY CHAPTER 4 2 ",

(B) by striking out "subtitle A or chapter 12," and inserting in lieu thereof "subtitle A, chapter 12, or chapter 42,", and (C) by inserting "chapter 42," after "chapter 12," the last place it appears. (42) Section 6213(a) (relating to restrictions applicable to deficiencies; petition to Tax Court) is amended by inserting "or chapter 42" after "subtitle A or B ". (43) Section 6214 (relating to determination by the Tax Court) is amended by relettering subsection (c) as subsection (d) and by inserting after subsection (b) the following new subsection:

�


text:
Page:United States Statutes at Large Volume 83.djvu/559

 83 STAT. ] "(c)

PUBLIC LAW 91-172-DEC. 30, 1969

TAXES IMPOSED BY SECTION 507

OR CHAPTER 42.—The

531 Tax

Court, in redetermining a deficiency of any tax imposed by section 507 or chapter 42 for any period, act, or failure to act, shall consider such facts with relation to the taxes under chapter 42 for other periods, acts, or failures to act as may be necessary correctly to redetermine the amount of such deficiency, but in so doing shall have no jurisdiction to determine whether or not the taxes under chapter 42 for any other period, act, or failure to act have been overpaid or underpaid." (44) Section 6214(d) (as relettered) is amended by inserting ", chapter 42," after "chapter". (45) Section 6344(a)(1) (relating to certain cross references) is amended by inserting "and taxes imposed by chapter 42," after "gift taxes,". (46) Section 6503(a)(1) (relating to issuance of statutory notice of deficiency) is amended by striking out "and gift taxes" and inserting in lieu thereof "gift and chapter 42 taxes". (47) Section 6512(a) (relating to effect of petition to Tax Court) is amended— (A) by striking out "and gift taxes" and inserting in lieu thereof "gift, and chapter 42 taxes", and (B) by striking out "or of estate tax in respect of the taxable estate of the same decedent," and inserting in lieu thereof "of estate tax in respect of the taxable estate of the same decedent, or of tax imposed by chapter 42 with respect to any act (or failure to act) to which such petition relates,". (48) Section 6512(b)(1) (relating to jurisdiction to determine overpayment determined by Tax Court) is amended by striking out "or of estate tax in respect of the taxable estate of the same decedent," and inserting in lieu thereof "of estate tax in respect of the taxable estate of the same decedent, or of tax imposed by chapter 42 with respect to any act (or failure to act) to which such petition relates,". (49) Section 6601(d) (relating to suspension of interest in certain cases) is amended— (A) by striking out in the title thereof "AND GIFT TAX CASES." and inserting in lieu thereof " G I F T, AND CHAPTER 42 TAX CASES.",

>^«e. P- 492. Ante. p. 498.

^"'^' P- S3O. ^SA Stat. 789.

and

(B) by striking out "and gift taxes" and inserting in lieu thereof "gift, and chapter 42 taxes". (50) Section 6653(c)(1) (relating to definition of underpayment) is amended— (A) by striking out in the heading thereof "AND GIFT TAXES." and inserting in lieu thereof "GIFT, AND CHAPTER 42 TAXES.", and

(B) by striking out "and gift taxes" the last time it appears and inserting in lieu thereof "gift, and chapter 42 taxes". (51) Section 6659(b) (relating to procedure for assessing certain additions to tax) is amended by striking out "and gift taxes" and inserting in lieu thereof "gift, and chapter 42 taxes". (52) Section 6676(b) (relating to deficiency procedures not to apply) is amended by striking out "and gift taxes" and inserting in lieu thereof "gift, and chapter 42 taxes". (53) Section 6677(b) (relating to deficiency procedures not to ^PPjy) is amended by striking out "and gift taxes" and inserting in lieu thereof "gift, and chapter 42 taxes".

75 Stat. 829. ^^ s*^'- -'s^-

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text:
Page:United States Statutes at Large Volume 83.djvu/560

 532 26 USC ^°^^' 80 Stat. 6 1.

68A Stat. 877,

Ante, p. 515.

68A Stat. 163.

PUBLIC LAW 91-172-DEC. 30, 1969

[83 STAT.

^^^^ Section 6679(b) (relating to deficiency procedures not to apply) is amended by striking out "and gift taxes" and inserting in lieu thereof "gift, and chapter 42 taxes". (55) Section 6682(b) (relating to deficiency procedures not to apply) is amended by striking out "and gift taxes" and inserting in lieu thereof "gift, and chapter 42 taxes". (56) Section 7422(e) (relating to stay of proceeding in civil actions for refund) is amended b}^ striking out "or gift tax" the first time it appears and inserting in lieu thereof "gift tax, or tax imposed by chapter 42". (57) Section 7454 (relating to burden of proof in fraud and transferee cases) is amended— (A) by striking out " F R A U D A N D TRANSFER E E C A S E S " and inserting in lieu thereof " F R A U D, FOUNDAT I O N MANAGER, AND TRANSFER E E C A S E S ", (B) by redesignating subsection (b) as subsection (c), and (C) by inserting after subsection (a) the following new subsection: "(b) FOUNDATION- MANAGERS.—In any proceeding involving the issue whether a foundation manager (as defined in section 4946(b)) has 'knowingly' participated in an act of self-dealing (within the meaning of section 4941), participated in an investment which jeopardizes the carrying out of exempt purposes (within the meaning of section 4944), or agreed to the making of a taxable expenditure (within the meaning of section 4945), the burden of proof in respect of such issue shall be upon the Secretary or his delegate." (58) The table of parts for subchapter F of chapter 1 is amended to read as follows: "Subchapter F.—Exempt Organizations

68A Stat. 473.

68A Stat. 163. 68A Stat. 770. 68A Stat. 767.

"Part I. General rule. "Part II. Private foundations. "Part III. Taxation of business income of certain exempt organizations. "Part IV. Farmers' cooperatives. "Part V. Shipowners' protection and indemnity associations." (59) The table of chapters for subtitle D is amended by adding at the end thereof the following new item: "Chapter 42. Private foundations." (60) The table of sections for subchapter B of chapter 68 is amended by adding at the end thereof the following new items: "Sec. 6684. Repeated liability for tax under chapter 42. "Sec. 6685. Assessable penalties with respect to private foundation annual reports." (g^) The table of sections for part I of subchapter F of chapter 1 is amended by striking out the item relating to section 504. ^g2) The heading of subchapter B of chapter 63 is amended by striking out "and Gift T a x e s " and inserting in lieu thereof "Gift, and Certain Excise Taxes". ^gg) The table of subchapters for chapter 63 is amended by striking out "and gift taxes" in the item relating to subchapter B and inserting in lieu thereof "gift, and certain excise taxes".

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Page:United States Statutes at Large Volume 83.djvu/561

 83 STAT. ]

PUBLIC LAW 91-172-DEC. 30, 1969

533

(64) The table of subparts for part III of subchapter A of chapter 61 is amended by adding at the end thereof the following new item: "Subpart D. Information concerning private foundations." (k) EFFECTIVE DATES.—

(1) IN GENERAL.—Except as otherwise provided in this subsection and subsection (1), the amendments made by this section shall take effect on January 1, 1970. (2) PROVISIONS EFFECTIVE FOR TAXABLE YEARS BEGINNING AFTER

DECEMBER 31, 1969.—The following provisions shall apply to taxable years beginning after December 31, 1969: (A) Sections 4940, 4942, 4943, and 4948 of the Internal Revenue Code of 1954 (as added by this section), and ^"'^' P- ''^^• (B) The amendments made by subsection (d) and paragraphs (3), (15), (16), (20), (21), (30), (31), (32), (33), (34), (35), and (61) of subsection (j). (3) SECTIONS 5 0 8 (a), (b), AND (C).—Sections 508(a), (b),

and (c) of the Internal Revenue Code of 1954 (as added by this section) shall take effect on October 9, 1969. (1) SAVINGS PROVISIONS.— (1) REFERENCES TO INTERNAL REVENUE CODE PRO\T:SIONS.—Ex-

cept as otherwise expressly provided, references in the following paragraphs of this subsection are to sections of the Internal Revenue Code of 1954 as amended by this section. (2) SECTION 4941.—Section 4941 shall not apply to— (A) any transaction between a private foundation and a corporation which is a disqualified person (as defined in section 4946), pursuant to the terms of securities of such corporation in existence at the time acquired by the foundation, if such securities were acquired by the foundation before May 27, 1969; (B) the sale, exchange, or other disposition of property which is owned by a private foundation on May 26, 1969 (or which is acquired by a private foundation under the terms of a trust which was irrevocable on May 26, 1969, or under the terms of a will executed on or before such date, which are in effect on such date and at all times thereafter), to a disqualified person, if such foundation is required to dispose of such property in order not to be liable for tax under section 4943 (relating to taxes on excess business holdings) applied, in the case of a disposition before January 1, 1975, without taking section 4943(c)(4) into account and it receives in return an amount which equals or exceeds the fair market value of such property at the time of such disposition or at the time a contract for such disposition was previously executed in a transaction which would not constitute a prohibited transaction (within the meaning of section 503(b) or the corresponding provisions of prior law); (C) the leasing of property or the lending of money or other extension of credit between a disq^ualified person and a private foundation pursuant to a binding contract in effect on October 9, 1969 (or pursuant to renewals of such a contract), until taxable years beginning after December 31, 1979, if such leasing or lending (or other extension of credit) remains at least as favorable as an arm's-length transaction with an unrelated party and if the execution of such contract

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Rh her the prettiest girl he ever seen, excepting Mary Nestor.

"Oh, that's for you," replied the young inventor. "It's a tip. Aren't you in the habit of getting them down here?"

"Not very often. Thank yo' all. But what did yo' all ask about that paper?"

"I asked where I could get a copy of it. There is something in it that interests me."

"Yes, an' Ah reckon Ah knows what it is," exclaimed the girl. "It's about that airship with th' robbers in it!"

"How do you know?" inquired Tom quickly, and he tried to seem cool, though he felt the hot blood mounting to his cheeks.

"Oh, Ah saw yo' all readin' it. Everybody down heah is crazy about it. We all think th' ship is comin' down this way, 'cause it says th' robbers was intendin' to start south befo' they robbed th' bank. Ah wish Ah could collect thet five thousand dollars. If Ah could see that airship, I wouldn't work no mo' in this eatin' place. What do yo' all reckon thet airship looks like?" and the girl gazed intently at Tom and Mr. Damon.

"Why, bless my—" began the eccentric man, but Tom broke in hurriedly:

"Oh, I guess it looks like most any other

title: Page:Tom Swift and His Airship.djvu/171