I
104TH CONGRESS
1ST SESSION
H. R. 285
To amend the Internal Revenue Code of 1986 to provide an exemption
from income tax for certain common investment funds.
IN THE HOUSE OF REPRESENTATIVES
JANUARY 4, 1995
Mr. JACOBS introduced the following bill; which was referred to the Committee
on Ways and Means
A BILL
To amend the Internal Revenue Code of 1986 to provide
an exemption from income tax for certain common in-
vestment funds.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. COOPERATIVE SERVICE ORGANIZATIONS FOR
CERTAIN FOUNDATIONS.
(a) IN GENERAL.—Section 501 of the Internal Reve-
nue Code of 1986 (relating to exemption from tax on cor-
porations, certain trusts, etc.) is amended by redesignat-
ing subsection (n) as subsection (o) and by inserting after
subsection (m) the following new subsection:
‘‘(n) COOPERATIVE SERVICE ORGANIZATIONS
FOR
CERTAIN FOUNDATIONS.—
‘‘(1) IN GENERAL.—For purposes of this title,
if an organization—
‘‘(A) is organized and operated solely for
purposes referred to in subsection (f)(1),
‘‘(B) is composed solely of members which
are exempt from taxation under subsection (a)
and are—
‘‘(i) private foundations, or
‘‘(ii) community foundations as to
which section 170(b)(1)(A)(vi) applies,
‘‘(C) has at least 20 members,
‘‘(D) does not at any time after the second
taxable year beginning after the date of its or-
ganization or, if later, beginning after the date
of the enactment of this subsection, have a
member which holds more than 10 percent (by
value) of the interests in the organization,
‘‘(E) is organized and controlled by its
members but is not controlled by any one mem-
ber and does not have a member which controls
another member of the organization, and
‘‘(F) permits members of the organization
to require the dismissal of any of the organiza-
tion’s investment advisors, following reasonable
notice, if members holding a majority of inter-
est in the account managed by such advisor
vote to remove such advisor,
then such organization shall be treated as an organi-
zation organized and operated exclusively for chari-
table purposes.
‘‘(2) TREATMENT OF INCOME OF MEMBERS.—
If any member of an organization described in para-
graph (1) is a private foundation (other than an ex-
empt operating foundation, as defined in section
4940(d)), such private foundation’s allocable share
of the capital gain net income and gross investment
income of the organization for any taxable year of
the organization shall be treated, for purposes of
section 4940, as capital gain net income and gross
investment income of such private foundation
(whether or not distributed to such foundation) for
the taxable year of such private foundation with or
within which the taxable year of the organization de-
scribed in paragraph (1) ends (and such private
foundation shall take into account its allocable share
of the deductions referred to in section 4940(c)(3) of
the organization).
‘‘(3) APPLICABLE EXCISE TAXES.—Subchapter
A of chapter 42 (other than sections 4940 and
4942) shall apply to any organization described in
paragraph (1).’’
(b) CONFORMING AMENDMENTS.—
(1) Section 4945(d) of such Code is amended
by adding at the end the following new flush sen-
tence:
‘‘Paragraph (4)(B) shall not apply to a grant to an organi-
zation described in section 501(n).’’
(2) Section 4942(g)(1)(A) of such Code is
amended by inserting ‘‘or an organization described
in section 501(n)’’ after ‘‘subsection (j)(3))’’.
(c) EFFECTIVE DATE.—The amendment made by
subsection (a) shall apply to taxable years ending on or
after December 31, 1994.
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