Title: Philanthropic Enterprise Act of 2017
Policy area: Taxation

Summary:
Philanthropic Enterprise Act of 2017
This bill amends the Internal Revenue Code to exempt the holdings of a private foundation in any business enterprise that meets specified requirements relating to exclusive ownership, minimum distribution of net operating income for the charitable purpose (all profits to charity distribution requirement), and independent operation (not controlled by a substantial contributor or family members) from the excise taxes on excess business holdings.

[Congressional Bills 115th Congress]
[From the U.S. Government Publishing Office]
[H.R. 3035 Introduced in House (IH)]

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115th CONGRESS
  1st Session
                                H. R. 3035

     To amend the Internal Revenue Code of 1986 to exempt private 
  foundations from the tax on excess business holdings in the case of 
 certain philanthropic enterprises which are independently supervised, 
                        and for other purposes.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                             June 23, 2017

 Mr. Reichert (for himself, Mr. Larson of Connecticut, Mr. Tiberi, Mr. 
  Kelly of Pennsylvania, Mr. Rice of South Carolina, Mr. Paulsen, Mr. 
      Holding, Mr. Smith of Missouri, Ms. Jenkins of Kansas, Mr. 
 Frelinghuysen, Mr. Higgins of New York, Ms. Esty of Connecticut, and 
 Mr. Calvert) 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 exempt private 
  foundations from the tax on excess business holdings in the case of 
 certain philanthropic enterprises which are independently supervised, 
                        and for other purposes.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Philanthropic Enterprise Act of 
2017''.

SEC. 2. EXCEPTION FROM PRIVATE FOUNDATION EXCESS BUSINESS HOLDING TAX 
              FOR CERTAIN PHILANTHROPIC BUSINESS HOLDINGS.

    (a) In General.--Section 4943 of the Internal Revenue Code of 1986 
is amended by adding at the end the following new subsection:
    ``(g) Exception for Certain Philanthropic Business Holdings.--
            ``(1) In general.--Subsection (a) shall not apply with 
        respect to the holdings of a private foundation in any business 
        enterprise which for the taxable year meets--
                    ``(A) the exclusive ownership requirements of 
                paragraph (2),
                    ``(B) the all profits to charity distribution 
                requirement of paragraph (3), and
                    ``(C) the independent operation requirements of 
                paragraph (4).
            ``(2) Exclusive ownership.--The exclusive ownership 
        requirements of this paragraph are met if--
                    ``(A) all ownership interests in the business 
                enterprise are held by the private foundation at all 
                times during the taxable year, and
                    ``(B) all the private foundation's ownership 
                interests in the business enterprise were acquired 
                under the terms of a will or trust upon the death of 
                the testator or settlor, as the case may be.
            ``(3) All profits to charity.--
                    ``(A) In general.--The all profits to charity 
                distribution requirement of this paragraph is met if 
                the business enterprise, not later than 120 days after 
                the close of the taxable year, distributes an amount 
                equal to its net operating income for such taxable year 
                to the private foundation.
                    ``(B) Net operating income.--For purposes of this 
                paragraph, the net operating income of any business 
                enterprise for any taxable year is an amount equal to 
                the gross income of the business enterprise for the 
                taxable year, reduced by the sum of--
                            ``(i) the deductions allowed by chapter 1 
                        for the taxable year which are directly 
                        connected with the production of such income,
                            ``(ii) the tax imposed by chapter 1 on the 
                        business enterprise for the taxable year, and
                            ``(iii) an amount for a reasonable reserve 
                        for working capital and other business needs of 
                        the business enterprise.
            ``(4) Independent operation.--The independent operation 
        requirements of this paragraph are met if, at all times during 
        the taxable year--
                    ``(A) no substantial contributor (as defined in 
                section 4958(c)(3)(C)) to the private foundation, or 
                family member of such a contributor (determined under 
                section 4958(f)(4)) is a director, officer, trustee, 
                manager, employee, or contractor of the business 
                enterprise (or an individual having powers or 
                responsibilities similar to any of the foregoing),
                    ``(B) at least a majority of the board of directors 
                of the private foundation are not--
                            ``(i) also directors or officers of the 
                        business enterprise, or
                            ``(ii) members of the family (determined 
                        under section 4958(f)(4)) of a substantial 
                        contributor (as defined in section 
                        4958(c)(3)(C)) to the private foundation, and
                    ``(C) there is no loan outstanding from the 
                business enterprise to a substantial contributor (as so 
                defined) to the private foundation or a family member 
                of such contributor (as so determined).
            ``(5) Certain deemed private foundations excluded.--This 
        subsection shall not apply to--
                    ``(A) any fund or organization treated as a private 
                foundation for purposes of this section by reason of 
                subsection (e) or (f),
                    ``(B) any trust described in section 4947(a)(1) 
                (relating to charitable trusts), and
                    ``(C) any trust described in section 4947(a)(2) 
                (relating to split-interest trusts).''.
    (b) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2016.
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