Source: http://www.law.cornell.edu/uscode/text/26/507
Timestamp: 2013-05-21 04:57:13
Document Index: 751423132

Matched Legal Cases: ['§ 507', '§ 507', '§ 507', '§ 101', '§ 1906', '§ 313', '§ 3', '§ 2']

26 USC § 507 - Termination of private foundation status | Title 26 - Internal Revenue Code | U.S. Code | LII / Legal Information Institute
USC › Title 26 › Subtitle A › Chapter 1 › Subchapter F › Part II › § 507	prevnext
26 USC § 507 - Termination of private foundation status
General rule Except as provided in subsection (b), the status of any organization as a private foundation shall be terminated only if—
Transfer to, or operation as, public charity The status as a private foundation of any organization, with respect to which there have not been either willful repeated acts (or failures to act) or a willful and flagrant act (or failure to act) giving rise to liability for tax under chapter 42, shall be terminated if—
such organization distributes all of its net assets to one or more organizations described in section 170
(b)(1)(A) (other than in clauses (vii) and (viii)) each of which has been in existence and so described for a continuous period of at least 60 calendar months immediately preceding such distribution, or
such organization meets the requirements of paragraph (1), (2), or (3) of section 509
(a) by the end of the 12-month period beginning with its first taxable year which begins after December 31, 1969, or for a continuous period of 60 calendar months beginning with the first day of any taxable year which begins after December 31, 1969,
If an organization gives notice under subparagraph (B)(ii) of the commencement of a 60-month period and such organization fails to meet the requirements of paragraph (1), (2), or (3) of section 509
(a) for the entire 60-month period, this part and chapter 42 shall not apply to such organization for any taxable year within such 60-month period for which it does meet such requirements.
Transferee foundations For purposes of this part, in the case of a transfer of assets of any private foundation to another private foundation pursuant to any liquidation, merger, redemption, recapitalization, or other adjustment, organization, or reorganization, the transferee foundation shall not be treated as a newly created organization.
Imposition of tax There is hereby imposed on each organization which is referred to in subsection (a) a tax equal to the lower of—
the amount which the private foundation substantiates by adequate records or other corroborating evidence as the aggregate tax benefit resulting from the section 501
(c)(3) status of such foundation, or
Aggregate tax benefit (1)
In general For purposes of subsection (c), the aggregate tax benefit resulting from the section 501
(c)(3) status of any private foundation is the sum of—
the aggregate increases in tax under chapter 1 (or the corresponding provisions of prior law) which would have been imposed with respect to the income of the private foundation for taxable years beginning after December 31, 1912, if (i) it had not been exempt from tax under section 501
(a) (or the corresponding provisions of prior law), and (ii) in the case of a trust, deductions under section 642
(c) (or the corresponding provisions of prior law) had been limited to 20 percent of the taxable income of the trust (computed without the benefit of section 642
(c) but with the benefit of section 170
(b)(1)(A)), and
Substantial contributor (A)
Definition For purposes of paragraph (1), the term “substantial contributor” means any person who contributed or bequeathed an aggregate amount of more than $5,000 to the private foundation, if such amount is more than 2 percent of the total contributions and bequests received by the foundation before the close of the taxable year of the foundation in which the contribution or bequest is received by the foundation from such person. In the case of a trust, the term “substantial contributor” also means the creator of the trust.
Person ceases to be substantial contributor in certain cases (i)
Regulations For purposes of this section, the determination as to whether and to what extent there would have been any increase in tax shall be made in accordance with regulations prescribed by the Secretary.
Value of assets For purposes of subsection (c), the value of the net assets shall be determined at whichever time such value is higher: (1)
the first day on which action is taken by the organization which culminates in its ceasing to be a private foundation, or (2)
the date on which it ceases to be a private foundation.
Liability in case of transfers of assets from private foundation For purposes of determining liability for the tax imposed by subsection (c) in the case of assets transferred by the private foundation, such tax shall be deemed to have been imposed on the first day on which action is taken by the organization which culminates in its ceasing to be a private foundation.
Abatement of taxes The Secretary may abate the unpaid portion of the assessment of any tax imposed by subsection (c), or any liability in respect thereof, if—
the private foundation distributes all of its net assets to one or more organizations described in section 170
(b)(1)(A) (other than in clauses (vii) and (viii)) each of which has been in existence and so described for a continuous period of at least 60 calendar months, or
following the notification prescribed in section 6104
(c) to the appropriate State officer, such State officer within one year notifies the Secretary, in such manner as the Secretary may by regulations prescribe, that corrective action has been initiated pursuant to State law to insure that the assets of such private foundation are preserved for such charitable or other purposes specified in section 501
(c)(3) as may be ordered or approved by a court of competent jurisdiction, and upon completion of the corrective action, the Secretary receives certification from the appropriate State officer that such action has resulted in such preservation of assets.
(Added Pub. L. 91–172, title I, § 101(a),Dec. 30, 1969, 83 Stat. 492; amended Pub. L. 94–455, title XIX, § 1906(b)(13)(A),Oct. 4, 1976, 90 Stat. 1834; Pub. L. 98–369, div. A, title III, § 313(a),July 18, 1984, 98 Stat. 786.)
1984—Subsec. (d)(2)(C). Pub. L. 98–369added subpar. (C).
Section 313(b) ofPub. L. 98–369provided that: “The amendment made by subsection (a) [amending this section] shall apply to taxable years beginning after December 31, 1984.”
Pub. L. 95–170, § 3,Nov. 12, 1977, 91 Stat. 1352, as amended by Pub. L. 99–514, § 2,Oct. 22, 1986, 100 Stat. 2095, provided that: “In determining whether a person is a substantial contributor within the meaning of section 507(d)(2) of the Internal Revenue Code of 1986 [formerly I.R.C. 1954] for purposes of applying section 4941 of such Code (relating to taxes on self-dealing), contributions made before October 9, 1969, which—