Source: https://www.law.cornell.edu/uscode/text/26/4943
Timestamp: 2019-05-20 18:49:20
Document Index: 72626659

Matched Legal Cases: ['§ 4943', '§\u202f4943', '§\u202f101', '§\u202f1906', '§\u202f2', '§\u202f307', '§\u202f1212', '§\u202f220', '§\u202f41110', '§\u202f1212', '§\u202f1233', '§\u202f1243', '§\u202f308', '§\u202f309', '§\u202f310', '§\u202f307', '§\u202f314', '§\u202f2', '§\u202f2', '§\u202f2', '§\u202f41110', '§\u202f1233', '§\u202f1243', '§\u202f307', '§\u202f2', '§\u202f308', '§\u202f309', '§\u202f310', '§\u202f314']

26 U.S. Code § 4943 - Taxes on excess business holdings | U.S. Code | US Law | LII / Legal Information Institute
Section 4943. Taxes on excess business holdings
26 U.S. Code § 4943. Taxes on excess business holdings
(2) Special rulesThe tax imposed by paragraph (1)—
(c) Excess business holdingsFor purposes of this section—
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 holdings of the foundation in such enterprise to be permitted holdings.
(A) In generalThe permitted holdings of any private foundation in an incorporated business enterprise are—
(B) 35 percent rule where third person has effective control of enterpriseIf—
(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. Such regulations shall be consistent in principle with paragraphs (2) and (4), except that—
(6) 5-year period to dispose of gifts, bequests, etc.Except 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—
(7) 5-year extension of period to dispose of certain large gifts and bequestsThe Secretary may extend for an additional 5-year period the period under paragraph (6) for disposing of excess business holdings in the case of an unusually large gift or bequest of diverse business holdings or holdings with complex corporate structures if—
(d) Definitions; special rulesFor purposes of this section—
(2) Taxable periodThe 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 excess holdings and ending on the earlier of—
(3) Business enterpriseThe term “business enterprise” does not include—
a functionally related business (as defined in section 4942(j)(4)), or
The term “disqualified person” (as defined in section 4946(a)) does not include a plan described in section 4975(e)(7) with respect to the holdings of a private foundation described in paragraphs (4) and (5) of subsection (c).
(2) Disqualified personIn applying this section to any donor advised fund (as so defined), the term “disqualified person” means, with respect to the donor advised fund, any person who is—
described in section 4966(d)(2)(A)(iii),
a 35-percent controlled entity (as defined in section 4958(f)(3) by substituting “persons described in subparagraph (A) or (B) of section 4943(e)(2)” for “persons described in subparagraph (A) or (B) of paragraph (1)” in subparagraph (A)(i) thereof).
(3) Present holdingsFor purposes of this subsection, rules similar to the rules of paragraphs (4), (5), and (6) of subsection (c) shall apply to donor advised funds (as so defined), except that—
“January 1, 2007” shall be substituted for “January 1, 1971” in paragraph (4)(E).
(3) Organizations describedAn organization is described in this paragraph if such organization is—
an organization which meets the requirements of subparagraphs (A) and (C) of section 509(a)(3) and which is supervised or controlled in connection with one or more organizations described in paragraph (1) or (2) of section 509(a), but only if such organization accepts any gift or contribution from any person described in section 509(f)(2)(B).
(A) In generalIn applying this section to any organization described in paragraph (3), the term “disqualified person” means, with respect to the organization—
any 35-percent controlled entity (as defined in section 4958(f)(3) by substituting “persons described in clause (i) or (ii) of section 4943(f)(4)(A)” for “persons described in subparagraph (A) or (B) of paragraph (1)” in subparagraph (A)(i) thereof),
any person described in section 4958(c)(3)(B), and
(B) Persons describedA person is described in this subparagraph if such person is—
a substantial contributor to the organization (as defined in section 4958(c)(3)(C)),
(5) Type III supporting organization; functionally integrated type III supporting organizationFor purposes of this subsection—
The term “type III supporting organization” means an organization which meets the requirements of subparagraphs (A) and (C) of section 509(a)(3) and which is operated in connection with one or more organizations described in paragraph (1) or (2) of section 509(a).
The term “functionally integrated type III supporting organization” means a type III supporting organization which is not required under regulations established by the Secretary to make payments to supported organizations (as defined under section 509(f)(3)) due to the activities of the organization related to performing the functions of, or carrying out the purposes of, such supported organizations.
For purposes of this subsection, the term “excess business holdings” shall not include any holdings of a type III supporting organization in any business enterprise if, as of November 18, 2005, the holdings were held (and at all times thereafter, are held) for the benefit of the community pursuant to the direction of a State attorney general or a State official with jurisdiction over such organization.
(7) Present holdingsFor purposes of this subsection, rules similar to the rules of paragraphs (4), (5), and (6) of subsection (c) shall apply to organizations described in section 509(a)(3), except that—
(2) OwnershipThe requirements of this paragraph are met if—
100 percent of the voting stock in the business enterprise is held by the private foundation at all times during the taxable year, and
all the private foundation’s ownership interests in the business enterprise were acquired by means other than by purchase.
(B) Net operating incomeFor 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—
(4) Independent operationThe requirements of this paragraph are met if, at all times during the taxable year—
no substantial contributor (as defined in section 4958(c)(3)(C)) to the private foundation or family member (as determined under section 4958(f)(4)) of such a contributor 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),
family members (as so determined) of a substantial contributor (as so defined) to the private foundation, and
there is no loan outstanding from the business enterprise to a substantial contributor (as so defined) to the private foundation or to any family member of such a contributor (as so determined).
(5) Certain deemed private foundations excludedThis subsection shall not apply to—
(Added Pub. L. 91–172, title I, § 101(b), Dec. 30, 1969, 83 Stat. 507; amended Pub. L. 94–455, title XIX, § 1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1834; Pub. L. 96–596, § 2(a)(1)(D), (2)(C), (3)(C), (4)(B), Dec. 24, 1980, 94 Stat. 3469–3472; Pub. L. 98–369, div. A, title III, §§ 307(a), 308(a), 309(a), 310(a), 314(c)(1), July 18, 1984, 98 Stat. 784, 785, 787; Pub. L. 109–280, title XII, §§ 1212(c), 1233(a), 1243(a), Aug. 17, 2006, 120 Stat. 1074, 1099, 1105; Pub. L. 113–295, div. A, title II, § 220(r), Dec. 19, 2014, 128 Stat. 4036; Pub. L. 115–123, div. D, title II, § 41110(a), Feb. 9, 2018, 132 Stat. 159.)
2014—Subsecs. (e)(3)(B), (f)(7)(B). Pub. L. 113–295 substituted “January 1, 1971” for “January 1, 1970”.
2006—Subsec. (a)(1). Pub. L. 109–280, § 1212(c), substituted “10 percent” for “5 percent”. See Codification note above.
Subsec. (e). Pub. L. 109–280, § 1233(a), added subsec. (e). See Codification note above.
Subsec. (f). Pub. L. 109–280, § 1243(a), added subsec. (f). See Codification note above.
1984—Subsec. (c)(4)(A)(ii). Pub. L. 98–369, § 308(a), substituted “For purposes of the preceding sentence, any decrease in percentage holdings attributable to issuances of stock (or to issuances of stock coupled with redemptions of stock) shall be disregarded so long as (I) the net percentage decrease disregarded under this sentence does not exceed 2 percent, and (II) the number of shares held by the foundation is not affected by any such issuance or redemption” for “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”.
Subsec. (c)(4)(B)(i). Pub. L. 98–369, § 309(a), substituted “the private foundation and all disqualified persons have” for “the private foundation has”.
Subsec. (c)(6). Pub. L. 98–369, § 310(a), inserted following subpar. (B) “In any case where an acquisition by a disqualified person would result in a substitution under clause (i) or (ii) of subparagraph (D) of paragraph (4), the preceding sentence shall be applied with respect to such acquisition as if it did not contain the phrase ‘or by a disqualified person’ in the material preceding subparagraph (A).”
Subsec. (c)(7). Pub. L. 98–369, § 307(a), added par. (7).
Subsec. (d)(4). Pub. L. 98–369, § 314(c)(1), added par. (4).
1980—Subsec. (b). Pub. L. 96–596, § 2(a)(1)(D), substituted “taxable period” for “correction period”.
Subsec. (d)(2). Pub. L. 96–596, § 2(a)(2)(C), substituted provision ending the taxable period on the earlier of the date of mailing of a notice of deficiency with respect to the tax imposed by subsec. (a) of this section under section 6212 of this title in respect to such holdings or the date on which the tax imposed by subsec. (a) of this section in respect to such holdings is assessed for provision ending the taxable period on the date of mailing the notice of deficiency with respect to a tax imposed by subsec. (a) of this section under section 6212 of this title in respect to such holdings.
Subsec. (d)(3), (4). Pub. L. 96–596, § 2(a)(3)(C), (4)(B), redesignated par. (4) as (3), and in subpar. (A) of par. (3) as so redesignated, substituted “section 4942(j)(4)” for “section 4942(j)(5)”, and struck out par. (3), which defined correction period, with respect to excess business holdings of a private foundation in a business enterprise, as the period ending 90 days after the date of mailing of a notice of deficiency with respect to the tax imposed by subsec. (b) of this section under section 6212 of this title, extended by any period in which a deficiency cannot be assessed under section 6213(a) of this title and any other period which the Secretary determines is reasonable and necessary to permit orderly disposition of such excess business holdings.
Pub. L. 115–123, div. D, title II, § 41110(b), Feb. 9, 2018, 132 Stat. 160, provided that:
Pub. L. 109–280, title XII, § 1233(b), Aug. 17, 2006, 120 Stat. 1100, provided that:
“The amendment made by this section [amending this section] shall apply to taxable years beginning after the date of the enactment of this Act [Aug. 17, 2006].”
Pub. L. 109–280, title XII, § 1243(b), Aug. 17, 2006, 120 Stat. 1107, provided that:
Pub. L. 98–369, div. A, title III, § 307(b), July 18, 1984, 98 Stat. 785, as amended by Pub. L. 99–514, § 2, Oct. 22, 1986, 100 Stat. 2095, provided that:
The amendment made by subsection (a) [amending this section] shall apply to business holdings with respect to which the 5-year period described in section 4943(c)(6) of the Internal Revenue Code of 1986 [formerly I.R.C. 1954] ends on or after November 1, 1983.
Any plan submitted to the Secretary of the Treasury or his delegate on or before the 60th day after the date of the enactment of this Act [July 18, 1984] shall be treated as submitted before the close of the initial 5-year period referred to in section 4943(c)(7)(B) of the Internal Revenue Code of 1986 (as added by subsection (a)).”
Pub. L. 98–369, div. A, title III, § 308(b), July 18, 1984, 98 Stat. 785, provided that:
“The amendment made by subsection (a) [amending this section] shall apply to increases and decreases occurring after the date of the enactment of this Act [July 18, 1984].”
Pub. L. 98–369, div. A, title III, § 309(b), July 18, 1984, 98 Stat. 785, provided that:
“The amendment made by subsection (a) [amending this section] shall take effect as if included in the amendment made by section 101(b) of the Tax Reform Act of 1969 [section 101(b) of Pub. L. 91–172 which enacted this section].”
Pub. L. 98–369, div. A, title III, § 310(b), July 18, 1984, 98 Stat. 786, provided that:
“The amendment made by subsection (a) [amending this section] shall apply to acquisitions after the date of the enactment of this Act [July 18, 1984].”
Pub. L. 98–369, div. A, title III, § 314(c)(2), July 18, 1984, 98 Stat. 788, provided that:
“The amendment made by paragraph (1) [amending this section] shall apply with respect to taxable years beginning after the date of the enactment of this Act [July 18, 1984].”
26 CFR Subpart D - Taxes on Excess Business Holdings