An Act to amend the Internal Revenue Code of 1954 to provide an exemption from income tax for supplemental unemployment benefit trusts
PL 86-667 (H.R.8229), enacted 07/14/1960

534 
PUBLIC LAW 86-667-JULY 14, 1960 
[74 STAT. 
Public Law 86-667 
Tuly 14. 1960 
AN ACT 
[H. R. 8229] 
rjiQ amend the Internal Revenue Code of 1954 to provide an exemption from 
income tax for supplemental unemployment benefit trusts. 
Be it enacted iy the Senate and House of Representatives 
of the 
^^^V^fl^^'f"l^ ""' United States of America in Conqress assemhled, That section 501(c) 
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fit trusts. 
01 the Internal Kevenue Code oi 1954 (relating to exemption from tax 
Tax exemptions. QJI corporations, Certain or^^anizations, etc.) is amended by adding 
26 use 501. ' 
after paragraph (16) the following new paragraph: 
"(17) (A) A trust or trusts forming part of a plan providing 
for the payment of supplemental unemployment compensation 
benefits, if— 
"(i) under the plan, it is impossible, at any time prior to 
the satisfaction of all liabilities with respect to employees 
under the plan, for any part of the corpus or income to ^'^ 
(within the taxable year or thereafter) used for, or diverted 
to, any purpose other than the providing of supplemental 
unemployment compensation benefits, 
"(ii) such benefits are payable to employees under a classi-
fication which is set forth in the plan and which is found by 
the Secretary or his delegate not to be discriminatory in 
favor of employees who are officers, shareholders, persons 
whose principal duties consist of supervising the w^ork of 
other employees, or highly compensated employees, and 
"(iii) such benefits do not discriminate in favor of em-
ployees w^ho are officers, shareholders, persons whose principal 
duties consist of supervising the work of other employees, or 
highly compensated employees. A plan shall not be con-
sidered discriminatory within the meaning of this clause 
merely because the benefits received under the plan bear a 
uniform relationship to the total compensation, or the basic 
or regular rate of compensation, of the employees covered 
by the plan. 
"(B) In determining whether a plan meets the requirements 
of subparagraph (A), any benefits provided under any other 
plan shall not be taken into consideration, except that a plan shall 
not be considered discriminatory— 
"(i) merely because the benefits under the plan which are 
first determined in a nondiscriminatory manner within the 
meaning of subparagraph (A) are then reduced by any sick, 
accident, or unemployment compensation benefits received 
under State or Federal law (or reduced by a portion of such 
benefits if determined in a nondiscriminatory manner), or 
"(ii) merely because the plan provides only for employees 
who are not eligible to receive sick, accident, or unemploy-
ment compensation benefits under State or Federal law the 
same benefits (or a portion of such benefits if determined in a 
nondiscriminatory manner) which such employees would 
receive under such laws if such employees were eligible for 
such benefits, or 
"(iii) merely because the plan provides only for employees 
who are not eligible under another plan (which meets the 
requirements of subparagraph (A)) of supplemental unem-
ployment compensation benefits provided wholly by the 
employer the same benefits (or a portion of such benefits if 
determined in a nondiscriminatory manner) which such 
employees would receive under such other plan if such em-
74 S T A T . ] 
PUBLIC LAW 86-667-JULY U, 1960 
535 
ployees were eligible under such other plan, but only if the 
employees eligible under both plans would make a classi-
fication which would be nondiscriminatory within the mean-
ing of subparagraph (A). 
"(C) A plan shall be considered to meet the requirements of 
subparagraph (A) during the whole of any year of the plan if 
on one day in each quarter it satisfies such requirements, 
"(D) The tei^m 'supplemental unemployment compensation 
benefits' means only— 
"(i) benefits which are paid to an employee because of his 
involuntary separation from the employment of the employer 
(whether or not such separation is temporary) resulting di-
rectly from a reduction in force, the discontinuance of a plant 
or operation, or other similar conditions, and 
"(ii) sick and accident benefits subordinate to the bene-
fits described in clause (i). 
"(E) Exemption shall not be denied under subsection (a) to 
any organization entitled to such exemption as an association de-
scribed in paragraph (9) of this subsection merely because such 
organization provides for the payment of supplemental unem-
ployment benefits (as defined in subparagraph (D)(i))." 
SEC. 2." (a) Subsection (a) of section 503 of the Internal Revenue 
Denial of ex-
Code of 1954 (relating to denial of "exemption to organizations engaged 
26 use 503. 
in prohibited transactions) is amended— 
(1) by revising paragraph (1) to read as follows: 
"(1) 
GENERAL RULE.— 
"(A) An organization described in section '501(c)(3) 
which is subject to the provisions of this section shall not be 
exempt from taxation under section 501(a) if it has engaged 
in a prohibited transaction after July 1, 1950. 
"(B) An organization described in section 501(c) (IT) 
Ante, p. 534. 
which is subject to the provisions of'this section shall not be 
exempt from taxation under section 501(a) if it has engaged 
in a prohibited transaction after December 31, 1959. 
"(C) An organization described in section 401(a) which 
is subject to the provisions of this section shall not be exempt 
from taxation under section 501(a) if it has engaged in a 
prohibited transaction after March 1, 1954.", and 
(2) by striking out "section 501(c) (3)" in paragraph (2) and 
inserting in lieu thereof "section 501(c) (3) or (17)". 
(b) Subsection (b) of such section 503 is amended by striking out 
26 use 503. 
"section 501(c) (3)" and inserting in lieu thereof "section 501(c) (3) 
or (17)". 
(c) Subsection (d) of such section 503 is amended by striking out 
"section 501(c) (3)" and inserting in lieu thereof "section 501(c) (3) 
or (17)". 
(d) Subsection (h) of such section 503 is amended— 
(1) by striking out "section 401(a)" in the heading and insert-
ing in lieu thereof "section 401(a) and section 501(c) (17)", and 
(2) by striking out "section 401(a)" in such subsection and 
inserting in lieu thereof "section 401(a) or section 501(c) (17)". 
SEC. 3. (a) Subsection (a) (2) of section 511 of the Internal Reve- 
26 use 511. 
nue Code of 1954 (relating to imposition of tax on unrelated busi-
ness income of charitable, etc., organizations) is amended— 
(1) by striking out "and (6)" in the heading of subparagraph 
(A) and inserting in lieu thereof " (6), and (17)", and 
(2) by striking out "or (6)" in the first sentence of subpara-
graph (A) and inserting in lieu thereof "(6), or (17)". 
536 
PUBLIC LAW 86-668-JULY 14, 1960 
[74 ST A T . 
26 u s e 513. 
26 u s e 5 14. 
Ante, p. 534. 
Effective date. 
(b) Subsection (b) of such section 511 is amended by striking out 
"section 501(c)(3)" in paragraph (2) and inserting in lieu thereof 
"section 501(c) (3) or (17)". 
SFX\ 4. Section 513(b)(2) of the Internal Revenue Code of 1954 
(relating to the definition of unrelated trade or business) is amended 
by striking out "section 401 (a)" and inserting in lieu thei-eof "section 
401(a), or section 501(c) (IT),". 
SEC. 5. Section 514(c) of the Internal Revenue Code of 1954 (relat-
ing to business leases) is amended by adding at the end thereof the 
following new paragraph: 
"(8) 
TRUSTS DESCRIBED IN SECTION OOKC) ( I T ) . — 
" (A) In the case of a trust described in section 501 (c) (17), 
or in the case of a corporation described in section 501 (c) (2), 
all of the stock of which was acquired before January 1, 
1960, by a trust described in section 501(c) (17), any in-
debtedness incurred by such trust or such corporation before 
January 1, 1960, in connection with real property which is 
leased before January 1, 1960, and any indebtedness incurred 
by such trust or such corporation on or after such date neces-
sary to carry out the terms of such lease, shall not be con-
sidered as an indebtedness with respect to such trust or such 
corporation for purposes of this subsection. 
"(B) In the application of paragraph (1), if a trust 
described in section 501(c) (17) forming part of a supple-
mental unemployment compensation benefit plan lends any 
money to another trust described in section 501(c) (17) 
forming part of the same plan, such loan shall not be treated 
as an indebtedness of the borrowing trust, except to the 
extent that the loaning trust— 
"(i) incurs any indebtedness in order to make such 
loan, 
"(ii) incurred indebtedness before the making of such 
loan which would not have been incurred but for the 
making of such loan, or 
"(iii) incurred indebtedness after the making of such 
loan which would not have been incurred but for the 
making of such loan and w^hich w'as reasonably foresee-
able at the time of making such loan.". 
SKC. 6. (a) Except as provided in subsection (b), the amendments 
made by this Act shall apply to taxable years beginning after Decem-
ber 31,1959. 
(b) Ifi the case of loans, the amendments made by section 2 of this 
Act shall apply only to loans made, renewed, or continued after Decem-
ber 31, 1959. 
Approved July 14, 1960. 
July 14, I960 
[H. R. 12584] 
70 Stat. 619. 
D. C. e o de 33-
410. 
Public Law 86-668 
AN ACT 
To anieiul the Uniform Xarcotic Ding Act for the District of Columbia. 
Be it emicted hy the Senate and House of Representatives^ of the 
United States of America in Congress assembled^ That subsection (a) 
of section 10 of the Uniform Narcotic Drug Act (52 Stat. 785) is 
amended by striking out ", (5) not more than one-sixth of a grain of 
dihydrocodeinone or any of its salts". 
Approved July 14, 1960.