-CITE-
26 USC Subchapter F - Exempt Organizations 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter F - Exempt Organizations
-HEAD-
SUBCHAPTER F - EXEMPT ORGANIZATIONS
-MISC1-
Part
I. General rule.
II. Private foundations.
III. Taxation of business income of certain exempt
organizations.
IV. Farmers' cooperatives.
V. Shipowners' protection and indemnity associations.
VI. Political organizations.
VII. Certain homeowners associations.
VIII. Higher education savings entities.
AMENDMENTS
1997 - Pub. L. 105-34, title II, Sec. 211(e)(1)(B), Aug. 5, 1997,
111 Stat. 812, substituted "Higher education savings entities" for
"Qualified State tuition programs" in part VIII heading.
1996 - Pub. L. 104-188, title I, Sec. 1806(b)(2), Aug. 20, 1996,
110 Stat. 1898, added part VIII heading.
1976 - Pub. L. 94-455, title XXI, Sec. 2101(d), Oct. 4, 1976, 90
Stat. 1899, added part VII heading.
1975 - Pub. L. 93-625, Sec. 10(d), Jan. 3, 1975, 88 Stat. 2119,
added part VI heading.
1969 - Pub. L. 91-172, title I, Sec. 101(j)(58), Dec. 30, 1969,
83 Stat. 532, added part II heading, and redesignated former parts
II, III and IV as parts III, IV and V, respectively.
-SECREF-
SUBCHAPTER REFERRED TO IN OTHER SECTIONS
This subchapter is referred to in section 532, 542, 552 of this
title.
-End-
-CITE-
26 USC PART I - GENERAL RULE 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter F - Exempt Organizations
PART I - GENERAL RULE
-HEAD-
PART I - GENERAL RULE
-MISC1-
Sec.
501. Exemption from tax on corporations, certain trusts,
etc.
502. Feeder organizations.
503. Requirements for exemption.
504. Status after organization ceases to qualify for
exemption under section 501(c)(3) because of
substantial lobbying or because of political
activities.
505. Additional requirements for organizations described in
paragraph (9), (17), or (20) of section 501(c).
AMENDMENTS
1987 - Pub. L. 100-203, title X, Sec. 10711(b)(2)(B), Dec. 22,
1987, 101 Stat. 1330-464, substituted "substantial lobbying or
because of political activities" for "substantial lobbying" in item
504.
1984 - Pub. L. 98-369, div. A, title V, Sec. 513(b), July 18,
1984, 98 Stat. 865, added item 505.
1976 - Pub. L. 94-455, title XIII, Sec. 1307(d)(3)(B), Oct. 4,
1976, 90 Stat. 1728, added item 504.
1969 - Pub. L. 91-172, title I, Sec. 101(j)(61), Dec. 30, 1969,
83 Stat. 532, struck out item 504 "Denial of exemption".
-End-
-CITE-
26 USC Sec. 501 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter F - Exempt Organizations
PART I - GENERAL RULE
-HEAD-
Sec. 501. Exemption from tax on corporations, certain trusts, etc.
-STATUTE-
(a) Exemption from taxation
An organization described in subsection (c) or (d) or section
401(a) shall be exempt from taxation under this subtitle unless
such exemption is denied under section 502 or 503.
(b) Tax on unrelated business income and certain other activities
An organization exempt from taxation under subsection (a) shall
be subject to tax to the extent provided in parts II, III, and VI
of this subchapter, but (notwithstanding parts II, III, and VI of
this subchapter) shall be considered an organization exempt from
income taxes for the purpose of any law which refers to
organizations exempt from income taxes.
(c) List of exempt organizations
The following organizations are referred to in subsection (a):
(1) Any corporation organized under Act of Congress which is an
instrumentality of the United States but only if such corporation
-
(A) is exempt from Federal income taxes -
(i) under such Act as amended and supplemented before July
18, 1984, or
(ii) under this title without regard to any provision of
law which is not contained in this title and which is not
contained in a revenue Act, or
(B) is described in subsection (l).
(2) Corporations organized for the exclusive purpose of holding
title to property, collecting income therefrom, and turning over
the entire amount thereof, less expenses, to an organization
which itself is exempt under this section. Rules similar to the
rules of subparagraph (G) of paragraph (25) shall apply for
purposes of this paragraph.
(3) Corporations, and any community chest, fund, or foundation,
organized and operated exclusively for religious, charitable,
scientific, testing for public safety, literary, or educational
purposes, or to foster national or international amateur sports
competition (but only if no part of its activities involve the
provision of athletic facilities or equipment), or for the
prevention of cruelty to children or animals, no part of the net
earnings of which inures to the benefit of any private
shareholder or individual, no substantial part of the activities
of which is carrying on propaganda, or otherwise attempting, to
influence legislation (except as otherwise provided in subsection
(h)), and which does not participate in, or intervene in
(including the publishing or distributing of statements), any
political campaign on behalf of (or in opposition to) any
candidate for public office.
(4)(A) Civic leagues or organizations not organized for profit
but operated exclusively for the promotion of social welfare, or
local associations of employees, the membership of which is
limited to the employees of a designated person or persons in a
particular municipality, and the net earnings of which are
devoted exclusively to charitable, educational, or recreational
purposes.
(B) Subparagraph (A) shall not apply to an entity unless no
part of the net earnings of such entity inures to the benefit of
any private shareholder or individual.
(5) Labor, agricultural, or horticultural organizations.
(6) Business leagues, chambers of commerce, real-estate boards,
boards of trade, or professional football leagues (whether or not
administering a pension fund for football players), not organized
for profit and no part of the net earnings of which inures to the
benefit of any private shareholder or individual.
(7) Clubs organized for pleasure, recreation, and other
nonprofitable purposes, substantially all of the activities of
which are for such purposes and no part of the net earnings of
which inures to the benefit of any private shareholder.
(8) Fraternal beneficiary societies, orders, or associations -
(A) operating under the lodge system or for the exclusive
benefit of the members of a fraternity itself operating under
the lodge system, and
(B) providing for the payment of life, sick, accident, or
other benefits to the members of such society, order, or
association or their dependents.
(9) Voluntary employees' beneficiary associations providing for
the payment of life, sick, accident, or other benefits to the
members of such association or their dependents or designated
beneficiaries, if no part of the net earnings of such association
inures (other than through such payments) to the benefit of any
private shareholder or individual.
(10) Domestic fraternal societies, orders, or associations,
operating under the lodge system -
(A) the net earnings of which are devoted exclusively to
religious, charitable, scientific, literary, educational, and
fraternal purposes, and
(B) which do not provide for the payment of life, sick,
accident, or other benefits.
(11) Teachers' retirement fund associations of a purely local
character, if -
(A) no part of their net earnings inures (other than through
payment of retirement benefits) to the benefit of any private
shareholder or individual, and
(B) the income consists solely of amounts received from
public taxation, amounts received from assessments on the
teaching salaries of members, and income in respect of
investments.
(12)(A) Benevolent life insurance associations of a purely
local character, mutual ditch or irrigation companies, mutual or
cooperative telephone companies, or like organizations; but only
if 85 percent or more of the income consists of amounts collected
from members for the sole purpose of meeting losses and expenses.
(B) In the case of a mutual or cooperative telephone company,
subparagraph (A) shall be applied without taking into account any
income received or accrued -
(i) from a nonmember telephone company for the performance of
communication services which involve members of the mutual or
cooperative telephone company,
(ii) from qualified pole rentals,
(iii) from the sale of display listings in a directory
furnished to the members of the mutual or cooperative telephone
company, or
(iv) from the prepayment of a loan under section 306A, 306B,
or 311 (!1) of the Rural Electrification Act of 1936 (as in
effect on January 1, 1987).
(C) In the case of a mutual or cooperative electric company,
subparagraph (A) shall be applied without taking into account any
income received or accrued -
(i) from qualified pole rentals, or
(ii) from the prepayment of a loan under section 306A, 306B,
or 311 (!1) of the Rural Electrification Act of 1936 (as in
effect on January 1, 1987).
(D) For purposes of this paragraph, the term "qualified pole
rental" means any rental of a pole (or other structure used to
support wires) if such pole (or other structure) -
(i) is used by the telephone or electric company to support
one or more wires which are used by such company in providing
telephone or electric services to its members, and
(ii) is used pursuant to the rental to support one or more
wires (in addition to the wires described in clause (i)) for
use in connection with the transmission by wire of electricity
or of telephone or other communications.
For purposes of the preceding sentence, the term "rental"
includes any sale of the right to use the pole (or other
structure).
(13) Cemetery companies owned and operated exclusively for the
benefit of their members or which are not operated for profit;
and any corporation chartered solely for the purpose of the
disposal of bodies by burial or cremation which is not permitted
by its charter to engage in any business not necessarily incident
to that purpose and no part of the net earnings of which inures
to the benefit of any private shareholder or individual.
(14)(A) Credit unions without capital stock organized and
operated for mutual purposes and without profit.
(B) Corporations or associations without capital stock
organized before September 1, 1957, and operated for mutual
purposes and without profit for the purpose of providing reserve
funds for, and insurance of shares or deposits in -
(i) domestic building and loan associations,
(ii) cooperative banks without capital stock organized and
operated for mutual purposes and without profit,
(iii) mutual savings banks not having capital stock
represented by shares, or
(iv) mutual savings banks described in section 591(b) (!2)
(C) Corporations or associations organized before September 1,
1957, and operated for mutual purposes and without profit for the
purpose of providing reserve funds for associations or banks
described in clause (i), (ii), or (iii) of subparagraph (B); but
only if 85 percent or more of the income is attributable to
providing such reserve funds and to investments. This
subparagraph shall not apply to any corporation or association
entitled to exemption under subparagraph (B).
(15)(A) Insurance companies or associations other than life
(including interinsurers and reciprocal underwriters) if the net
written premiums (or, if greater, direct written premiums) for
the taxable year do not exceed $350,000.
(B) For purposes of subparagraph (A), in determining whether
any company or association is described in subparagraph (A), such
company or association shall be treated as receiving during the
taxable year amounts described in subparagraph (A) which are
received during such year by all other companies or associations
which are members of the same controlled group as the insurance
company or association for which the determination is being made.
(C) For purposes of subparagraph (B), the term "controlled
group" has the meaning given such term by section
831(b)(2)(B)(ii).
(16) Corporations organized by an association subject to part
IV of this subchapter or members thereof, for the purpose of
financing the ordinary crop operations of such members or other
producers, and operated in conjunction with such association.
Exemption shall not be denied any such corporation because it has
capital stock, if the dividend rate of such stock is fixed at not
to exceed the legal rate of interest in the State of
incorporation or 8 percent per annum, whichever is greater, on
the value of the consideration for which the stock was issued,
and if substantially all such stock (other than nonvoting
preferred stock, the owners of which are not entitled or
permitted to participate, directly or indirectly, in the profits
of the corporation, on dissolution or otherwise, beyond the fixed
dividends) is owned by such association, or members thereof; nor
shall exemption be denied any such corporation because there is
accumulated and maintained by it a reserve required by State law
or a reasonable reserve for any necessary purpose.
(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 be
(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
classification which is set forth in the plan and which is
found by the Secretary not to be discriminatory in favor of
employees who are highly compensated employees (within the
meaning of section 414(q)), and
(iii) such benefits do not discriminate in favor of employees
who are highly compensated employees (within the meaning of
section 414(q)). A plan shall not be considered 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 unemployment
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 unemployment
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 employees were eligible under
such other plan, but only if the employees eligible under both
plans would make a classification which would be
nondiscriminatory within the meaning 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 term "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
directly 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 benefits
described in clause (i).
(E) Exemption shall not be denied under subsection (a) to any
organization entitled to such exemption as an association
described in paragraph (9) of this subsection merely because such
organization provides for the payment of supplemental
unemployment benefits (as defined in subparagraph (D)(i)).
(18) A trust or trusts created before June 25, 1959, forming
part of a plan providing for the payment of benefits under a
pension plan funded only by contributions of employees, if -
(A) 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 be
(within the taxable year or thereafter) used for, or diverted
to, any purpose other than the providing of benefits under the
plan,
(B) such benefits are payable to employees under a
classification which is set forth in the plan and which is
found by the Secretary not to be discriminatory in favor of
employees who are highly compensated employees (within the
meaning of section 414(q)),
(C) such benefits do not discriminate in favor of employees
who are highly compensated employees (within the meaning of
section 414(q)). A plan shall not be considered discriminatory
within the meaning of this subparagraph 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, and
(D) in the case of a plan under which an employee may
designate certain contributions as deductible -
(i) such contributions do not exceed the amount with
respect to which a deduction is allowable under section
219(b)(3),
(ii) requirements similar to the requirements of section
401(k)(3)(A)(ii) are met with respect to such elective
contributions,
(iii) such contributions are treated as elective deferrals
for purposes of section 402(g), and
(iv) the requirements of section 401(a)(30) are met.
For purposes of subparagraph (D)(ii), rules similar to the rules
of section 401(k)(8) shall apply. For purposes of section 4979,
any excess contribution under clause (ii) shall be treated as an
excess contribution under a cash or deferred arrangement.
(19) A post or organization of past or present members of the
Armed Forces of the United States, or an auxiliary unit or
society of, or a trust or foundation for, any such post or
organization -
(A) organized in the United States or any of its possessions,
(B) at least 75 percent of the members of which are past or
present members of the Armed Forces of the United States and
substantially all of the other members of which are individuals
who are cadets or are spouses, widows,,(!3) widowers,
ancestors, or lineal descendants of past or present members of
the Armed Forces of the United States or of cadets, and
(C) no part of the net earnings of which inures to the
benefit of any private shareholder or individual.
(20) an (!4) organization or trust created or organized in the
United States, the exclusive function of which is to form part of
a qualified group legal services plan or plans, within the
meaning of section 120. An organization or trust which receives
contributions because of section 120(c)(5)(C) shall not be
prevented from qualifying as an organization described in this
paragraph merely because it provides legal services or
indemnification against the cost of legal services unassociated
with a qualified group legal services plan.
(21)(A) A trust or trusts established in writing, created or
organized in the United States, and contributed to by any person
(except an insurance company) if -
(i) the purpose of such trust or trusts is exclusively -
(I) to satisfy, in whole or in part, the liability of such
person for, or with respect to, claims for compensation for
disability or death due to pneumoconiosis under Black Lung
Acts,
(II) to pay premiums for insurance exclusively covering
such liability,
(III) to pay administrative and other incidental expenses
of such trust in connection with the operation of the trust
and the processing of claims against such person under Black
Lung Acts, and
(IV) to pay accident or health benefits for retired miners
and their spouses and dependents (including administrative
and other incidental expenses of such trust in connection
therewith) or premiums for insurance exclusively covering
such benefits; and
(ii) no part of the assets of the trust may be used for, or
diverted to, any purpose other than -
(I) the purposes described in clause (i),
(II) investment (but only to the extent that the trustee
determines that a portion of the assets is not currently
needed for the purposes described in clause (i)) in qualified
investments, or
(III) payment into the Black Lung Disability Trust Fund
established under section 9501, or into the general fund of
the United States Treasury (other than in satisfaction of any
tax or other civil or criminal liability of the person who
established or contributed to the trust).
(B) No deduction shall be allowed under this chapter for any
payment described in subparagraph (A)(i)(IV) from such trust.
(C) Payments described in subparagraph (A)(i)(IV) may be made
from such trust during a taxable year only to the extent that the
aggregate amount of such payments during such taxable year does
not exceed the lesser of -
(i) the excess (if any) (as of the close of the preceding
taxable year) of -
(I) the fair market value of the assets of the trust, over
(II) 110 percent of the present value of the liability
described in subparagraph (A)(i)(I) of such person, or
(ii) the excess (if any) of -
(I) the sum of a similar excess determined as of the close
of the last taxable year ending before the date of the
enactment of this subparagraph plus earnings thereon as of
the close of the taxable year preceding the taxable year
involved, over
(II) the aggregate payments described in subparagraph
(A)(i)(IV) made from the trust during all taxable years
beginning after the date of the enactment of this
subparagraph.
The determinations under the preceding sentence shall be made by
an independent actuary using actuarial methods and assumptions
(not inconsistent with the regulations prescribed under section
192(c)(1)(A)) each of which is reasonable and which are
reasonable in the aggregate.
(D) For purposes of this paragraph:
(i) The term "Black Lung Acts" means part C of title IV of
the Federal Mine Safety and Health Act of 1977, and any State
law providing compensation for disability or death due to that
pneumoconiosis.
(ii) The term "qualified investments" means -
(I) public debt securities of the United States,
(II) obligations of a State or local government which are
not in default as to principal or interest, and
(III) time or demand deposits in a bank (as defined in
section 581) or an insured credit union (within the meaning
of section 101(7) of the Federal Credit Union Act, 12 U.S.C.
1752(7)) located in the United States.
(iii) The term "miner" has the same meaning as such term has
when used in section 402(d) of the Black Lung Benefits Act (30
U.S.C. 902(d)).
(iv) The term "incidental expenses" includes legal,
accounting, actuarial, and trustee expenses.
(22) A trust created or organized in the United States and
established in writing by the plan sponsors of multiemployer
plans if -
(A) the purpose of such trust is exclusively -
(i) to pay any amount described in section 4223(c) or (h)
of the Employee Retirement Income Security Act of 1974, and
(ii) to pay reasonable and necessary administrative
expenses in connection with the establishment and operation
of the trust and the processing of claims against the trust,
(B) no part of the assets of the trust may be used for, or
diverted to, any purpose other than -
(i) the purposes described in subparagraph (A), or
(ii) the investment in securities, obligations, or time or
demand deposits described in clause (ii) of paragraph
(21)(B),
(C) such trust meets the requirements of paragraphs (2), (3),
and (4) of section 4223(b), 4223(h), or, if applicable, section
4223(c) of the Employee Retirement Income Security Act of 1974,
and
(D) the trust instrument provides that, on dissolution of the
trust, assets of the trust may not be paid other than to plans
which have participated in the plan or, in the case of a trust
established under section 4223(h) of such Act, to plans with
respect to which employers have participated in the fund.
(23) Any association organized before 1880 more than 75 percent
of the members of which are present or past members of the Armed
Forces and a principal purpose of which is to provide insurance
and other benefits to veterans or their dependents.
(24) A trust described in section 4049 of the Employee
Retirement Income Security Act of 1974 (as in effect on the date
of the enactment of the Single-Employer Pension Plan Amendments
Act of 1986).
(25)(A) Any corporation or trust which -
(i) has no more than 35 shareholders or beneficiaries,
(ii) has only 1 class of stock or beneficial interest, and
(iii) is organized for the exclusive purposes of -
(I) acquiring real property and holding title to, and
collecting income from, such property, and
(II) remitting the entire amount of income from such
property (less expenses) to 1 or more organizations described
in subparagraph (C) which are shareholders of such
corporation or beneficiaries of such trust.
For purposes of clause (iii), the term "real property" shall not
include any interest as a tenant in common (or similar interest)
and shall not include any indirect interest.
(B) A corporation or trust shall be described in subparagraph
(A) without regard to whether the corporation or trust is
organized by 1 or more organizations described in subparagraph
(C).
(C) An organization is described in this subparagraph if such
organization is -
(i) a qualified pension, profit sharing, or stock bonus plan
that meets the requirements of section 401(a),
(ii) a governmental plan (within the meaning of section
414(d)),
(iii) the United States, any State or political subdivision
thereof, or any agency or instrumentality of any of the
foregoing, or
(iv) any organization described in paragraph (3).
(D) A corporation or trust shall in no event be treated as
described in subparagraph (A) unless such corporation or trust
permits its shareholders or beneficiaries -
(i) to dismiss the corporation's or trust's investment
adviser, following reasonable notice, upon a vote of the
shareholders or beneficiaries holding a majority of interest in
the corporation or trust, and
(ii) to terminate their interest in the corporation or trust
by either, or both, of the following alternatives, as
determined by the corporation or trust:
(I) by selling or exchanging their stock in the corporation
or interest in the trust (subject to any Federal or State
securities law) to any organization described in subparagraph
(C) so long as the sale or exchange does not increase the
number of shareholders or beneficiaries in such corporation
or trust above 35, or
(II) by having their stock or interest redeemed by the
corporation or trust after the shareholder or beneficiary has
provided 90 days notice to such corporation or trust.
(E)(i) For purposes of this title -
(I) a corporation which is a qualified subsidiary shall not
be treated as a separate corporation, and
(II) all assets, liabilities, and items of income, deduction,
and credit of a qualified subsidiary shall be treated as
assets, liabilities, and such items (as the case may be) of the
corporation or trust described in subparagraph (A).
(ii) For purposes of this subparagraph, the term "qualified
subsidiary" means any corporation if, at all times during the
period such corporation was in existence, 100 percent of the
stock of such corporation is held by the corporation or trust
described in subparagraph (A).
(iii) For purposes of this subtitle, if any corporation which
was a qualified subsidiary ceases to meet the requirements of
clause (ii), such corporation shall be treated as a new
corporation acquiring all of its assets (and assuming all of its
liabilities) immediately before such cessation from the
corporation or trust described in subparagraph (A) in exchange
for its stock.
(F) For purposes of subparagraph (A), the term "real property"
includes any personal property which is leased under, or in
connection with, a lease of real property, but only if the rent
attributable to such personal property (determined under the
rules of section 856(d)(1)) for the taxable year does not exceed
15 percent of the total rent for the taxable year attributable to
both the real and personal property leased under, or in
connection with, such lease.
(G)(i) An organization shall not be treated as failing to be
described in this paragraph merely by reason of the receipt of
any otherwise disqualifying income which is incidentally derived
from the holding of real property.
(ii) Clause (i) shall not apply if the amount of gross income
described in such clause exceeds 10 percent of the organization's
gross income for the taxable year unless the organization
establishes to the satisfaction of the Secretary that the receipt
of gross income described in clause (i) in excess of such
limitation was inadvertent and reasonable steps are being taken
to correct the circumstances giving rise to such income.
(26) Any membership organization if -
(A) such organization is established by a State exclusively
to provide coverage for medical care (as defined in section
213(d)) on a not-for-profit basis to individuals described in
subparagraph (B) through -
(i) insurance issued by the organization, or
(ii) a health maintenance organization under an arrangement
with the organization,
(B) the only individuals receiving such coverage through the
organization are individuals -
(i) who are residents of such State, and
(ii) who, by reason of the existence or history of a
medical condition -
(I) are unable to acquire medical care coverage for such
condition through insurance or from a health maintenance
organization, or
(II) are able to acquire such coverage only at a rate
which is substantially in excess of the rate for such
coverage through the membership organization,
(C) the composition of the membership in such organization is
specified by such State, and
(D) no part of the net earnings of the organization inures to
the benefit of any private shareholder or individual.
A spouse and any qualifying child (as defined in section 24(c))
of an individual described in subparagraph (B) (without regard to
this sentence) shall be treated as described in subparagraph (B).
(27)(A) Any membership organization if -
(i) such organization is established before June 1, 1996, by
a State exclusively to reimburse its members for losses arising
under workmen's compensation acts,
(ii) such State requires that the membership of such
organization consist of -
(I) all persons who issue insurance covering workmen's
compensation losses in such State, and
(II) all persons and governmental entities who self-insure
against such losses, and
(iii) such organization operates as a non-profit organization
by -
(I) returning surplus income to its members or workmen's
compensation policyholders on a periodic basis, and
(II) reducing initial premiums in anticipation of
investment income.
(B) Any organization (including a mutual insurance company) if
-
(i) such organization is created by State law and is
organized and operated under State law exclusively to -
(I) provide workmen's compensation insurance which is
required by State law or with respect to which State law
provides significant disincentives if such insurance is not
purchased by an employer, and
(II) provide related coverage which is incidental to
workmen's compensation insurance,
(ii) such organization must provide workmen's compensation
insurance to any employer in the State (for employees in the
State or temporarily assigned out-of-State) which seeks such
insurance and meets other reasonable requirements relating
thereto,
(iii)(I) the State makes a financial commitment with respect
to such organization either by extending the full faith and
credit of the State to the initial debt of such organization or
by providing the initial operating capital of such
organization, and (II) in the case of periods after the date of
enactment of this subparagraph, the assets of such organization
revert to the State upon dissolution or State law does not
permit the dissolution of such organization, and
(iv) the majority of the board of directors or oversight body
of such organization are appointed by the chief executive
officer or other executive branch official of the State, by the
State legislature, or by both.
(28) The National Railroad Retirement Investment Trust
established under section 15(j) of the Railroad Retirement Act of
1974.
(d) Religious and apostolic organizations
The following organizations are referred to in subsection (a):
Religious or apostolic associations or corporations, if such
associations or corporations have a common treasury or community
treasury, even if such associations or corporations engage in
business for the common benefit of the members, but only if the
members thereof include (at the time of filing their returns) in
their gross income their entire pro rata shares, whether
distributed or not, of the taxable income of the association or
corporation for such year. Any amount so included in the gross
income of a member shall be treated as a dividend received.
(e) Cooperative hospital service organizations
For purposes of this title, an organization shall be treated as
an organization organized and operated exclusively for charitable
purposes, if -
(1) such organization is organized and operated solely -
(A) to perform, on a centralized basis, one or more of the
following services which, if performed on its own behalf by a
hospital which is an organization described in subsection
(c)(3) and exempt from taxation under subsection (a), would
constitute activities in exercising or performing the purpose
or function constituting the basis for its exemption: data
processing, purchasing (including the purchasing of insurance
on a group basis), warehousing, billing and collection
(including the purchase of patron accounts receivable on a
recourse basis), food, clinical, industrial engineering,
laboratory, printing, communications, record center, and
personnel (including selection, testing, training, and
education of personnel) services; and
(B) to perform such services solely for two or more hospitals
each of which is -
(i) an organization described in subsection (c)(3) which is
exempt from taxation under subsection (a),
(ii) a constituent part of an organization described in
subsection (c)(3) which is exempt from taxation under
subsection (a) and which, if organized and operated as a
separate entity, would constitute an organization described
in subsection (c)(3), or
(iii) owned and operated by the United States, a State, the
District of Columbia, or a possession of the United States,
or a political subdivision or an agency or instrumentality of
any of the foregoing;
(2) such organization is organized and operated on a
cooperative basis and allocates or pays, within 8 1/2 months
after the close of its taxable year, all net earnings to patrons
on the basis of services performed for them; and
(3) if such organization has capital stock, all of such stock
outstanding is owned by its patrons.
For purposes of this title, any organization which, by reason of
the preceding sentence, is an organization described in subsection
(c)(3) and exempt from taxation under subsection (a), shall be
treated as a hospital and as an organization referred to in section
170(b)(1)(A)(iii).
(f) Cooperative service organizations of operating educational
organizations
For purposes of this title, if an organization is -
(1) organized and operated solely to hold, commingle, and
collectively invest and reinvest (including arranging for and
supervising the performance by independent contractors of
investment services related thereto) in stocks and securities,
the moneys contributed thereto by each of the members of such
organization, and to collect income therefrom and turn over the
entire amount thereof, less expenses, to such members,
(2) organized and controlled by one or more such members, and
(3) comprised solely of members that are organizations
described in clause (ii) or (iv) of section 170(b)(1)(A) -
(A) which are exempt from taxation under subsection (a), or
(B) the income of which is excluded from taxation under
section 115(a),
then such organization shall be treated as an organization
organized and operated exclusively for charitable purposes.
(g) Definition of agricultural
For purposes of subsection (c)(5), the term "agricultural"
includes the art or science of cultivating land, harvesting crops
or aquatic resources, or raising livestock.
(h) Expenditures by public charities to influence legislation
(1) General rule
In the case of an organization to which this subsection
applies, exemption from taxation under subsection (a) shall be
denied because a substantial part of the activities of such
organization consists of carrying on propaganda, or otherwise
attempting, to influence legislation, but only if such
organization normally -
(A) makes lobbying expenditures in excess of the lobbying
ceiling amount for such organization for each taxable year, or
(B) makes grass roots expenditures in excess of the grass
roots ceiling amount for such organization for each taxable
year.
(2) Definitions
For purposes of this subsection -
(A) Lobbying expenditures
The term "lobbying expenditures" means expenditures for the
purpose of influencing legislation (as defined in section
4911(d)).
(B) Lobbying ceiling amount
The lobbying ceiling amount for any organization for any
taxable year is 150 percent of the lobbying nontaxable amount
for such organization for such taxable year, determined under
section 4911.
(C) Grass roots expenditures
The term "grass roots expenditures" means expenditures for
the purpose of influencing legislation (as defined in section
4911(d) without regard to paragraph (1)(B) thereof).
(D) Grass roots ceiling amount
The grass roots ceiling amount for any organization for any
taxable year is 150 percent of the grass roots nontaxable
amount for such organization for such taxable year, determined
under section 4911.
(3) Organizations to which this subsection applies
This subsection shall apply to any organization which has
elected (in such manner and at such time as the Secretary may
prescribe) to have the provisions of this subsection apply to
such organization and which, for the taxable year which includes
the date the election is made, is described in subsection (c)(3)
and -
(A) is described in paragraph (4), and
(B) is not a disqualified organization under paragraph (5).
(4) Organizations permitted to elect to have this subsection
apply
An organization is described in this paragraph if it is
described in -
(A) section 170(b)(1)(A)(ii) (relating to educational
institutions),
(B) section 170(b)(1)(A)(iii) (relating to hospitals and
medical research organizations),
(C) section 170(b)(1)(A)(iv) (relating to organizations
supporting government schools),
(D) section 170(b)(1)(A)(vi) (relating to organizations
publicly supported by charitable contributions),
(E) section 509(a)(2) (relating to organizations publicly
supported by admissions, sales, etc.), or
(F) section 509(a)(3) (relating to organizations supporting
certain types of public charities) except that for purposes of
this subparagraph, section 509(a)(3) shall be applied without
regard to the last sentence of section 509(a).
(5) Disqualified organizations
For purposes of paragraph (3) an organization is a disqualified
organization if it is -
(A) described in section 170(b)(1)(A)(i) (relating to
churches),
(B) an integrated auxiliary of a church or of a convention or
association of churches, or
(C) a member of an affiliated group of organizations (within
the meaning of section 4911(f)(2)) if one or more members of
such group is described in subparagraph (A) or (B).
(6) Years for which election is effective
An election by an organization under this subsection shall be
effective for all taxable years of such organization which -
(A) end after the date the election is made, and
(B) begin before the date the election is revoked by such
organization (under regulations prescribed by the Secretary).
(7) No effect on certain organizations
With respect to any organization for a taxable year for which -
(A) such organization is a disqualified organization (within
the meaning of paragraph (5)), or
(B) an election under this subsection is not in effect for
such organization,
nothing in this subsection or in section 4911 shall be construed
to affect the interpretation of the phrase, "no substantial part
of the activities of which is carrying on propaganda, or
otherwise attempting, to influence legislation," under subsection
(c)(3).
(8) Affiliated organizations
For rules regarding affiliated organizations, see section
4911(f).
(i) Prohibition of discrimination by certain social clubs
Notwithstanding subsection (a), an organization which is
described in subsection (c)(7) shall not be exempt from taxation
under subsection (a) for any taxable year if, at any time during
such taxable year, the charter, bylaws, or other governing
instrument, of such organization or any written policy statement of
such organization contains a provision which provides for
discrimination against any person on the basis of race, color, or
religion. The preceding sentence to the extent it relates to
discrimination on the basis of religion shall not apply to -
(1) an auxiliary of a fraternal beneficiary society if such
society -
(A) is described in subsection (c)(8) and exempt from tax
under subsection (a), and
(B) limits its membership to the members of a particular
religion, or
(2) a club which in good faith limits its membership to the
members of a particular religion in order to further the
teachings or principles of that religion, and not to exclude
individuals of a particular race or color.
(j) Special rules for certain amateur sports organizations
(1) In general
In the case of a qualified amateur sports organization -
(A) the requirement of subsection (c)(3) that no part of its
activities involve the provision of athletic facilities or
equipment shall not apply, and
(B) such organization shall not fail to meet the requirements
of subsection (c)(3) merely because its membership is local or
regional in nature.
(2) Qualified amateur sports organization defined
For purposes of this subsection, the term "qualified amateur
sports organization" means any organization organized and
operated exclusively to foster national or international amateur
sports competition if such organization is also organized and
operated primarily to conduct national or international
competition in sports or to support and develop amateur athletes
for national or international competition in sports.
(k) Treatment of certain organizations providing child care
For purposes of subsection (c)(3) of this section and sections
170(c)(2), 2055(a)(2), and 2522(a)(2), the term "educational
purposes" includes the providing of care of children away from
their homes if -
(1) substantially all of the care provided by the organization
is for purposes of enabling individuals to be gainfully employed,
and
(2) the services provided by the organization are available to
the general public.
(l) Government corporations exempt under subsection (c)(1)
For purposes of subsection (c)(1), the following organizations
are described in this subsection:
(1) The Central Liquidity Facility established under title III
of the Federal Credit Union Act (12 U.S.C. 1795 et seq.).
(2) The Resolution Trust Corporation established under section
21A of the Federal Home Loan Bank Act.
(3) The Resolution Funding Corporation established under
section 21B of the Federal Home Loan Bank Act.
(m) Certain organizations providing commercial-type insurance not
exempt from tax
(1) Denial of tax exemption where providing commercial-type
insurance is substantial part of activities
An organization described in paragraph (3) or (4) of subsection
(c) shall be exempt from tax under subsection (a) only if no
substantial part of its activities consists of providing
commercial-type insurance.
(2) Other organizations taxed as insurance companies on insurance
business
In the case of an organization described in paragraph (3) or
(4) of subsection (c) which is exempt from tax under subsection
(a) after the application of paragraph (1) of this subsection -
(A) the activity of providing commercial-type insurance shall
be treated as an unrelated trade or business (as defined in
section 513), and
(B) in lieu of the tax imposed by section 511 with respect to
such activity, such organization shall be treated as an
insurance company for purposes of applying subchapter L with
respect to such activity.
(3) Commercial-type insurance
For purposes of this subsection, the term "commercial-type
insurance" shall not include -
(A) insurance provided at substantially below cost to a class
of charitable recipients,
(B) incidental health insurance provided by a health
maintenance organization of a kind customarily provided by such
organizations,
(C) property or casualty insurance provided (directly or
through an organization described in section 414(e)(3)(B)(ii))
by a church or convention or association of churches for such
church or convention or association of churches,
(D) providing retirement or welfare benefits (or both) by a
church or a convention or association of churches (directly or
through an organization described in section 414(e)(3)(A) or
414(e)(3)(B)(ii)) for the employees (including employees
described in section 414(e)(3)(B)) of such church or convention
or association of churches or the beneficiaries of such
employees, and
(E) charitable gift annuities.
(4) Insurance includes annuities
For purposes of this subsection, the issuance of annuity
contracts shall be treated as providing insurance.
(5) Charitable gift annuity
For purposes of paragraph (3)(E), the term "charitable gift
annuity" means an annuity if -
(A) a portion of the amount paid in connection with the
issuance of the annuity is allowable as a deduction under
section 170 or 2055, and
(B) the annuity is described in section 514(c)(5) (determined
as if any amount paid in cash in connection with such issuance
were property).
(n) Charitable risk pools
(1) In general
For purposes of this title -
(A) a qualified charitable risk pool shall be treated as an
organization organized and operated exclusively for charitable
purposes, and
(B) subsection (m) shall not apply to a qualified charitable
risk pool.
(2) Qualified charitable risk pool
For purposes of this subsection, the term "qualified charitable
risk pool" means any organization -
(A) which is organized and operated solely to pool insurable
risks of its members (other than risks related to medical
malpractice) and to provide information to its members with
respect to loss control and risk management,
(B) which is comprised solely of members that are
organizations described in subsection (c)(3) and exempt from
tax under subsection (a), and
(C) which meets the organizational requirements of paragraph
(3).
(3) Organizational requirements
An organization (hereinafter in this subsection referred to as
the "risk pool") meets the organizational requirements of this
paragraph if -
(A) such risk pool is organized as a nonprofit organization
under State law provisions authorizing risk pooling
arrangements for charitable organizations,
(B) such risk pool is exempt from any income tax imposed by
the State (or will be so exempt after such pool qualifies as an
organization exempt from tax under this title),
(C) such risk pool has obtained at least $1,000,000 in
startup capital from nonmember charitable organizations,
(D) such risk pool is controlled by a board of directors
elected by its members, and
(E) the organizational documents of such risk pool require
that -
(i) each member of such pool shall at all times be an
organization described in subsection (c)(3) and exempt from
tax under subsection (a),
(ii) any member which receives a final determination that
it no longer qualifies as an organization described in
subsection (c)(3) shall immediately notify the pool of such
determination and the effective date of such determination,
and
(iii) each policy of insurance issued by the risk pool
shall provide that such policy will not cover the insured
with respect to events occurring after the date such final
determination was issued to the insured.
An organization shall not cease to qualify as a qualified
charitable risk pool solely by reason of the failure of any of
its members to continue to be an organization described in
subsection (c)(3) if, within a reasonable period of time after
such pool is notified as required under subparagraph (E)(ii),
such pool takes such action as may be reasonably necessary to
remove such member from such pool.
(4) Other definitions
For purposes of this subsection -
(A) Startup capital
The term "startup capital" means any capital contributed to,
and any program-related investments (within the meaning of
section 4944(c)) made in, the risk pool before such pool
commences operations.
(B) Nonmember charitable organization
The term "nonmember charitable organization" means any
organization which is described in subsection (c)(3) and exempt
from tax under subsection (a) and which is not a member of the
risk pool and does not benefit (directly or indirectly) from
the insurance coverage provided by the pool to its members.
(o) Treatment of hospitals participating in provider-sponsored
organizations
An organization shall not fail to be treated as organized and
operated exclusively for a charitable purpose for purposes of
subsection (c)(3) solely because a hospital which is owned and
operated by such organization participates in a provider-sponsored
organization (as defined in section 1855(d) of the Social Security
Act), whether or not the provider-sponsored organization is exempt
from tax. For purposes of subsection (c)(3), any person with a
material financial interest in such a provider-sponsored
organization shall be treated as a private shareholder or
individual with respect to the hospital.
(p) Suspension of tax-exempt status of terrorist organizations
(1) In general
The exemption from tax under subsection (a) with respect to any
organization described in paragraph (2), and the eligibility of
any organization described in paragraph (2) to apply for
recognition of exemption under subsection (a), shall be suspended
during the period described in paragraph (3).
(2) Terrorist organizations
An organization is described in this paragraph if such
organization is designated or otherwise individually identified -
(A) under section 212(a)(3)(B)(vi)(II) or 219 of the
Immigration and Nationality Act as a terrorist organization or
foreign terrorist organization,
(B) in or pursuant to an Executive order which is related to
terrorism and issued under the authority of the International
Emergency Economic Powers Act or section 5 of the United
Nations Participation Act of 1945 for the purpose of imposing
on such organization an economic or other sanction, or
(C) in or pursuant to an Executive order issued under the
authority of any Federal law if -
(i) the organization is designated or otherwise
individually identified in or pursuant to such Executive
order as supporting or engaging in terrorist activity (as
defined in section 212(a)(3)(B) of the Immigration and
Nationality Act) or supporting terrorism (as defined in
section 140(d)(2) of the Foreign Relations Authorization Act,
Fiscal Years 1988 and 1989); and
(ii) such Executive order refers to this subsection.
(3) Period of suspension
With respect to any organization described in paragraph (2),
the period of suspension -
(A) begins on the later of -
(i) the date of the first publication of a designation or
identification described in paragraph (2) with respect to
such organization, or
(ii) the date of the enactment of this subsection, and
(B) ends on the first date that all designations and
identifications described in paragraph (2) with respect to such
organization are rescinded pursuant to the law or Executive
order under which such designation or identification was made.
(4) Denial of deduction
No deduction shall be allowed under any provision of this
title, including sections 170, 545(b)(2), 556(b)(2), 642(c),
2055, 2106(a)(2), and 2522, with respect to any contribution to
an organization described in paragraph (2) during the period
described in paragraph (3).
(5) Denial of administrative or judicial challenge of suspension
or denial of deduction
Notwithstanding section 7428 or any other provision of law, no
organization or other person may challenge a suspension under
paragraph (1), a designation or identification described in
paragraph (2), the period of suspension described in paragraph
(3), or a denial of a deduction under paragraph (4) in any
administrative or judicial proceeding relating to the Federal tax
liability of such organization or other person.
(6) Erroneous designation
(A) In general
If -
(i) the tax exemption of any organization described in
paragraph (2) is suspended under paragraph (1),
(ii) each designation and identification described in
paragraph (2) which has been made with respect to such
organization is determined to be erroneous pursuant to the
law or Executive order under which such designation or
identification was made, and
(iii) the erroneous designations and identifications result
in an overpayment of income tax for any taxable year by such
organization,
credit or refund (with interest) with respect to such
overpayment shall be made.
(B) Waiver of limitations
If the credit or refund of any overpayment of tax described
in subparagraph (A)(iii) is prevented at any time by the
operation of any law or rule of law (including res judicata),
such credit or refund may nevertheless be allowed or made if
the claim therefor is filed before the close of the 1-year
period beginning on the date of the last determination
described in subparagraph (A)(ii).
(7) Notice of suspensions
If the tax exemption of any organization is suspended under
this subsection, the Internal Revenue Service shall update the
listings of tax-exempt organizations and shall publish
appropriate notice to taxpayers of such suspension and of the
fact that contributions to such organization are not deductible
during the period of such suspension.
(q) Cross reference
For nonexemption of Communist-controlled organizations, see
section 11(b) of the Internal Security Act of 1950 (64 Stat.
997; 50 U.S.C. 790(b)).
-SOURCE-
(Aug. 16, 1954, ch. 736, 68A Stat. 163; Mar. 13, 1956, ch. 83, Sec.
5(2), 70 Stat. 49; Pub. L. 86-428, Sec. 1, Apr. 22, 1960, 74 Stat.
54; Pub. L. 86-667, Sec. 1, July 14, 1960, 74 Stat. 534; Pub. L.
87-834, Sec. 8(d), Oct. 16, 1962, 76 Stat. 997; Pub. L. 89-352,
Sec. 1, Feb. 2, 1966, 80 Stat. 4; Pub. L. 89-800, Sec. 6(a), Nov.
8, 1966, 80 Stat. 1515; Pub. L. 90-364, title I, Sec. 109(a), June
28, 1968, 82 Stat. 269; Pub. L. 91-172, title I, Secs.
101(j)(3)-(6), 121(b)(5)(A), (6)(A), Dec. 30, 1969, 83 Stat. 526,
527, 541; Pub. L. 91-618, Sec. 1, Dec. 31, 1970, 84 Stat. 1855;
Pub. L. 92-418, Sec. 1(a), Aug. 29, 1972, 86 Stat. 656; Pub. L.
93-310, Sec. 3(a), June 8, 1974, 88 Stat. 235; Pub. L. 93-625, Sec.
10(c), Jan. 3, 1975, 88 Stat. 2119; Pub. L. 94-455, title XIII,
Secs. 1307(a)(1), (d)(1)(A), 1312(a), 1313(a), title XIX, Sec.
1906(b)(13)(A), title XXI, Secs. 2113(a), 2134(b), Oct. 4, 1976, 90
Stat. 1720, 1727, 1730, 1834, 1907, 1927; Pub. L. 94-568, Secs.
1(a), 2(a), Oct. 20, 1976, 90 Stat. 2697; Pub. L. 95-227, Sec.
4(a), Feb. 10, 1978, 92 Stat. 15; Pub. L. 95-345, Sec. 1(a), Aug.
15, 1978, 92 Stat. 481; Pub. L. 95-600, title VII, Sec. 703(b)(2),
(g)(2)(A), (B), Nov. 6, 1978, 92 Stat. 2939, 2940; Pub. L. 96-222,
title I, Sec. 108(b)(2)(B), Apr. 1, 1980, 94 Stat. 226; Pub. L.
96-364, title II, Sec. 209(a), Sept. 26, 1980, 94 Stat. 1290; Pub.
L. 96-601, Sec. 3(a), Dec. 24, 1980, 94 Stat. 3496; Pub. L. 96-605,
title I, Sec. 106(a), Dec. 28, 1980, 94 Stat. 3523; Pub. L. 97-119,
title I, Sec. 103(c)(1), Dec. 29, 1981, 95 Stat. 1638; Pub. L.
97-248, title II, Sec. 286(a), title III, Sec. 354(a), (b), Sept.
3, 1982, 96 Stat. 569, 640, 641; Pub. L. 97-448, title III, Sec.
306(b)(5), Jan. 12, 1983, 96 Stat. 2406; Pub. L. 98-369, div. A,
title X, Secs. 1032(a), 1079, div. B, title VIII, Sec. 2813(b),
July 18, 1984, 98 Stat. 1033, 1056, 1206; Pub. L. 99-272, title XI,
Sec. 11012(b), Apr. 7, 1986, 100 Stat. 260; Pub. L. 99-514, title
X, Secs. 1012(a), 1024(b), title XI, Secs. 1109(a), 1114(b)(14),
title XVI, Sec. 1603(a), title XVIII, Secs. 1879(k)(1), 1899A(15),
Oct. 22, 1986, 100 Stat. 2390, 2406, 2435, 2451, 2768, 2909, 2959;
Pub. L. 100-203, title X, Sec. 10711(a)(2), Dec. 22, 1987, 101
Stat. 1330-464; Pub. L. 100-647, title I, Secs. 1010(b)(4),
1011(c)(7)(D), 1016(a)(1)(A), (2)-(4), 1018(u)(14), (15), (34),
title II, Sec. 2003(a)(1), (2), title VI, Sec. 6202(a), Nov. 10,
1988, 102 Stat. 3451, 3458, 3573, 3574, 3590, 3592, 3597, 3598,
3730; Pub. L. 101-73, title XIV, Sec. 1402(a), Aug. 9, 1989, 103
Stat. 550; Pub. L. 102-486, title XIX, Sec. 1940(a), Oct. 24, 1992,
106 Stat. 3034; Pub. L. 103-66, title XIII, Sec. 13146(a), (b),
Aug. 10, 1993, 107 Stat. 443; Pub. L. 104-168, title XIII, Sec.
1311(b)(1), July 30, 1996, 110 Stat. 1477; Pub. L. 104-188, title
I, Secs. 1114(a), 1704(j)(5), Aug. 20, 1996, 110 Stat. 1759, 1882;
Pub. L. 104-191, title III, Secs. 341(a), 342(a), Aug. 21, 1996,
110 Stat. 2070; Pub. L. 105-33, title IV, Sec. 4041(a), Aug. 5,
1997, 111 Stat. 360; Pub. L. 105-34, title I, Sec. 101(c), title
IX, Secs. 963(a), (b), 974(a), Aug. 5, 1997, 111 Stat. 799, 892,
898; Pub. L. 105-206, title VI, Sec. 6023(6), (7), July 22, 1998,
112 Stat. 825; Pub. L. 107-16, title VI, Sec. 611(d)(3)(C), June 7,
2001, 115 Stat. 98; Pub. L. 107-90, title II, Sec. 202, Dec. 21,
2001, 115 Stat. 890; Pub. L. 108-121, title I, Secs. 105(a),
108(a), Nov. 11, 2003, 117 Stat. 1338, 1339.)
-STATAMEND-
AMENDMENT OF SECTION
For termination of amendment by section 901 of Pub. L. 107-16,
see Effective and Termination Dates of 2001 Amendments note below.
-REFTEXT-
REFERENCES IN TEXT
Sections 306A, 306B, and 311 of the Rural Electrification Act of
1936, referred to in subsec. (c)(12)(B)(iv), (C)(ii), are
classified to sections 936a and 936b, respectively, of Title 7,
Agriculture. Section 311 of the Act was classified to section 940a
of Title 7 prior to repeal by Pub. L. 104-127, title VII, Sec. 780,
Apr. 4, 1996, 110 Stat. 1151.
The date of the enactment of this subparagraph, referred to in
subsec. (c)(21)(C)(ii), is the date of enactment of Pub. L.
102-486, which was approved Oct. 24, 1992.
The Federal Mine Safety and Health Act of 1977, referred to in
subsec. (c)(21)(D)(i), is Pub. L. 91-173, Dec. 30, 1969, 83 Stat.
742, as amended by Pub. L. 95-164, Nov. 9, 1977, 91 Stat. 1290.
Part C of title IV of the Act is classified generally to part C
(Sec. 931 et seq.) of subchapter IV of chapter 22 of Title 30,
Mineral Lands and Mining. For complete classification of this Act
to the Code, see Short Title note set out under section 801 of
Title 30 and Tables.
Section 4223 of the Employee Retirement Income Security Act of
1974, referred to in subsec. (c)(22)(A)(i), (C), (D), is classified
to section 1403 of Title 29, Labor.
Section 4049 of the Employee Retirement Income Security Act of
1974, referred to in subsec. (c)(24), was classified to section
1349 of Title 29, prior to its repeal by Pub. L. 100-203, title IX,
Sec. 9312(a), Dec. 22, 1987, 101 Stat. 1330-361.
The date of the enactment of the Single-Employer Pension Plan
Amendments Act of 1986, referred to in subsec. (c)(24), is the date
of enactment of title XI of Pub. L. 99-272, which was approved Apr.
7, 1986.
The date of enactment of this subparagraph, referred to in
subsec. (c)(27)(B)(iii)(I), is the date of enactment of Pub. L.
105-34, which was approved Aug. 5, 1997.
Section 15(j) of the Railroad Retirement Act of 1974, referred to
in subsec. (c)(28), is classified to section 231n(j) of Title 45,
Railroads.
The provisions of subsec. (a) of section 115, referred to in
subsec. (f)(3)(B), now comprise section 115 in its entirety,
following the deletion therefrom of the subsec. (a) designation by
section 1901(a)(19) of Pub. L. 94-455.
The Federal Credit Union Act, referred to in subsec. (l)(1), is
act June 26, 1934, ch. 750, 48 Stat. 1216, as amended. Title III of
the Federal Credit Union Act is classified generally to subchapter
III (Sec. 1795 et seq.) of chapter 14 of Title 12, Banks and
Banking. For complete classification of this Act to the Code, see
section 1751 of Title 12 and Tables.
Sections 21A and 21B of the Federal Home Loan Bank Act, referred
to in subsec. (l)(2), (3), are classified to sections 1441a and
1441b, respectively, of Title 12.
Section 1855(d) of the Social Security Act, referred to in
subsec. (o), is classified to section 1395w-25(d) of Title 42, The
Public Health and Welfare.
Sections 212(a)(3)(B) and 219 of the Immigration and Nationality
Act, referred to in subsec. (p)(2)(A), (C)(i), are classified to
sections 1182(a)(3)(B) and 1189, respectively, of Title 8, Aliens
and Nationality.
The International Emergency Economic Powers Act, referred to in
subsec. (p)(2)(B), is title II of Pub. L. 95-223, Dec. 28, 1977, 91
Stat. 1626, as amended, which is classified generally to chapter 35
(Sec. 1701 et seq.) of Title 50, War and National Defense. For
complete classification of this Act to the Code, see Short Title
note set out under section 1701 of Title 50 and Tables.
Section 5 of the United Nations Participation Act of 1945,
referred to in subsec. (p)(2)(B), is classified to section 287c of
Title 22, Foreign Relations and Intercourse.
Section 140(d)(2) of the Foreign Relations Authorization Act,
Fiscal Years 1988 and 1989, referred to in subsec. (p)(2)(C)(i), is
classifed to section 2656f(d)(2) of Title 22, Foreign Relations and
Intercourse.
The date of the enactment of this subsection, referred to in
subsec. (p)(3)(A)(ii), is the date of enactment of Pub. L. 108-121,
which was approved Nov. 11, 2003.
Section 11(b) of the Internal Security Act of 1950 (64 Stat. 997;
50 U.S.C. 790(b)), referred to in subsec. (q), was repealed by Pub.
L. 103-199, title VIII, Sec. 803(1), Dec. 17, 1993, 107 Stat. 2329.
-MISC1-
AMENDMENTS
2003 - Subsec. (c)(19)(B). Pub. L. 108-121, Sec. 105(a),
substituted ", widowers, ancestors, or lineal descendants" for "or
widowers".
Subsecs. (p), (q). Pub. L. 108-121, Sec. 108(a), added subsec.
(p) and redesignated former subsec. (p) as (q).
2001 - Subsec. (c)(18)(D)(iii). Pub. L. 107-16, Secs.
611(d)(3)(C), 901, temporarily struck out "(other than paragraph
(4) thereof)" after "section 402(g)". See Effective and Termination
Dates of 2001 Amendment note below.
Subsec. (c)(28). Pub. L. 107-90 added par. (28).
1998 - Subsec. (n)(3). Pub. L. 105-206, Sec. 6023(6), substituted
"subparagraph (E)(ii)" for "subparagraph (C)(ii)" in concluding
provisions.
Subsec. (o). Pub. L. 105-206, Sec. 6023(7), substituted "section
1855(d)" for "section 1853(e)".
1997 - Subsec. (c)(26). Pub. L. 105-34, Sec. 101(c), inserted
concluding provisions "A spouse and any qualifying child (as
defined in section 24(c)) of an individual described in
subparagraph (B) (without regard to this sentence) shall be treated
as described in subparagraph (B)."
Subsec. (c)(27). Pub. L. 105-34, Sec. 963(a), (b), designated
existing provisions as subpar. (A), redesignated former subpar. (A)
as cl. (i), redesignated subpar. (B) as cl. (ii) and former cls.
(i) and (ii) of subpar. (B) as subcls. (I) and (II), respectively,
of cl. (ii), redesignated subpar. (C) as cl. (iii) and former cls.
(i) and (ii) of subpar. (C) as subcls. (I) and (II), respectively,
of cl. (iii), and added subpar. (B).
Subsec. (e)(1)(A). Pub. L. 105-34, Sec. 974(a), inserted
"(including the purchase of patron accounts receivable on a
recourse basis)" after "billing and collection".
Subsecs. (o), (p). Pub. L. 105-33 added subsec. (o) and
redesignated former subsec. (o) as (p).
1996 - Subsec. (c)(4). Pub. L. 104-168 designated existing
provisions as subpar. (A) and added subpar. (B).
Subsec. (c)(21)(D)(ii)(III). Pub. L. 104-188, Sec. 1704(j)(5),
substituted "section 101(7)" for "section 101(6)" and "1752(7)" for
"1752(6)".
Subsec. (c)(26). Pub. L. 104-191, Sec. 341(a), added par. (26).
Subsec. (c)(27). Pub. L. 104-191, Sec. 342(a), added par. (27).
Subsecs. (n), (o). Pub. L. 104-188, Sec. 1114(a), added subsec.
(n) and redesignated former subsec. (n) as (o).
1993 - Subsec. (c)(2). Pub. L. 103-66, Sec. 13146(b), inserted at
end "Rules similar to the rules of subparagraph (G) of paragraph
(25) shall apply for purposes of this paragraph."
Subsec. (c)(25)(G). Pub. L. 103-66, Sec. 13146(a), added subpar.
(G).
1992 - Subsec. (c)(21). Pub. L. 102-486 amended par. (21)
generally, substituting present provisions consisting of subpars.
(A) to (D) for former provisions consisting of subpars. (A) and
(B).
1989 - Subsec. (l). Pub. L. 101-73 amended subsec. (l) generally.
Prior to amendment, subsec. (l) read as follows: "The organization
described in this subsection is the Central Liquidity Facility
established under title III of the Federal Credit Union Act (12
U.S.C. 1795 et seq.)."
1988 - Subsec. (c)(1). Pub. L. 100-647, Sec. 1018(u)(15),
substituted "Any" for "any".
Subsec. (c)(12)(B)(iv). Pub. L. 100-647, Sec. 2003(a)(1), added
cl. (iv).
Subsec. (c)(12)(C). Pub. L. 100-647, Sec. 2003(a)(2), amended
subpar. (C) generally. Prior to amendment, subpar. (C) read as
follows: "In the case of a mutual or cooperative electric company,
subparagraph (A) shall be applied without taking into account any
income received or accrued from qualified pole rentals."
Subsec. (c)(17)(A)(ii), (iii), (18)(B), (C). Pub. L. 100-647,
Sec. 1018(u)(34), made technical amendments to Pub. L. 99-154, Sec.
1114(b)(14). See 1986 Amendment note below.
Subsec. (c)(18)(D)(iv). Pub. L. 100-647, Sec. 1011(c)(7)(D),
added cl. (iv).
Subsec. (c)(23). Pub. L. 100-647, Sec. 1018(u)(14), substituted
"Any" for "any".
Subsec. (c)(25)(A). Pub. L. 100-647, Sec. 1016(a)(1)(A), inserted
at end "For purposes of clause (iii), the term 'real property'
shall not include any interest as a tenant in common (or similar
interest) and shall not include any indirect interest."
Subsec. (c)(25)(C)(v). Pub. L. 100-647, Sec. 1016(a)(3)(B),
struck out cl. (v) which read as follows: "any organization
described in this paragraph."
Subsec. (c)(25)(D). Pub. L. 100-647, Sec. 1016(a)(2), substituted
"A corporation or trust shall in no event be treated as described
in subparagraph (A) unless such corporation or trust permits its
shareholders or beneficiaries" for "A corporation or trust
described in this paragraph must permit its shareholders or
beneficiaries" in introductory text.
Subsec. (c)(25)(E), (F). Pub. L. 100-647, Sec. 1016(a)(3)(A),
(4), added subpars. (E) and (F).
Subsec. (e)(1)(A). Pub. L. 100-647, Sec. 6202(a), inserted
"(including the purchasing of insurance on a group basis)" after
"purchasing".
Subsec. (m)(3)(E). Pub. L. 100-647, Sec. 1010(b)(4)(A), added
subpar. (E).
Subsec. (m)(5). Pub. L. 100-647, Sec. 1010(b)(4)(B), added par.
(5).
1987 - Subsec. (c)(3). Pub. L. 100-203 inserted "(or in
opposition to)" after "in behalf of".
1986 - Subsec. (c)(1)(A)(i). Pub. L. 99-514, Sec. 1899A(15),
substituted "July 18, 1984" for "the date of the enactment of the
Tax Reform Act of 1984".
Subsec. (c)(14)(B)(iv). Pub. L. 99-514, Sec. 1879(k)(1), added
cl. (iv).
Subsec. (c)(15). Pub. L. 99-514, Sec. 1024(b), amended par. (15)
generally. Prior to amendment, par. (15) read as follows: "Mutual
insurance companies or associations other than life or marine
(including inter-insurers and reciprocal underwriters) if the gross
amount received during the taxable year from the items described in
section 822(b) (other than paragraph (1)(D) thereof) and premiums
(including deposits and assessments) does not exceed $150,000."
Subsec. (c)(17)(A)(ii), (iii), (18)(B), (C). Pub. L. 99-514, Sec.
1114(b)(14), as amended by Pub. L. 100-647, Sec. 1018(u)(34),
substituted "highly compensated employees (within the meaning of
section 414(q))" for "officers, shareholders, persons whose
principal duties consist of supervising the work of other
employees, or highly compensated employees".
Subsec. (c)(18)(D). Pub. L. 99-514, Sec. 1109(a), added subpar.
(D).
Subsec. (c)(24). Pub. L. 99-272 added par. (24).
Subsec. (c)(25). Pub. L. 99-514, Sec. 1603(a), added par. (25).
Subsecs. (m), (n). Pub. L. 99-514, Sec. 1012(a), added subsec.
(m) and redesignated former subsec. (m) as (n).
1984 - Subsec. (c)(1). Pub. L. 98-369, Sec. 2813(b)(2),
designated existing provisions as subpar. (A) and added subpar.
(B).
Subsec. (c)(1)(A). Pub. L. 98-369, Sec. 1079, substituted
provisions referring to corporations exempt from Federal income
taxes under any Act of Congress as amended and supplemented before
July 18, 1984, or under this title without regard to any provision
of law not contained in this title and not contained in a revenue
Act for provisions referring to corporations exempt from Federal
income taxes under any Act of Congress as amended and supplemented.
Subsec. (k). Pub. L. 98-369, Sec. 1032(a), added subsec. (k).
Former subsec. (k) redesignated (l).
Subsec. (l). Pub. L. 98-369, Sec. 2813(b)(1), added subsec. (l).
Former subsec. (l) redesignated (m).
Pub. L. 98-369, Sec. 1032(a), redesignated former subsec. (k) as
(l).
Subsec. (m). Pub. L. 98-369, Sec. 2813(b)(1), redesignated former
subsec. (l) as (m).
1983 - Subsec. (c)(23). Pub. L. 97-448 substituted "75 percent"
for "25 percent".
1982 - Subsec. (c)(19). Pub. L. 97-248, Sec. 354(a)(1),
substituted "past or present members of the Armed Forces of the
United States" for "war veterans" after "A post or organization
of".
Subsec. (c)(19)(B). Pub. L. 97-248, Sec. 354(a)(2), substituted
"past or present members of the Armed Forces of the United States"
for "war veterans" wherever appearing, struck out "veterans (but
not war veterans), or are" after "individuals who are", and
substituted "or of cadets" for "or such individuals" before ",
and".
Subsec. (c)(23). Pub. L. 97-248, Sec. 354(b), added par. (23).
Subsecs. (j), (k). Pub. L. 97-248, Sec. 286(a), added subsec. (j)
and redesignated former subsec. (j) as (k).
1981 - Subsec. (c)(21)(B)(iii). Pub. L. 97-119 substituted
"established under section 9501" for "established under section 3
of the Black Lung Benefits Revenue Act of 1977".
1980 - Subsec. (c)(12). Pub. L. 96-605 designated existing
provision as subpar. (A), struck out provision that, in the case of
any mutual or cooperative telephone company, the 85 per cent or
more income requirement be applied without taking into account any
income received or accrued from a nonmember telephone company for
the performance of communication services which involve members of
such mutual or cooperative telephone company, and added subpars.
(B) to (D).
Subsec. (c)(21). Pub. L. 96-222 substituted "Federal Mine Safety
and Health Act of 1977" for "Federal Coal Mine Health and Safety
Act of 1969".
Subsec. (c)(22). Pub. L. 96-364 added par. (22).
Subsec. (i). Pub. L. 96-601 inserted provision that the
restriction on religious discrimination not apply to an auxiliary
of a fraternal beneficiary society if the society is described in
subsec. (c)(8) of this section, is exempt from income tax under
subsec. (a) of this section, and limits its membership to the
members of a particular religion or to a club which in good faith
limits its membership to the members of a particular religion in
order to further the teachings or principles of that religion, and
not to exclude individuals of a particular race or color.
1978 - Subsec. (c)(12). Pub. L. 95-345 inserted provision
relating to applicability of statutory provisions to mutual or
cooperative telephone company of income received or accrued from a
nonmember telephone company.
Subsec. (c)(20). Pub. L. 95-600, Sec. 703(b)(2), substituted
"this paragraph" for "section 501(c)(20)".
Subsec. (c)(21). Pub. L. 95-227 added par. (21).
Subsecs. (g), (i). Pub. L. 95-600, Sec. 703(g)(2)(B),
redesignated subsec. (g), which was added by section 2(a) of Pub.
L. 94-568, as subsec. (i). Former subsec. (i), relating to cross
reference, redesignated (j).
Subsecs. (i), (j). Pub. L. 95-600, Sec. 703(g)(2)(A), amended
Pub. L. 95-600, Sec. 2(a). See 1976 Amendment note below.
1976 - Subsec. (c)(3). Pub. L. 94-455, Secs. 1313(a),
1307(d)(1)(A), inserted "or to foster national or international
amateur sports competition (but only if no part of its activities
involve the provision of athletic facilities or equipment)" after
"educational purposes" and inserted "(except as otherwise provided
in subsection (h))" after "influence legislation".
Subsec. (c)(7). Pub. L. 94-568, Sec. 1(a), struck out requirement
that clubs be "operated exclusively" for specified purposes but
required that substantially all of club activities be for specified
purposes.
Subsec. (c)(17), (18). Pub. L. 94-455, Sec. 1906(b)(13)(A),
struck out "or his delegate" after "Secretary".
Subsec. (c)(20). Pub. L. 94-455, Sec. 2134(b), added par. (20).
Subsec. (e)(1)(A). Pub. L. 94-455, Sec. 1312(a), inserted
"clinical" after "food".
Subsec. (g). Pub. L. 94-568, Sec. 2(a), added subsec. (g)
relating to prohibition of discrimination by certain social clubs.
Pub. L. 94-455, Sec. 2113(a), added subsec. (g) defining
agricultural. Former subsec. (g) redesignated (h).
Subsec. (h). Pub. L. 94-455, Secs. 1307(a)(1), 2113(a), added
subsec. (h). Former subsec. (g), relating to cross reference,
redesignated (h) and further redesignated (i).
Subsec. (i). Pub. L. 94-568, Sec. 2(a), as amended by Pub. L.
95-600, Sec. 703(g)(2)(A), added subsec. (i). Former subsec. (i)
redesignated (j).
Pub. L. 94-455, Sec. 1307(a)(1), redesignated subsec. (h),
relating to cross reference, as (i).
Subsec. (j). Pub. L. 94-568, Sec. 2(a), as amended by Pub. L.
95-600, Sec. 703(g)(2)(A), redesignated subsec. (i), relating to
cross reference, as (j).
1975 - Subsec. (b). Pub. L. 93-625 inserted references to part VI
of this subchapter.
1974 - Subsecs. (f), (g). Pub. L. 93-310 added subsec. (f) and
redesignated former subsec. (f) as (g).
1972 - Subsec. (c)(19). Pub. L. 92-418 added par. (19).
1970 - Subsec. (c)(13). Pub. L., 91-618 substituted "corporation
chartered solely for the purpose of disposal of bodies by burial or
cremation which is not permitted" for "corporation chartered solely
for burial purposes as a cemetery corporation and is not
permitted".
1969 - Subsec. (a). Pub. L. 91-172, Sec. 101(j)(3), struck out
reference to section 504.
Subsec. (b). Pub. L. 91-172, Sec. 101(j)(4), inserted reference
to certain other activities in heading and to part III in text, and
struck out reference to tax on unrelated income.
Subsec. (c). Pub. L. 91-172, Secs. 101(j)(5), 121(b)(6)(A),
substituted "part IV" for "part III" after "Corporations organized
by an association subject to" and added par. 18.
Subsec. (c)(9). Pub. L. 91-172, Sec. 121(b)(5)(A), inserted
reference to designated beneficiaries and struck out reference to
85 percent or more income of voluntary employees' beneficiary
associations.
Subsec. (c)(10). Pub. L. 91-172, Sec. 121(b)(5)(A), substituted
provisions concerning domestic fraternal societies, orders, or
associations, operating under the lodge system, for provisions
covering voluntary employees' beneficiary associations which would
pay benefits to designated beneficiaries of members.
Subsec. (e). Pub. L. 91-172, Sec. 101(j)(6), substituted "section
170(b)(1)(A)(iii)" for "section 503(b)(5)" in last sentence.
1968 - Subsecs. (e), (f). Pub. L. 90-364 added subsec. (e) and
redesignated former subsec. (e) as (f).
1966 - Subsec. (c)(6). Pub. L. 89-800 inserted reference to
professional football leagues (whether or not administering a
pension fund for football players).
Subsec. (c)(14). Pub. L. 89-352 designated as subpar. (A)
provisions covering credit unions which were formerly set out
preceding subpar. (A), designated as subpar. (B) and clauses (i),
(ii), and (iii) thereunder provisions covering corporation or
associations without capital stock organized before Sept. 1, 1957,
which formerly were set out as provisions preceding subpar. (A) and
as subpars. (A), (B), and (C) respectively, and added subpar. (C).
1962 - Subsec. (c)(15). Pub. L. 87-834 substituted "$150,000" for
"$75,000".
1960 - Subsec. (c)(14). Pub. L. 86-428 substituted "September 1,
1957" for "September 1, 1951".
Subsec. (c)(17). Pub. L. 86-667 added par. (17).
1956 - Subsec. (c)(15). Act Mar. 13, 1956, substituted "the items
described in section 822(b) (other than paragraph (1)(D) thereof)"
for "interest, dividends, rents,".
EFFECTIVE DATE OF 2003 AMENDMENT
Pub. L. 108-121, title I, Sec. 105(b), Nov. 11, 2003, 117 Stat.
1338, provided that: "The amendments made by this section [amending
this section] shall apply to taxable years beginning after the date
of the enactment of this Act [Nov. 11, 2003]."
Pub. L. 108-121, title I, Sec. 108(b), Nov. 11, 2003, 117 Stat.
1341, provided that: "The amendments made by this section [amending
this section] shall apply to designations made before, on, or after
the date of the enactment of this Act [Nov. 11, 2003]."
EFFECTIVE AND TERMINATION DATES OF 2001 AMENDMENT
Amendment by Pub. L. 107-16 applicable to years beginning after
Dec. 31, 2001, see section 611(i)(1) of Pub. L. 107-16, set out as
a note under section 415 of this title.
Amendment by Pub. L. 107-16 inapplicable to taxable, plan, or
limitation years beginning after Dec. 31, 2010, and the Internal
Revenue Code of 1986 to be applied and administered to such years
as if such amendment had never been enacted, see section 901 of
Pub. L. 107-16, set out as a note under section 1 of this title.
EFFECTIVE DATE OF 1997 AMENDMENTS
Amendment by section 101(c) of Pub. L. 105-34 applicable to
taxable years beginning after Dec. 31, 1997, see section 101(e) of
Pub. L. 105-34, set out as an Effective Date note under section 24
of this title.
Section 963(c) of Pub. L. 105-34 provided that: "The amendments
made by this section [amending this section] shall apply to taxable
years beginning after December 31, 1997."
Section 974(b) of Pub. L. 105-34 provided that: "The amendment
made by subsection (a) [amending this section] shall apply to
taxable years beginning after December 31, 1996."
Section 4041(b) of Pub. L. 105-33 provided that: "The amendment
made by subsection (a) [amending this section] shall take effect on
the date of the enactment of this Act [Aug. 5, 1997]."
EFFECTIVE DATE OF 1996 AMENDMENTS
Section 341(b) of Pub. L. 104-191 provided that: "The amendment
made by this section [amending this section] shall apply to taxable
years beginning after December 31, 1996."
Section 342(b) of Pub. L. 104-191 provided that: "The amendment
made by this section [amending this section] shall apply to taxable
years ending after the date of the enactment of this Act [Aug. 21,
1996]."
Section 1114(b) of Pub. L. 104-188 provided that: "The amendment
made by subsection (a) [amending this section] shall apply to
taxable years beginning after the date of the enactment of this Act
[Aug. 20, 1996]."
Section 1311(d)(3) of Pub. L. 104-168 provided that:
"(A) In general. - The amendment made by subsection (b) [amending
this section] shall apply to inurement occurring on or after
September 14, 1995.
"(B) Binding contracts. - The amendment made by subsection (b)
shall not apply to any inurement occurring before January 1, 1997,
pursuant to a written contract which was binding on September 13,
1995, and at all times thereafter before such inurement occurred."
EFFECTIVE DATE OF 1993 AMENDMENT
Section 13146(c) of Pub. L. 103-66 provided that: "The amendments
made by this section [amending this section] shall apply to taxable
years beginning on or after January 1, 1994."
EFFECTIVE DATE OF 1992 AMENDMENT
Amendment by Pub. L. 102-486 applicable to taxable years
beginning after Dec. 31, 1991, see section 1940(d) of Pub. L.
102-486, set out as a note under section 192 of this title.
EFFECTIVE DATE OF 1989 AMENDMENT
Section 1402(b) of Pub. L. 101-73 provided that: "The amendment
made by subsection (a) [amending this section] shall take effect on
the date of the enactment of this Act [Aug. 9, 1989]."
EFFECTIVE DATE OF 1988 AMENDMENT
Amendment by section 1011(c)(7)(D) of Pub. L. 100-647 applicable
to plan years beginning after Dec. 31, 1987, with exception in case
of a plan described in section 1105(c)(2) of Pub. L. 99-514, see
section 1011(c)(7)(E) of Pub. L. 100-647, set out as a note under
section 401 of this title.
Section 1016(a)(1)(B) of Pub. L. 100-647 provided that: "The
amendment made by subparagraph (A) [amending this section] shall
apply with respect to property acquired by the organization after
June 10, 1987, except that such amendment shall not apply to any
property acquired after June 10, 1987, pursuant to a binding
written contract in effect on June 10, 1987, and at all times
thereafter before such acquisition."
Amendment by sections 1010(b)(4), 1016(a)(2)-(4), and
1018(u)(14), (15), (34) of Pub. L. 100-647 effective, except as
otherwise provided, as if included in the provision of the Tax
Reform Act of 1986, Pub. L. 99-514, to which such amendment
relates, see section 1019(a) of Pub. L. 100-647, set out as a note
under section 1 of this title.
Section 2003(a)(3) of Pub. L. 100-647 provided that: "The
amendments made by this subsection [amending this section] shall
apply to taxable years ending after the date of the enactment of
the Omnibus Budget Reconciliation Act of 1986 [Oct. 21, 1986]."
Section 6202(b) of Pub. L. 100-647 provided that: "The amendment
made by subsection (a) [amending this section] shall apply to
purchases before, on, or after the date of the enactment of this
Act [Nov. 10, 1988]."
EFFECTIVE DATE OF 1987 AMENDMENT
Amendment by Pub. L. 100-203 applicable with respect to
activities after Dec. 22, 1987, see section 10711(c) of Pub. L.
100-203, set out as a note under section 170 of this title.
EFFECTIVE DATE OF 1986 AMENDMENTS
Amendment by section 1012(a) of Pub. L. 99-514 applicable to
taxable years beginning after Dec. 31, 1986, see section 1012(c) of
Pub. L. 99-514, set out as an Effective Date note under section 833
of this title.
Amendment by section 1024(b) of Pub. L. 99-514 applicable to
taxable years beginning after Dec. 31, 1986, see section 1024(e) of
Pub. L. 99-514, set out as a note under section 831 of this title.
Amendment by section 1109(a) of Pub. L. 99-514 applicable to
taxable years beginning after Dec. 31, 1986, see section 1109(c) of
Pub. L. 99-514, set out as a note under section 219 of this title.
Amendment by section 1114(b)(14) of Pub. L. 99-514 applicable to
years beginning after Dec. 31, 1986, see section 1114(c)(1) of Pub.
L. 99-514, set out as a note under section 414 of this title.
Section 1603(c) of Pub. L. 99-514 provided that: "The amendments
made by this section [amending this section and section 514 of this
title] shall apply to taxable years beginning after December 31,
1986."
Section 1879(k)(2) of Pub. L. 99-514 provided that: "The
amendments made by this subsection [amending this section] shall
apply to taxable years ending after August 13, 1981."
Amendment by Pub. L. 99-272 effective Jan. 1, 1986, with certain
exceptions, see section 11019 of Pub. L. 99-272, set out as a note
under section 1341 of Title 29, Labor.
EFFECTIVE DATE OF 1984 AMENDMENT
Amendment by section 1032 of Pub. L. 98-369 applicable to taxable
years beginning after July 18, 1984, see section 1032(c) of Pub. L.
98-369, set out as a note under section 170 of this title.
Amendment by section 2813(b) of Pub. L. 98-369 effective Oct. 1,
1979, see section 2813(c) of Pub. L. 98-369, set out as an
Effective Date note under section 1795k of Title 12, Banks and
Banking.
EFFECTIVE DATE OF 1983 AMENDMENT
Amendment by Pub. L. 97-448 effective as if included in the
provisions of the Tax Equity and Fiscal Responsibility Act of 1982,
Pub. L. 97-248, to which such amendment relates, see section 311(d)
of Pub. L. 97-448, set out as a note under section 31 of this
title.
EFFECTIVE DATE OF 1982 AMENDMENT
Section 286(c) of Pub. L. 97-248 provided that: "The amendments
made by this section [amending this section and sections 170, 2055,
and 2522 of this title] shall take effect on October 5, 1976."
Section 354(c) of Pub. L. 97-248 provided that: "The amendments
made by subsections (a) and (b) [amending this section] shall apply
to taxable years beginning after the date of the enactment of this
Act [Sept. 3, 1982]."
EFFECTIVE DATE OF 1981 AMENDMENT
Amendment by Pub. L. 97-119 effective Jan. 1, 1982, see section
103(d)(1) of Pub. L. 97-119, set out as an Effective Date note
under section 9501 of this title.
EFFECTIVE DATE OF 1980 AMENDMENTS
Section 106(c)(1) of Pub. L. 96-605, as amended by Pub. L.
99-514, Sec. 2, Oct. 22, 1986, 100 Stat. 2095, provided that: "The
amendments made by subsection (a) [amending this section] shall
apply to all taxable years to which the Internal Revenue Code of
1986 [formerly I.R.C. 1954] applies."
Section 3(b) of Pub. L. 96-601 provided that: "The amendment made
by subsection (a) [amending this section] shall apply to taxable
years beginning after October 20, 1976."
Amendment by Pub. L. 96-364 applicable to taxable years ending
after Sept. 26, 1980, see section 210(c) of Pub. L. 96-364, set out
as an Effective Date note under section 418 of this title.
Amendment by Pub. L. 96-222 effective, except as otherwise
provided, as if it had been included in the provisions of the
Revenue Act of 1978, Pub. L. 95-600, to which such amendment
relates, see section 201 of Pub. L. 96-222, set out as an Effective
Date of 1980 Amendment note under section 32 of this title.
EFFECTIVE DATE OF 1978 AMENDMENTS
Amendment by section 703(b)(2), (g)(2)(B) of Pub. L. 95-600
effective on Oct. 4, 1976, see section 703(r) of Pub. L. 95-600,
set out as a note under section 46 of this title.
Section 703(g)(2)(C) of Pub. L. 95-600 provided that: "The
amendments made by this paragraph [amending this section] shall
take effect on October 20, 1976, as if included in Public Law
94-568."
Section 1(b) of Pub. L. 95-345 provided that: "The amendment made
by subsection (a) [amending this section] shall apply to taxable
years beginning after December 31, 1974."
Amendment by Pub. L. 95-227 applicable with respect to
contributions, acts, and expenditures made after Dec. 31, 1977, in
and for taxable years beginning after such date, see section 4(f)
of Pub. L. 95-227, set out as a note under section 192 of this
title.
EFFECTIVE DATE OF 1976 AMENDMENTS
Section 1(d) of Pub. L. 94-568 provided that: "The amendments
made by this section [amending this section and sections 277 and
512 of this title] shall apply to taxable years beginning after the
date of the enactment of this Act [Oct. 20, 1976]."
Section 2(b) of Pub. L. 94-568 provided that: "The amendment made
by subsection (a) [amending this section] shall apply to taxable
years beginning after the date of the enactment of this Act [Oct.
20, 1976]."
Section 1307(e) of Pub. L. 94-455 provided that: "The amendments
made by this section [amending this section and sections 170, 275,
2055, 2106, 2522, 6104, 6161, 6201, 6211, 6212, 6213, 6214, 6344,
6501, 6512, 6601, and 7422 of this title and enacting sections 504
and 4911 of this title] shall apply -
"(1) except as otherwise specified in paragraph (2), in the
case of amendments to subtitle A, to taxable years beginning
after December 31, 1976;
"(2) in the case of the amendments made by subsection (a)(2)
[enacting section 504 of this title], to activities occurring
after the date of the enactment of this Act [Oct. 4, 1976];
"(3) in the case of amendments to chapter 11, to the estates of
decedents dying after December 31, 1976;
"(4) in the case of amendments to chapter 12, to gifts in
calendar years beginning after December 31, 1976;
"(5) in the case of amendments to subtitle D, to taxable years
beginning after December 31, 1976; and
"(6) in the case of amendments to subtitle F, on and after the
date of the enactment of this Act [Oct. 4, 1976]."
Section 1312(b) of Pub. L. 94-455 provided that: "The amendment
made by this section [amending this section] shall apply to taxable
years ending after December 31, 1976."
Section 1313(d) of Pub. L. 94-455 provided that: "The amendments
made by this section [amending this section and sections 170, 2055,
and 2522 of this title] shall apply on the day following the date
of the enactment of this Act [Oct. 4, 1976]."
Section 2113(b) of Pub. L. 94-455 provided that: "The amendment
made by this section [amending this section] applies to taxable
years ending after December 31, 1975."
EFFECTIVE DATE OF 1975 AMENDMENT
Amendment by Pub. L. 93-625 applicable to taxable years beginning
after Dec. 31, 1974, see section 10(e) of Pub. L. 93-625, set out
as an Effective Date note under section 527 of this title.
EFFECTIVE DATE OF 1974 AMENDMENT
Section 3(b) of Pub. L. 93-310 provided that: "The amendments
made by this section [amending this section] shall apply to taxable
years ending after December 31, 1973."
EFFECTIVE DATE OF 1972 AMENDMENT
Section 1(c) of Pub. L. 92-418 provided that: "The amendments
made by this section [amending this section and section 512 of this
title] shall apply to taxable years beginning after December 31,
1969."
EFFECTIVE DATE OF 1970 AMENDMENT
Section 2 of Pub L. 91-618 provided that: "The amendment made by
the first section of this Act [amending this section] shall apply
to taxable years ending after the date of enactment of this Act
[Dec. 31, 1970]."
EFFECTIVE DATE OF 1969 AMENDMENT
Amendment by section 101(j)(3) of Pub. L. 91-172 effective Jan.
1, 1970, except that amendment of subsec. (a) of this section
applicable to taxable years beginning after Dec. 31, 1969, see
section 101(k)(1), (2)(B) of Pub. L. 91-172, set out as an
Effective Date note under section 4940 of this title.
Amendment by section 121(b)(5)(A), (6)(A) of Pub. L. 91-172
applicable to taxable years beginning after Dec. 31, 1969, see
section 121(g) of Pub. L. 91-172, set out as a note under section
511 of this title.
EFFECTIVE DATE OF 1968 AMENDMENT
Section 109(b) of Pub. L. 90-364 provided that: "The amendments
made by subsection (a) [amending this section] shall apply to
taxable years ending after the date of the enactment of this Act
[June 28, 1968]."
EFFECTIVE DATE OF 1966 AMENDMENTS
Section 6(c) of Pub. L. 89-800 provided that: "The amendment made
by subsection (a) [amending this section] shall apply to taxable
years ending after the date of the enactment of this Act [Nov. 8,
1966]."
Section 3 of Pub. 89-352 provided in part that: "The amendment
made by the first section of this Act [amending this section] shall
apply to taxable years ending after the date of the enactment of
this Act [Feb. 2, 1966]."
EFFECTIVE DATE OF 1962 AMENDMENT
Section 8(h) of Pub. L. 87-834 provided that: "The amendments
made by this section [enacting sections 823 to 826 of this title,
amending this section and sections 821, 822, 832, 841, 1016, and
1201 of this title, and redesignating former section 823 as section
822(f) of this title] (other than by subsection (f) [amending
section 831 of this title]) shall apply with respect to taxable
years beginning after December 31, 1962."
EFFECTIVE DATE OF 1960 AMENDMENTS
Section 6 of Pub. L. 86-667 provided that:
"(a) Except as provided in subsection (b), the amendments made by
this Act [amending this section and sections 503, 511, 513, and 514
of this title] shall apply to taxable years beginning after
December 31, 1959.
"(b) In the case of loans, the amendments made by section 2 of
this Act [amending section 503 of this title] shall apply only to
loans made, renewed, or continued after December 31, 1959."
Section 2 of Pub. L. 86-428 provided that: "The amendment made by
this Act [amending this section] shall apply only with respect to
taxable years beginning after December 31, 1959."
EFFECTIVE DATE OF 1956 AMENDMENT
Amendment by act Mar. 13, 1956, applicable only to taxable years
beginning after Dec. 31, 1954, see section 6 of act Mar. 13, 1956,
set out as a note under section 316 of this title.
REGULATIONS
Secretary of the Treasury or his delegate to issue before Feb. 1,
1988, final regulations to carry out amendments made by section
1114 of Pub. L. 99-514, see section 1141 of Pub. L. 99-514, set out
as a note under section 401 of this title.
PAYMENTS BY CHARITABLE ORGANIZATIONS TREATED AS EXEMPT PAYMENTS
Pub. L. 107-134, title I, Sec. 104, Jan. 23, 2002, 115 Stat.
2431, provided that:
"(a) In General. - For purposes of the Internal Revenue Code of
1986 -
"(1) payments made by an organization described in section
501(c)(3) of such Code by reason of the death, injury, wounding,
or illness of an individual incurred as the result of the
terrorist attacks against the United States on September 11,
2001, or an attack involving anthrax occurring on or after
September 11, 2001, and before January 1, 2002, shall be treated
as related to the purpose or function constituting the basis for
such organization's exemption under section 501 of such Code if
such payments are made in good faith using a reasonable and
objective formula which is consistently applied; and
"(2) in the case of a private foundation (as defined in section
509 of such Code), any payment described in paragraph (1) shall
not be treated as made to a disqualified person for purposes of
section 4941 of such Code.
"(b) Effective Date. - This section shall apply to payments made
on or after September 11, 2001."
SPECIAL RULE FOR CERTAIN COOPERATIVES
Section 1311(b)(2) of Pub. L. 104-168 provided that: "In the case
of an organization operating on a cooperative basis which, before
the date of the enactment of this Act [July 30, 1996], was
determined by the Secretary of the Treasury or his delegate, to be
described in section 501(c)(4) of the Internal Revenue Code of 1986
and exempt from tax under section 501(a) of such Code, the
allocation or return of net margins or capital to the members of
such organization in accordance with its incorporating statute and
bylaws shall not be treated for purposes of such Code as the
inurement of the net earnings of such organization to the benefit
of any private shareholder or individual. The preceding sentence
shall apply only if such statute and bylaws are substantially as
such statute and bylaws were in existence on the date of the
enactment of this Act."
APPLICATION OF PUB. L. 100-647 TO SECTION 501(C)(3) BONDS
Section 1013(i) of Pub. L. 100-647 provided that: "In accordance
with section 1302 of the Reform Act [Pub. L. 99-514, set out as a
note below], each amendment and other provision of this Act [see
Tables for classification] which applies to private activity bonds
shall, unless otherwise expressly provided, apply to qualified
501(c)(3) bonds."
CANCELLATION OF CERTAIN DEBTS ORIGINATED BY OR GUARANTEED BY UNITED
STATES NOT TAKEN INTO ACCOUNT IN DETERMINING TAX EXEMPT STATUS OF
CERTAIN ORGANIZATIONS
Section 6203 of Pub. L. 100-647 provided that: "Subparagraph (A)
of section 501(c)(12) of the 1986 Code shall be applied without
taking into account any income attributable to the cancellation of
any loan originally made or guaranteed by the United States (or any
agency or instrumentality thereof) if such cancellation occurs
after 1986 and before 1990."
PLAN AMENDMENTS NOT REQUIRED UNTIL JANUARY 1, 1989
For provisions directing that if any amendments made by subtitle
A or subtitle C of title XI [Secs. 1101-1147 and 1171-1177] or
title XVIII [Secs. 1800-1899A] of Pub. L. 99-514 require an
amendment to any plan, such plan amendment shall not be required to
be made before the first plan year beginning on or after Jan. 1,
1989, see section 1140 of Pub. L. 99-514, as amended, set out as a
note under section 401 of this title.
TREATMENT OF SECTION 501(C)(3) BONDS
Section 1302 of title XIII of Pub. L. 99-514 provided that:
"Nothing in the treatment of section 501(c)(3) bonds as private
activity bonds under the amendments made by this title [enacting
sections 141 to 150 and 7703 of this title, amending sections 2,
22, 25, 32, 86, 103, 105, 152, 153, 163, 172, 194, 269A, 414, 879,
1016, 1398, 3402, 4701, 4940, 4942, 4988, 6362, 6652, and 7871 of
this title, repealing sections 103A, 1391 to 1397, and 6039B of
this title, enacting provisions set out as notes under sections 141
and 148 of this title, and amending provisions set out as a note
under section 103A of this title] shall be construed as indicating
how section 501(c)(3) bonds will be treated in future legislation,
and any change in future legislation applicable to private activity
bonds shall apply to section 501(c)(3) bonds only if expressly
provided in such legislation."
TAX-EXEMPT STATUS FOR ORGANIZATION INTRODUCING INTO PUBLIC USE
TECHNOLOGY DEVELOPED BY QUALIFIED ORGANIZATIONS
Section 1605 of Pub. L. 99-514 provided that:
"(a) In General. - For purposes of the Internal Revenue Code of
1986, an organization shall be treated as an organization organized
and operated exclusively for charitable purposes if such
organization -
"(1) is organized and operated exclusively -
"(A) to provide for (directly or by arranging for and
supervising the performance by independent contractors) -
"(i) reviewing technology disclosures from qualified
organizations,
"(ii) obtaining protection for such technology through
patents, copyrights, or other means, and
"(iii) licensing, sale, or other exploitation of such
technology,
"(B) to distribute the income therefrom, to such qualified
organizations after paying expenses and other amounts as agreed
with the originating qualified organizations, and
"(C) to make research grants to such qualified organizations,
"(2) regularly provides the services and research grants
described in paragraph (1) exclusively to 1 or more qualified
organizations, except that research grants may be made to such
qualified organizations through an organization which is
controlled by 1 or more organizations each of which -
"(A) is an organization described in section 501(c)(3) of the
Internal Revenue Code of 1986 or the income of which is
excluded from taxation under section 115 of such Code, and
"(B) may be a recipient of the services or research grants
described in paragraph (1),
"(3) derives at least 80 percent of its gross revenues from
providing services to qualified organizations located in the same
State as the State in which such organization has its principal
office, and
"(4) was incorporated on July 20, 1981.
"(b) Qualified Organizations. - For purposes of this section, the
term 'qualified organization' has the same meaning given to such
term by subparagraphs (A) and (B) of section 41(e)(6) (as
redesignated by section 231(d)(2)) of the Internal Revenue Code of
1986.
"(c) Treatment of Investment in a Technology Transfer Service
Organization. -
"(1) In general. - A qualified investment made by a private
foundation in an organization described in subparagraph (C) shall
be treated as an investment described in section 4944(c) of the
Internal Revenue Code of 1986 and shall not result in imposition
of taxes under section 4941, 4943, 4944, 4945, or 507(c) of such
Code.
"(2) Definitions. - For purposes of this subsection -
"(A) Qualified investment. - The term 'qualified investment'
means a transfer by a private foundation of -
"(i) all of the patents, copyrights, know-how, and other
technology or rights thereto of the private foundation, and
"(ii) investment assets, net receivables, and cash not
exceeding $35,000,000,
to such organization in exchange for debt.
"(B) Private foundation. - The term 'private foundation'
means -
"(i) a nonprofit corporation which was incorporated before
1913 which is described in sections 501(c)(3) and 509(a) of
such Code, and which is exempt from taxation under section
501(a) of such Code, and
"(ii) the principal purposes of which are to support
research by and to provide technology transfer services to
organizations described in section 170(b)(1)(A) of such Code
-
"(I) which are exempt from taxation under section 501(a) of
such Code, or
"(II) the income of which is excluded from taxation under
section 115 of such Code.
"(C) Technology transfer organization. - The term 'technology
transfer organization' means a corporation established after
the date of the enactment of this Act [Oct. 22, 1986] -
"(i) which is organized and operated to advance the public
welfare through the provision of technology transfer services
to research organizations,
"(ii) no part of the net earnings of which inures to the
benefit of, or is distributable to, any private shareholder,
individual, or entity, other than a private foundation or
research organization,
"(iii) which does not participate in, or intervene in
(including the publishing or distributing of statements) any
political campaign on behalf of any candidate for public
office,
"(iv) no substantial part of the activities of which is
carrying on propaganda, or otherwise attempting, to influence
legislation, and
"(v) upon liquidation or dissolution of which all of its
net assets can be distributed only to research organizations.
"(d) Effective Date. - This section shall take effect on the date
of the enactment of this Act [Oct. 22, 1986]."
APPLICABILITY OF 1976 AMENDMENT TO CERTAIN ORGANIZATIONS
Section 1313(c) of Pub. L. 94-455, as amended by Pub. L. 99-514,
Sec. 2, Oct. 22, 1986, 100 Stat. 2095, provided that: "An
organization which (without regard to the amendments made by this
section [amending this section and sections 170, 2055, and 2522 of
this title]) is an organization described in section 170(c)(2)(B),
501(c)(3), 2055(a)(2), or 2522(a)(2) of the Internal Revenue Code
of 1986 [formerly I.R.C. 1954] shall not be treated as an
organization not so described as a result of the amendments made by
this section."
TAX EXEMPTION FOR CERTAIN PUERTO RICAN PENSION, ETC., PLANS
Section 1022(i) of Pub. L. 93-406, title II, Sept. 2, 1974, 88
Stat. 942, as amended by Pub. L. 99-514, Sec. 2, Oct. 22, 1986, 100
Stat. 2095, provided that:
"(1) General rule. - Effective for taxable years beginning after
December 31, 1973, for purposes of section 501(a) of the Internal
Revenue Code of 1986 [formerly I.R.C. 1954] (relating to exemption
from tax), any trust forming part of a pension, profit-sharing, or
stock bonus plan all of the participants of which are residents of
the Commonwealth of Puerto Rico shall be treated as an organization
described in section 401(a) of such Code if such trust -
"(A) forms part of a pension, profit-sharing, or stock bonus
plan, and
"(B) is exempt from income tax under the laws of the
Commonwealth of Puerto Rico.
"(2) Election to have provisions of, and amendments made by,
title ii of this act apply. -
"(A) If the administrator of a pension, profit-sharing, or
stock bonus plan which is created or organized in Puerto Rico
elects, at such time and in such manner as the Secretary of the
Treasury may require, to have the provisions of this paragraph
apply, for plan years beginning after the date of election any
trust forming a part of such plan shall be treated as a trust
created or organized in the United States for purposes of section
401(a) of the Internal Revenue Code of 1986.
"(B) An election under subparagraph (A), once made, is
irrevocable.
"(C) This paragraph applies to plan years beginning after the
date of enactment of this Act [Sept. 2, 1974]
"(D) The source of any distributions made under a plan which
makes an election under this paragraph to participants and
beneficiaries residing outside of the United States shall be
determined, for purposes of subchapter N of chapter 1 of the
Internal Revenue Code of 1986 by the Secretary of the Treasury in
accordance with regulations prescribed by him. For purposes of
this subparagraph the United States means the United States as
defined in section 7701(a)(9) of the Internal Revenue Code of
1986."
EXCHANGES FOR SALE OF POULTRY
Pub. L. 89-44, title VIII, Sec. 811, June 21, 1965, 79 Stat. 169,
provided that certain corporations, associations, or organizations
organized and operated exclusively for the purpose of providing an
exchange for the sale of poultry growers of a particular locality
shall be treated for purposes of this title as an exempt
organization and that such exemption shall apply to taxable years
beginning after Dec. 31, 1953, and ending after Aug. 16, 1954,
which begin before Jan. 1, 1966.
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 1, 21, 41, 42, 50, 57,
62, 72, 79, 101, 104, 108, 120, 129, 141, 144, 145, 146, 147, 148,
149, 150, 151, 168, 170, 192, 194A, 219, 246, 265, 267, 274, 280G,
318, 401, 402, 402A, 403, 404, 408, 410, 411, 412, 414, 415, 419,
419A, 447, 448, 457, 468A, 502, 503, 504, 505, 507, 508, 509, 511,
512, 513, 514, 527, 529, 542, 593, 642, 644, 681, 818, 831, 832,
854, 856, 871, 992, 1275, 1361, 1400L, 1441, 1504, 1563, 2055,
2503, 2522, 3121, 3303, 3306, 3309, 3401, 4041, 4221, 4251, 4253,
4294, 4421, 4911, 4912, 4940, 4941, 4942, 4945, 4947, 4948, 4951,
4952, 4953, 4955, 4958, 4962, 4972, 4974, 4975, 4979, 4980F, 4982,
5214, 6033, 6039F, 6043, 6047, 6048, 6049, 6072, 6104, 6110, 6113,
6420, 6421, 6427, 6501, 6711, 6852, 7409, 7428, 7454, 7526, 7603,
7611, 7701, 9012, 9501, 9702, 9712 of this title; title 2 sections
117e, 441b, 441i, 806, 1611, 1953; title 4 section 114; title 5
sections 504, 3102, 4111, 7342, 8440; title 7 sections 1726b, 1732,
2008o, 2279, 4809, 5801; title 8 section 1101; title 10 section
2580; title 12 sections 1441a-1, 1709, 1843, 3051, 4145, 4146;
title 15 sections 37a, 77c, 80a-3, 80a-3a, 656, 1291, 1511d, 1679a,
6402; title 16 sections 18f-2, 284d, 539f, 583j-2, 742f, 1447a,
2105, 2708, 3372, 3451, 3838h, 3838q, 5406; title 17 section 114;
title 18 sections 207, 209, 1307, 1511, 1955; title 19 section
3391; title 20 sections 80q-7, 1085, 1128a, 1135, 1681, 4357, 5502,
5509; title 21 sections 353, 1523; title 22 sections 262p-4c,
262p-4e; title 25 sections 3653, 3662, 3663; title 28 section 2412;
title 29 sections 169, 623, 705, 1002, 1051, 1052, 1081, 1082,
1086, 1103, 1321, 1362, 1403, 2703; title 35 sections 201, 287;
title 36 sections 40705, 40706, 80102, 80106, 152602; title 38
section 2051; title 40 sections 525, 549, 550, 8902; title 42
sections 280e-11, 285l-3, 290b, 300e-9, 409, 604, 1301, 1382a,
1382b, 1395w-28, 1395x, 1395eee, 1396b, 1396u-4, 1397a, 1485, 1760,
1784, 2000e, 2996b, 3056, 5177a, 5197h, 5603, 6322, 6371, 6372,
8013, 8143, 9607, 9660, 9907, 9926, 10702, 11371, 12111, 12584,
14505; title 43 section 390ss; title 44 section 318; title 45
section 1347; title 46 section 2101; title 46 App. section 1158;
title 47 sections 154, 396; title 49 section 13709.
-FOOTNOTE-
(!1) See References in Text note below.
(!2) So in original. Probably should be followed by a period.
(!3) So in original.
(!4) So in original. Probably should be capitalized.
-End-
-CITE-
26 USC Sec. 502 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter F - Exempt Organizations
PART I - GENERAL RULE
-HEAD-
Sec. 502. Feeder organizations
-STATUTE-
(a) General rule
An organization operated for the primary purpose of carrying on a
trade or business for profit shall not be exempt from taxation
under section 501 on the ground that all of its profits are payable
to one or more organizations exempt from taxation under section
501.
(b) Special rule
For purposes of this section, the term "trade or business" shall
not include -
(1) the deriving of rents which would be excluded under section
512(b)(3), if section 512 applied to the organization,
(2) any trade or business in which substantially all the work
in carrying on such trade or business is performed for the
organization without compensation, or
(3) any trade or business which is the selling of merchandise,
substantially all of which has been received by the organization
as gifts or contributions.
-SOURCE-
(Aug. 16, 1954, ch. 736, 68A Stat. 166; Pub. L. 91-172, title I,
Sec. 121(b)(7), Dec. 30, 1969, 83 Stat. 542.)
-MISC1-
AMENDMENTS
1969 - Pub. L. 91-172 redesignated first sentence of existing
provisions as subsec. (a), and substantial portion of second
sentence as subsec. (b)(1), and, in subsec. (b)(1) as so
redesignated, inserted reference to section 512 of this title, and
added pars. (2) and (3).
EFFECTIVE DATE OF 1969 AMENDMENT
Amendment by Pub. L. 91-172 applicable to taxable years beginning
after Dec. 31, 1969, see section 121(g) of Pub. L. 91-172, set out
as a note under section 511 of this title.
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in section 501 of this title.
-End-
-CITE-
26 USC Sec. 503 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter F - Exempt Organizations
PART I - GENERAL RULE
-HEAD-
Sec. 503. Requirements for exemption
-STATUTE-
(a) Denial of exemption to organizations engaged in prohibited
transactions
(1) General rule
(A) An organization described in section 501(c)(17) shall not
be exempt from taxation under section 501(a) if it has engaged in
a prohibited transaction after December 31, 1959.
(B) An organization described in section 401(a) which is
referred to in section 4975(g) (2) or (3) shall not be exempt
from taxation under section 501(a) if it has engaged in a
prohibited transaction after March 1, 1954.
(C) An organization described in section 501(c)(18) shall not
be exempt from taxation under section 501(a) if it has engaged in
a prohibited transaction after December 31, 1969.
(2) Taxable years affected
An organization described in section 501(c) (17) or (18) or
paragraph (1)(B) shall be denied exemption from taxation under
section 501(a) by reason of paragraph (1) only for taxable years
after the taxable year during which it is notified by the
Secretary that it has engaged in a prohibited transaction, unless
such organization entered into such prohibited transaction with
the purpose of diverting corpus or income of the organization
from its exempt purposes, and such transaction involved a
substantial part of the corpus or income of such organization.
(b) Prohibited transactions
For purposes of this section, the term "prohibited transaction"
means any transaction in which an organization subject to the
provisions of this section -
(1) lends any part of its income or corpus, without the receipt
of adequate security and a reasonable rate of interest, to;
(2) pays any compensation, in excess of a reasonable allowance
for salaries or other compensation for personal services actually
rendered, to;
(3) makes any part of its services available on a preferential
basis to;
(4) makes any substantial purchase of securities or any other
property, for more than adequate consideration in money or
money's worth, from;
(5) sells any substantial part of its securities or other
property, for less than an adequate consideration in money or
money's worth, to; or
(6) engages in any other transaction which results in a
substantial diversion of its income or corpus to;
the creator of such organization (if a trust); a person who has
made a substantial contribution to such organization; a member of
the family (as defined in section 267(c)(4)) of an individual who
is the creator of such trust or who has made a substantial
contribution to such organization; or a corporation controlled by
such creator or person through the ownership, directly or
indirectly, of 50 percent or more of the total combined voting
power of all classes of stock entitled to vote or 50 percent or
more of the total value of shares of all classes of stock of the
corporation.
(c) Future status of organizations denied exemption
Any organization described in section 501(c) (17) or (18) or
subsection (a)(1)(B) which is denied exemption under section 501(a)
by reason of subsection (a) of this section, with respect to any
taxable year following the taxable year in which notice of denial
of exemption was received, may, under regulations prescribed by the
Secretary, file claim for exemption, and if the Secretary, pursuant
to such regulations, is satisfied that such organization will not
knowingly again engage in a prohibited transaction, such
organization shall be exempt with respect to taxable years after
the year in which such claim is filed.
[(d) Repealed. Pub. L. 101-508, title XI, Sec. 11801(a)(22), Nov.
5, 1990, 104 Stat. 1388-521]
(e) Special rules
For purposes of subsection (b)(1), a bond, debenture, note, or
certificate or other evidence of indebtedness (hereinafter in this
subsection referred to as "obligation") shall not be treated as a
loan made without the receipt of adequate security if -
(1) such obligation is acquired -
(A) on the market, either (i) at the price of the obligation
prevailing on a national securities exchange which is
registered with the Securities and Exchange Commission, or (ii)
if the obligation is not traded on such a national securities
exchange, at a price not less favorable to the trust than the
offering price for the obligation as established by current bid
and asked prices quoted by persons independent of the issuer;
(B) from an underwriter, at a price (i) not in excess of the
public offering price for the obligation as set forth in a
prospectus or offering circular filed with the Securities and
Exchange Commission, and (ii) at which a substantial portion of
the same issue is acquired by persons independent of the
issuer; or
(C) directly from the issuer, at a price not less favorable
to the trust than the price paid currently for a substantial
portion of the same issue by persons independent of the issuer;
(2) immediately following acquisition of such obligation -
(A) not more than 25 percent of the aggregate amount of
obligations issued in such issue and outstanding at the time of
acquisition is held by the trust, and
(B) at least 50 percent of the aggregate amount referred to
in subparagraph (A) is held by persons independent of the
issuer; and
(3) immediately following acquisition of the obligation, not
more than 25 percent of the assets of the trust is invested in
obligations of persons described in subsection (b).
(f) Loans with respect to which employers are prohibited from
pledging certain assets
Subsection (b)(1) shall not apply to a loan made by a trust
described in section 401(a) to the employer (or to a renewal of
such a loan or, if the loan is repayable upon demand, to a
continuation of such a loan) if the loan bears a reasonable rate of
interest, and if (in the case of a making or renewal) -
(1) the employer is prohibited (at the time of such making or
renewal) by any law of the United States or regulation thereunder
from directly or indirectly pledging, as security for such a
loan, a particular class or classes of his assets the value of
which (at such time) represents more than one-half of the value
of all his assets;
(2) the making or renewal, as the case may be, is approved in
writing as an investment which is consistent with the exempt
purposes of the trust by a trustee who is independent of the
employer, and no other such trustee had previously refused to
give such written approval; and
(3) immediately following the making or renewal, as the case
may be, the aggregate amount loaned by the trust to the employer,
without the receipt of adequate security, does not exceed 25
percent of the value of all the assets of the trust.
For purposes of paragraph (2), the term "trustee" means, with
respect to any trust for which there is more than one trustee who
is independent of the employer, a majority of such independent
trustees. For purposes of paragraph (3), the determination as to
whether any amount loaned by the trust to the employer is loaned
without the receipt of adequate security shall be made without
regard to subsection (e).
-SOURCE-
(Aug. 16, 1954, ch. 736, 68A Stat. 166; Pub. L. 85-866, title I,
Sec. 30(a), (b), Sept. 2, 1958, 72 Stat. 1629, 1630; Pub. L.
86-667, Sec. 2, July 14, 1960, 74 Stat. 535; Pub. L. 87-792, Sec.
6, Oct. 10, 1962, 76 Stat. 827; Pub. L. 91-172, title I, Secs.
101(j)(7)-(14), 121(b)(6)(B), Dec. 30, 1969, 83 Stat. 527, 542;
Pub. L. 93-406, title II, Sec. 2003(b), Sept. 2, 1974, 88 Stat.
978; Pub. L. 94-455, title XIX, Sec. 1906(b)(13)(A), Oct. 4, 1976,
90 Stat. 1834; Pub. L. 101-508, title XI, Sec. 11801(a)(22), Nov.
5, 1990, 104 Stat. 1388-521.)
-MISC1-
AMENDMENTS
1990 - Subsec. (d). Pub. L. 101-508 struck out subsec. (d)
"Special rule for loans" which read as follows: "For purposes of
the application of subsection (b)(1), in the case of a loan by a
trust described in section 401(a), the following rules shall apply
with respect to a loan made before March 1, 1954, which would
constitute a prohibited transaction if made on or after March 1,
1954:
"(1) If any part of the loan is repayable prior to December 31,
1955, the renewal of such part of the loan for a period not
extending beyond December 31, 1955, on the same terms, shall not
be considered a prohibited transaction.
"(2) If the loan is repayable on demand, the continuation of
the loan without the receipt of adequate security and a
reasonable rate of interest beyond December 31, 1955, shall be
considered a prohibited transaction."
1976 - Subsecs. (a)(2), (c). Pub. L. 94-455 struck out "or his
delegate" after "Secretary".
1974 - Subsec. (a)(1)(A). Pub. L. 93-406, Sec. 2003(b)(1),
substituted "section 501(c)(17)" for "section 501(c)(17) or (18)".
Subsec. (a)(1)(B). Pub. L. 93-406, Sec. 2003(b)(2), inserted
"which is referred to in section 4975(g)(2) or (3)".
Subsec. (a)(2). Pub. L. 93-406, Sec. 2003(b)(3), substituted "or
paragraph (1)(B)" for "or section 401".
Subsec. (c). Pub. L. 93-406, Sec. 2003(b)(4), substituted "or
subsection (a)(1)(B)" for "or section 401".
Subsec. (g). Pub. L. 93-406, Sec. 2003(b)(5), struck out subsec.
(g) which covered trusts benefiting certain owner-employees.
1969 - Subsec. (a)(1)(A). Pub. L. 91-172, Secs. 101(j)(7),
121(b)(6)(B)(ii), redesignated subpar. (B) as (A) and inserted
reference to section 501(c)(18). Former subpar. (A), referring to
organizations described in section 501(c)(3) and to prohibited
transactions engaged in after July 1, 1950, was struck out.
Subsec. (a)(1)(B). Pub. L. 91-172, Sec. 101(j)(7), redesignated
subpar. (C) as (B). Former subpar. (B), referring to organizations
described in section 501(c)(17) was amended by addition of a
reference to section 501(c)(18), and redesignated as subpar. (A).
Subsec. (a)(1)(C). Pub. L. 91-172, Secs. 101(j)(7),
121(b)(6)(B)(i), added subpar. (C). Former subpar. (C), dealing
with organizations described in section 401(a) and with prohibited
transactions engaged in after Mar. 1, 1954, was redesignated as
subpar. (B).
Subsec. (a)(2). Pub. L. 91-172, Secs. 101(j)(8),
121(b)(6)(B)(ii), struck out reference to organizations described
in section 501(c)(3), and inserted references to organizations
described in section 501(c)(18).
Subsec. (b). Pub. L. 91-172, Sec. 101(j)(14), redesignated
subsec. (c) as (b). Former subsec. (b), setting out the
organizations to which section applied, was struck out.
Subsec. (c). Pub. L. 91-172, Secs. 101(j)(9), (14),
121(b)(6)(B)(ii), redesignated subsec. (d) as (c), struck out
reference to organizations described in section 501(c)(3), and
inserted reference to organizations described in section
501(c)(17). Former subsec. (c) redesignated (b).
Subsec. (d). Pub. L. 91-172, Sec. 101(j)(10), (14), redesignated
subsec. (g) as (d) and substituted "subsection (b)(1)" for
"subsection (c)(1)." Former subsec. (d) redesignated (c).
Subsec. (e). Pub. L. 91-172, Sec. 101(j)(11), (14), redesignated
subsec. (h) as (e), modified heading to read: "Special rules",
substituted "subsection (b)(1)" for "subsection (c)(1)" in text
preceding par. (1) and in par. (3), and in text preceding par. (1)
struck out "acquired by a trust described in section 401(a) or
section 501(c)(17)". Former subsec. (e), covering the disallowance
of certain charitable deductions, was struck out.
Subsec. (f). Pub. L. 91-172, Sec. 101(j)(12), (14), redesignated
subsec. (i) as (f) and substituted "Subsection (b)(1)" for
"Subsection (c)(1)" and "subsection (e)" for "subsection (h)".
Former subsec. (f), defining "gift or bequest", was struck out.
Subsec. (g). Pub. L. 91-172, Sec. 101(j)(13), (14), redesignated
subsec. (j) as (g) and substituted "subsection (b)" for "subsection
(c)" in par. (1). Former subsec. (g) redesignated (d).
Subsecs. (h) to (j). Pub. L. 91-172, Sec. 101(j)(14),
redesignated subsecs. (h), (i), and (j) as (e), (f), and (g),
respectively. Former subsecs. (e) and (f) were struck out and
former subsec. (g) was redesignated (d).
1962 - Subsec. (j). Pub. L. 87-792 added subsec. (j).
1960 - Subsec. (a)(1). Pub. L. 86-667, Sec. 2(a)(1), denied
exemption to an organization described in section 501(c)(17) if it
has engaged in a prohibited transaction after Dec. 31, 1959.
Subsecs. (a)(2), (b), (d). Pub. L. 86-667, Sec. 2(a)(2), (b),
(c), included organizations described in section 501(c)(17).
Subsec. (h). Pub. L. 86-667, Sec. 2(d), included trusts described
in section 501(c)(17).
1958 - Subsec. (h). Pub. L. 85-866, Sec. 30(a), added subsec.
(h).
Subsec. (i). Pub. L. 85-866, Sec. 30(b), added subsec. (i).
EFFECTIVE DATE OF 1974 AMENDMENT
Amendment by Pub. L. 93-406 effective Jan. 1, 1975, but with
provision for an election to be exercised by an organization so as
to constitute a savings clause with reference to the amendment, see
section 2003(c) of Pub. L. 93-406, set out as an Effective Date;
Savings Provisions note under section 4975 of this title.
EFFECTIVE DATE OF 1969 AMENDMENT
Amendment by section 101(j)(7)-(14) of Pub. L. 91-172 effective
Jan. 1, 1970, see section 101(k)(1) of Pub. L. 91-172, set out as
an Effective Date note under section 4940 of this title.
Amendment by section 121(b)(6)(B) of Pub. L. 91-172 applicable to
taxable years beginning after Dec. 31, 1969, see section 121(g) of
Pub. L. 91-172, set out as a note under section 511 of this title.
EFFECTIVE DATE OF 1962 AMENDMENT
Amendment by Pub. L. 87-792 applicable to taxable years beginning
after Dec. 31, 1962, see section 8 of Pub. L. 87-792, set out as a
note under section 22 of this title.
EFFECTIVE DATE OF 1960 AMENDMENT
Amendment by Pub. L. 86-667 applicable to taxable years beginning
after Dec. 31, 1959, and in the case of loans, the amendments to
this section made by Pub. L. 86-667 are applicable only to loans
made, renewed, or continued after Dec. 31, 1959, see section 6 of
Pub. L. 86-667, set out as a note under section 501 of this title.
EFFECTIVE DATE OF 1958 AMENDMENT
Section 30(c) of Pub. L. 85-866, as amended by Pub. L. 99-514,
Sec. 2, Oct. 22, 1986, 100 Stat. 2095, provided that:
"(1) In general. - Except as provided in paragraph (2), the
amendment made by subsection (a) [amending this section] shall
apply with respect to taxable years ending after March 15, 1956.
The amendment made by subsection (b) [amending this section] shall
apply with respect to taxable years ending after the date of the
enactment of this Act [Sept. 2, 1958], but only with respect to
periods after such date.
"(2) Exceptions. - Nothing in subsection (a) [amending this
section] shall be construed to make any transaction a prohibited
transaction which, under announcements of the Internal Revenue
Service made with respect to section 503(c)(1) of the Internal
Revenue Code of 1986 [formerly I.R.C. 1954] before the date of the
enactment of this Act [Sept. 2, 1958], would not constitute a
prohibited transaction. In the case of any bond, debenture, note,
or certificate or other evidence of indebtedness acquired before
the date of the enactment of this Act [Sept. 2, 1958], by a trust
described in section 401(a) of such Code which is held on such
date, paragraphs (2) and (3) of section 503(h) of such Code shall
be treated as satisfied if such requirements would have been
satisfied if such obligation had been acquired on such date of
enactment [Sept. 2, 1958]."
SAVINGS PROVISION
For provisions that nothing in amendment by Pub. L. 101-508 be
construed to affect treatment of certain transactions occurring,
property acquired, or items of income, loss, deduction, or credit
taken into account prior to Nov. 5, 1990, for purposes of
determining liability for tax for periods ending after Nov. 5,
1990, see section 11821(b) of Pub. L. 101-508, set out as a note
under section 29 of this title.
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 501, 4941 of this title;
title 29 section 1114.
-End-
-CITE-
26 USC Sec. 504 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter F - Exempt Organizations
PART I - GENERAL RULE
-HEAD-
Sec. 504. Status after organization ceases to qualify for exemption
under section 501(c)(3) because of substantial lobbying or
because of political activities
-STATUTE-
(a) General rule
An organization which -
(1) was exempt (or was determined by the Secretary to be
exempt) from taxation under section 501(a) by reason of being an
organization described in section 501(c)(3), and
(2) is not an organization described in section 501(c)(3) -
(A) by reason of carrying on propaganda, or otherwise
attempting, to influence legislation, or
(B) by reason of participating in, or intervening in, any
political campaign on behalf of (or in opposition to) any
candidate for public office,
shall not at any time thereafter be treated as an organization
described in section 501(c)(4).
(b) Regulations to prevent avoidance
The Secretary shall prescribe such regulations as may be
necessary or appropriate to prevent the avoidance of subsection
(a), including regulations relating to a direct or indirect
transfer of all or part of the assets of an organization to an
organization controlled (directly or indirectly) by the same person
or persons who control the transferor organization.
(c) Churches, etc.
Subsection (a) shall not apply to any organization which is a
disqualified organization within the meaning of section 501(h)(5)
(relating to churches, etc.) for the taxable year immediately
preceding the first taxable year for which such organization is
described in paragraph (2) of subsection (a).
-SOURCE-
(Added Pub. L. 94-455, title XIII, Sec. 1307(a)(2), Oct. 4, 1976,
90 Stat. 1721; amended Pub. L. 100-203, title X, Sec. 10711(b)(1),
(2)(A), Dec. 22, 1987, 101 Stat. 1330-464.)
-MISC1-
PRIOR PROVISIONS
A prior section 504, acts Aug. 16, 1954, ch. 736, 68A Stat. 168;
Oct. 22, 1968, Pub. L. 90-630, Sec. 6(a), 82 Stat. 1330, related to
denial of exemption, prior to repeal by Pub. L. 91-172, title I,
Sec. 101(j)(15), Dec. 30, 1969, 83 Stat. 527. For effective date of
repeal, see section 101(k)(2)(B) of Pub. L. 91-172, set out as an
Effective Date note under section 4940 of this title.
AMENDMENTS
1987 - Pub. L. 100-203, Sec. 10711(b)(2)(A), substituted
"substantial lobbying or because of political activities" for
"substantial lobbying" in section catchline.
Subsec. (a)(2). Pub. L. 100-203, Sec. 10711(b)(1), amended par.
(2) generally. Prior to amendment, par. (2) read as follows: "is
not an organization described in section 501(c)(3) by reason of
carrying on propaganda, or otherwise attempting, to influence
legislation,".
EFFECTIVE DATE OF 1987 AMENDMENT
Amendment by Pub. L. 100-203 applicable with respect to
activities after Dec. 22, 1987, see section 10711(c) of Pub. L.
100-203, set out as a note under section 170 of this title.
CONSTRUCTION OF AMENDMENT
Section 1307(a)(3) of Pub. L. 94-455 provided that: "It is the
intent of Congress that enactment of this section [amending section
501 and enacting section 504 of this title] is not to be regarded
in any way as an approval or disapproval of the decision of the
Court of Appeals for the Tenth Circuit in Christian Echoes National
Ministry, Inc. versus United States, 470 F.2d 849 (1972), or of the
reasoning in any of the opinions leading to that decision."
-End-
-CITE-
26 USC Sec. 505 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter F - Exempt Organizations
PART I - GENERAL RULE
-HEAD-
Sec. 505. Additional requirements for organizations described in
paragraph (9), (17), or (20) of section 501(c)
-STATUTE-
(a) Certain requirements must be met in the case of organizations
described in paragraph (9) or (20) of section 501(c)
(1) Voluntary employees' beneficiary associations, etc.
An organization described in paragraph (9) or (20) of
subsection (c) of section 501 which is part of a plan shall not
be exempt from tax under section 501(a) unless such plan meets
the requirements of subsection (b) of this section.
(2) Exception for collective bargaining agreements
Paragraph (1) shall not apply to any organization which is part
of a plan maintained pursuant to an agreement between employee
representatives and 1 or more employers if the Secretary finds
that such agreement is a collective bargaining agreement and that
such plan was the subject of good faith bargaining between such
employee representatives and such employer or employers.
(b) Nondiscrimination requirements
(1) In general
Except as otherwise provided in this subsection, a plan meets
the requirements of this subsection only if -
(A) each class of benefits under the plan is provided under a
classification of employees which is set forth in the plan and
which is found by the Secretary not to be discriminatory in
favor of employees who are highly compensated individuals, and
(B) in the case of each class of benefits, such benefits do
not discriminate in favor of employees who are highly
compensated individuals.
A life insurance, disability, severance pay, or supplemental
unemployment compensation benefit shall not be considered to fail
to meet the requirements of subparagraph (B) merely because the
benefits available bear a uniform relationship to the total
compensation, or the basic or regular rate of compensation, of
employees covered by the plan.
(2) Exclusion of certain employees
For purposes of paragraph (1), there may be excluded from
consideration -
(A) employees who have not completed 3 years of service,
(B) employees who have not attained age 21,
(C) seasonal employees or less than half-time employees,
(D) employees not included in the plan who are included in a
unit of employees covered by an agreement between employee
representatives and 1 or more employers which the Secretary
finds to be a collective bargaining agreement if the class of
benefits involved was the subject of good faith bargaining
between such employee representatives and such employer or
employers, and
(E) employees who are nonresident aliens and who receive no
earned income (within the meaning of section 911(d)(2)) from
the employer which constitutes income from sources within the
United States (within the meaning of section 861(a)(3)).
(3) Application of subsection where other nondiscrimination rules
provided
In the case of any benefit for which a provision of this
chapter other than this subsection provides nondiscrimination
rules, paragraph (1) shall not apply but the requirements of this
subsection shall be met only if the nondiscrimination rules so
provided are satisfied with respect to such benefit.
(4) Aggregation rules
At the election of the employer, 2 or more plans of such
employer may be treated as 1 plan for purposes of this
subsection.
(5) Highly compensated individual
For purposes of this subsection, the determination as to
whether an individual is a highly compensated individual shall be
made under rules similar to the rules for determining whether an
individual is a highly compensated employee (within the meaning
of section 414(q)).
(6) Compensation
For purposes of this subsection, the term "compensation" has
the meaning given such term by section 414(s).
(7) Compensation limit
A plan shall not be treated as meeting the requirements of this
subsection unless under the plan the annual compensation of each
employee taken into account for any year does not exceed
$200,000. The Secretary shall adjust the $200,000 amount at the
same time, and by the same amount, as any adjustment under
section 401(a)(17)(B). This paragraph shall not apply in
determining whether the requirements of section 79(d) are met.
(c) Requirement that organization notify Secretary that it is
applying for tax-exempt status
(1) In general
An organization shall not be treated as an organization
described in paragraph (9), (17), or (20) of section 501(c) -
(A) unless it has given notice to the Secretary, in such
manner as the Secretary may by regulations prescribe, that it
is applying for recognition of such status, or
(B) for any period before the giving of such notice, if such
notice is given after the time prescribed by the Secretary by
regulations for giving notice under this subsection.
(2) Special rule for existing organizations
In the case of any organization in existence on July 18, 1984,
the time for giving notice under paragraph (1) shall not expire
before the date 1 year after such date of the enactment.
-SOURCE-
(Added Pub. L. 98-369, div. A, title V, Sec. 513(a), July 18, 1984,
98 Stat. 863; amended Pub. L. 99-514, title XI, Secs. 1114(b)(16),
1151(e)(2)(B), (g)(6), (j)(3), title XVIII, Secs. 1851(c),
1899A(16), Oct. 22, 1986, 100 Stat. 2452, 2506-2508, 2863, 2959;
Pub. L. 100-647, title I, Sec. 1011B(a)(27)(C), (31)(B), (32), Nov.
10, 1988, 102 Stat. 3487, 3488; Pub. L. 101-140, title II, Secs.
203(a)(1), (2), 204(c), Nov. 8, 1989, 103 Stat. 830, 833; Pub. L.
103-66, title XIII, Sec. 13212(c), Aug. 10, 1993, 107 Stat. 472;
Pub. L. 107-16, title VI, Sec. 611(c)(1), June 7, 2001, 115 Stat.
97.)
-STATAMEND-
AMENDMENT OF SECTION
For termination of amendment by section 901 of Pub. L. 107-16,
see Effective and Termination Dates of 2001 Amendment note below.
-MISC1-
AMENDMENTS
2001 - Subsec. (b)(7). Pub. L. 107-16, Secs. 611(c)(1), 901,
temporarily substituted "$200,000" for "$150,000" in two places.
See Effective and Termination Dates of 2001 Amendment note below.
1993 - Subsec. (b)(7). Pub. L. 103-66 substituted "Compensation
limit" for "$200,000 compensation limit" in heading and "exceed
$150,000. The Secretary shall adjust the $150,000 amount at the
same time, and by the same amount, as any adjustment under section
401(a)(17)(B)." for "exceed $200,000. The Secretary shall adjust
the $200,000 amount at the same time and in the same manner as
under section 415(d)." in text.
1989 - Subsec. (a)(1). Pub. L. 101-140, Sec. 203(a)(2), amended
par. (1) to read as if amendments by Pub. L. 100-647, Sec.
1011B(a)(27)(C), had not been enacted, see 1988 Amendment note
below.
Subsec. (b)(2). Pub. L. 101-140, Sec. 203(a)(2), amended par. (2)
to read as if amendments by Pub. L. 100-647, Sec. 1011B(a)(31)(B),
had not been enacted, see 1988 Amendment note below.
Pub. L. 101-140, Sec. 203(a)(1), amended par. (2) to read as if
amendments by Pub. L. 99-514, Sec. 1151(g)(6), had not been
enacted, see 1986 Amendment note below.
Subsec. (b)(7). Pub. L. 101-140, Sec. 204(c), inserted at end
"This paragraph shall not apply in determining whether the
requirements of section 79(d) are met."
1988 - Subsec. (a)(1). Pub. L. 100-647, Sec. 1011B(a)(27)(C),
inserted at end "This paragraph shall not apply to any organization
by reason of a failure to meet the requirements of subsection (b)
with respect to a benefit to which section 89 applies."
Subsec. (b)(2). Pub. L. 100-647, Sec. 1011B(a)(31)(B),
substituted "there shall be" for "there may be" and "who are" for
"who may be".
Subsec. (b)(7). Pub. L. 100-647, Sec. 1011B(a)(32), added par.
(7).
1986 - Subsec. (a)(1). Pub. L. 99-514, Sec. 1851(c)(1), struck
out "of an employer" before "shall".
Subsec. (a)(2). Pub. L. 99-514, Sec. 1851(c)(4), amended par. (2)
generally. Prior to amendment, par. (2) read as follows: "Paragraph
(1) shall not apply to any organization which is part of a plan
maintained pursuant to 1 or more collective bargaining agreements
between 1 or more employee organizations and 1 or more employers."
Subsec. (b)(1). Pub. L. 99-514, Sec. 1851(c)(2), (3), substituted
"as otherwise provided in this subsection" for "as provided in
paragraph (2)" in introductory provision, and in subpar. (B)
substituted "highly compensated individuals" for "highly
compensated employees".
Subsec. (b)(2). Pub. L. 99-514, Sec. 1151(g)(6), amended par. (2)
generally. Prior to amendment, par. (2) read as follows: "For
purposes of paragraph (1), there may be excluded from consideration
-
"(A) employees who have not completed 3 years of service,
"(B) employees who have not attained age 21,
"(C) seasonal employees or less than half-time employees,
"(D) employees not included in the plan who are included in a
unit of employees covered by an agreement between employee
representatives and 1 or more employers which the Secretary finds
to be a collective bargaining agreement if the class of benefits
involved was the subject of good faith bargaining between such
employee representatives and such employer or employers, and
"(E) employees who are nonresident aliens and who receive no
earned income (within the meaning of section 911(d)(2)) from the
employer which constitutes income from sources within the United
States (within the meaning of section 861(a)(3))."
Subsec. (b)(4). Pub. L. 99-514, Sec. 1151(e)(2)(B), amended par.
(4) generally. Prior to amendment, par. (4) read as follows: "For
purposes of this subsection -
"(A) Aggregation of plans. - At the election of the employer, 2
or more plans of such employer may be treated as 1 plan.
"(B) Treatment of related employers. - Rules similar to the
rules of subsections (b), (c), (m), and (n) of section 414 shall
apply. For purposes of the preceding sentence, section 414(n)
shall be applied without regard to paragraph (5)."
Subsec. (b)(5). Pub. L. 99-514, Sec. 1114(b)(16), amended par.
(5) generally. Prior to amendment, par. (5) read as follows: "For
purposes of this subsection, the term 'highly compensated
individual' has the meaning given such term by section 105(h)(5).
For purposes of the preceding sentence, section 105(h)(5) shall be
applied by substituting '10 percent' for '25 percent'."
Subsec. (b)(6). Pub. L. 99-514, Sec. 1151(j)(3), added par. (6).
Subsec. (c)(2). Pub. L. 99-514, Sec. 1899A(16), substituted "July
18, 1984" for "the date of the enactment of the Tax Reform Act of
1984".
EFFECTIVE AND TERMINATION DATES OF 2001 AMENDMENT
Amendment by Pub. L. 107-16 applicable to years beginning after
Dec. 31, 2001, see section 611(i)(1) of Pub. L. 107-16, set out as
a note under section 415 of this title.
Amendment by Pub. L. 107-16 inapplicable to taxable, plan, or
limitation years beginning after Dec. 31, 2010, and the Internal
Revenue Code of 1986 to be applied and administered to such years
as if such amendment had never been enacted, see section 901 of
Pub. L. 107-16, set out as a note under section 1 of this title.
EFFECTIVE DATE OF 1993 AMENDMENT
Amendment by Pub. L. 103-66 applicable, except as otherwise
provided, to benefits accruing in plan years beginning after Dec.
31, 1993, see section 13212(d) of Pub. L. 103-66, set out as a note
under section 401 of this title.
EFFECTIVE DATE OF 1989 AMENDMENT
Amendment by section 203(a)(1), (2) of Pub. L. 101-140 effective
as if included in section 1151 of Pub. L. 99-514, see section
203(c) of Pub. L. 101-140, set out as a note under section 79 of
this title.
Section 204(d)(4) of Pub. L. 101-140 provided that: "The
amendment made by subsection (c) [amending this section] shall take
effect as if included in the amendment made by section 1011B(a)(32)
of the Technical and Miscellaneous Revenue Act of 1988 [Pub. L.
100-647]."
EFFECTIVE DATE OF 1988 AMENDMENT
Amendment by Pub. L. 100-647 effective, except as otherwise
provided, as if included in the provision of the Tax Reform Act of
1986, Pub. L. 99-514, to which such amendment relates, see section
1019(a) of Pub. L. 100-647, set out as a note under section 1 of
this title.
EFFECTIVE DATE OF 1986 AMENDMENT
Amendment by section 1114(b)(16) of Pub. L. 99-514 applicable to
years beginning after Dec. 31, 1987, see section 1114(c)(2) of Pub.
L. 99-514, set out as a note under section 414 of this title.
Amendment by section 1151(e)(2)(B), (g)(6), (j)(3) of Pub. L.
99-514 applicable, with certain qualifications and exceptions, to
years beginning after Dec. 31, 1988, see section 1151(k) of Pub. L.
99-514, as amended, set out as a note under section 79 of this
title.
Amendment by section 1851(c) of Pub. L. 99-514 effective, except
as otherwise provided, as if included in the provisions of the Tax
Reform Act of 1984, Pub. L. 98-369, div. A, to which such amendment
relates, see section 1881 of Pub. L. 99-514, set out as a note
under section 48 of this title.
EFFECTIVE DATE
Section 513(c) of Pub. L. 98-369, as amended by Pub. L. 99-514,
Sec. 2, Oct. 22, 1986, 100 Stat. 2095, provided that:
"(1) In general. - The amendments made by this section [enacting
this section] shall apply to years beginning after December 31,
1984.
"(2) Treatment of certain benefits in pay status as of january 1,
1985. - For purposes of determining whether a plan meets the
requirements of section 505(b) of the Internal Revenue Code of 1986
[formerly I.R.C. 1954] (as added by subsection (a)), there may (at
the election of the employer) be excluded from consideration all
disability or severance payments payable to individuals who are in
pay status as of January 1, 1985. The preceding sentence shall not
apply to any payment to the extent such payment is increased by any
plan amendment adopted after June 22, 1984."
REGULATIONS
Secretary of the Treasury or his delegate to issue before Feb. 1,
1988, final regulations to carry out amendments made by section
1114 of Pub. L. 99-514, see section 1141 of Pub. L. 99-514, set out
as a note under section 401 of this title.
NONENFORCEMENT OF AMENDMENT MADE BY SECTION 1151 OF PUB. L. 99-514
FOR FISCAL YEAR 1990
No monies appropriated by Pub. L. 101-136 to be used to implement
or enforce section 1151 of Pub. L. 99-514 or the amendments made by
such section, see section 528 of Pub. L. 101-136, set out as a note
under section 89 of this title.
PLAN AMENDMENTS NOT REQUIRED UNTIL JANUARY 1, 1989
For provisions directing that if any amendments made by subtitle
A or subtitle C of title XI [Secs. 1101-1147 and 1171-1177] or
title XVIII [Secs. 1800-1899A] of Pub. L. 99-514 require an
amendment to any plan, such plan amendment shall not be required to
be made before the first plan year beginning on or after Jan. 1,
1989, see section 1140 of Pub. L. 99-514, as amended, set out as a
note under section 401 of this title.
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 414, 419A, 4976 of this
title.
-End-
-CITE-
26 USC PART II - PRIVATE FOUNDATIONS 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter F - Exempt Organizations
PART II - PRIVATE FOUNDATIONS
-HEAD-
PART II - PRIVATE FOUNDATIONS
-MISC1-
Sec.
507. Termination of private foundation status.
508. Special rules with respect to section 501(c)(3)
organizations.
509. Private foundation defined.
AMENDMENTS
1969 - Pub. L. 91-172, title I, Sec. 101(a), Dec. 30, 1969, 83
Stat. 492, added part heading and analysis for part II.
-SECREF-
PART REFERRED TO IN OTHER SECTIONS
This part is referred to in sections 501, 511, 4947 of this
title.
-End-
-CITE-
26 USC Sec. 507 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter F - Exempt Organizations
PART II - PRIVATE FOUNDATIONS
-HEAD-
Sec. 507. Termination of private foundation status
-STATUTE-
(a) General rule
Except as provided in subsection (b), the status of any
organization as a private foundation shall be terminated only if -
(1) such organization notifies the Secretary (at such time and
in such manner as the Secretary may by regulations prescribe) of
its intent to accomplish such termination, or
(2)(A) with respect to such organization, there have 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, and
(B) the Secretary notifies such organization that, by reason of
subparagraph (A), such organization is liable for the tax imposed
by subsection (c),
and either such organization pays the tax imposed by subsection (c)
(or any portion not abated under subsection (g)) or the entire
amount of such tax is abated under subsection (g).
(b) Special rules
(1) 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 -
(A) 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
(B)(i) 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,
(ii) such organization notifies the Secretary (in such manner
as the Secretary may by regulations prescribe) before the
commencement of such 12-month or 60-month period (or before the
90th day after the day on which regulations first prescribed
under this subsection become final) that it is terminating its
private foundation status, and
(iii) such organization establishes to the satisfaction of
the Secretary (in such manner as the Secretary may by
regulations prescribe) immediately after the expiration of such
12-month or 60-month period that such organization has complied
with clause (i).
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.
(2) 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.
(c) Imposition of tax
There is hereby imposed on each organization which is referred to
in subsection (a) a tax equal to the lower of -
(1) 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
(2) the value of the net assets of such foundation.
(d) 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 -
(A) the aggregate increases in tax under chapters 1, 11, and
12 (or the corresponding provisions of prior law) which would
have been imposed with respect to all substantial contributors
to the foundation if deductions for all contributions made by
such contributors to the foundation after February 28, 1913,
had been disallowed, and
(B) 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
(C) interest on the increases in tax determined under
subparagraphs (A) and (B) from the first date on which each
such increase would have been due and payable to the date on
which the organization ceases to be a private foundation.
(2) 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.
(B) Special rules
For purposes of subparagraph (A) -
(i) each contribution or bequest shall be valued at fair
market value on the date it was received,
(ii) in the case of a foundation which is in existence on
October 9, 1969, all contributions and bequests received on
or before such date shall be treated (except for purposes of
clause (i)) as if received on such date,
(iii) an individual shall be treated as making all
contributions and bequests made by his spouse, and
(iv) any person who is a substantial contributor on any
date shall remain a substantial contributor for all
subsequent periods.
(C) Person ceases to be substantial contributor in certain
cases
(i) In general
A person shall cease to be treated as a substantial
contributor with respect to any private foundation as of the
close of any taxable year of such foundation if -
(I) during the 10-year period ending at the close of such
taxable year such person (and all related persons) have not
made any contribution to such private foundation,
(II) at no time during such 10-year period was such
person (or any related person) a foundation manager of such
private foundation, and
(III) the aggregate contributions made by such person
(and related persons) are determined by the Secretary to be
insignificant when compared to the aggregate amount of
contributions to such foundation by one other person.
For purposes of subclause (III), appreciation on
contributions while held by the foundation shall be taken
into account.
(ii) Related person
For purposes of clause (i), the term "related person"
means, with respect to any person, any other person who would
be a disqualified person (within the meaning of section 4946)
by reason of his relationship to such person. In the case of
a contributor which is a corporation, the term also includes
any officer or director of such corporation.
(3) 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.
(e) 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.
(f) 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.
(g) 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 -
(1) 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
(2) 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.
-SOURCE-
(Added Pub. L. 91-172, title I, Sec. 101(a), Dec. 30, 1969, 83
Stat. 492; amended Pub. L. 94-455, title XIX, Sec. 1906(b)(13)(A),
Oct. 4, 1976, 90 Stat. 1834; Pub. L. 98-369, div. A, title III,
Sec. 313(a), July 18, 1984, 98 Stat. 786.)
-MISC1-
AMENDMENTS
1984 - Subsec. (d)(2)(C). Pub. L. 98-369 added subpar. (C).
1976 - Pub. L. 94-455 struck out "or his delegate" after
"Secretary" wherever appearing.
EFFECTIVE DATE OF 1984 AMENDMENT
Section 313(b) of Pub. L. 98-369 provided that: "The amendment
made by subsection (a) [amending this section] shall apply to
taxable years beginning after December 31, 1984."
EFFECTIVE DATE
Section effective Jan. 1, 1970, see section 101(k)(1) of Pub. L.
91-172, set out as a note under section 4940 of this title.
APPLICABILITY TO DETERMINATION OF STATUS AS SUBSTANTIAL CONTRIBUTOR
FOR PURPOSES OF TAXES ON SELF-DEALING OF CONTRIBUTIONS MADE PRIOR
TO OCTOBER 9, 1969
Pub. L. 95-170, Sec. 3, Nov. 12, 1977, 91 Stat. 1352, as amended
by Pub. L. 99-514, Sec. 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 -
"(1) were made on account of or in lieu of payments required
under a lease in effect before such date, and
"(2) were coincident with or by reason of the reduction in the
required payments under such lease,
shall not be taken into account. For purposes of applying section
507(d)(2)(B)(iv) of such Code, the preceding sentence shall be
treated as having taken effect on January 1, 1970."
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 508, 509, 4940, 4946,
4947, 4948, 6104, 6214, 6501, 6503 of this title.
-End-
-CITE-
26 USC Sec. 508 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter F - Exempt Organizations
PART II - PRIVATE FOUNDATIONS
-HEAD-
Sec. 508. Special rules with respect to section 501(c)(3)
organizations
-STATUTE-
(a) New organizations must notify Secretary that they are applying
for recognition of section 501(c)(3) status
Except as provided in subsection (c), an organization organized
after October 9, 1969, shall not be treated as an organization
described in section 501(c)(3) -
(1) unless it has given notice to the Secretary in such manner
as the Secretary may by regulations prescribe, that it is
applying for recognition of such status, or
(2) for any period before the giving of such notice, if such
notice is given after the time prescribed by the Secretary by
regulations for giving notice under this subsection.
(b) Presumption that organizations are private foundations
Except as provided in subsection (c), any organization (including
an organization in existence on October 9, 1969) which is described
in section 501(c)(3) and which does not notify the Secretary, at
such time and in such manner as the Secretary may by regulations
prescribe, that it is not a private foundation shall be presumed to
be a private foundation.
(c) Exceptions
(1) Mandatory exceptions
Subsections (a) and (b) shall not apply to -
(A) churches, their integrated auxiliaries, and conventions
or associations of churches, or
(B) any organization which is not a private foundation (as
defined in section 509(a)) and the gross receipts of which in
each taxable year are normally not more than $5,000.
(2) Exceptions by regulations
The Secretary may by regulations exempt (to the extent and
subject to such conditions as may be prescribed in such
regulations) from the provisions of subsection (a) or (b) or both
-
(A) educational organizations described in section
170(b)(1)(A)(ii), and
(B) any other class of organizations with respect to which
the Secretary determines that full compliance with the
provisions of subsections (a) and (b) is not necessary to the
efficient administration of the provisions of this title
relating to private foundations.
(d) Disallowance of certain charitable, etc., deductions
(1) Gift or bequest to organizations subject to section 507(c)
tax
No gift or bequest made to an organization upon which the tax
provided by section 507(c) has been imposed shall be allowed as a
deduction under section 170, 545(b)(2), 556(b)(2), 642(c), 2055,
2106(a)(2), or 2522, if such gift or bequest is made -
(A) by any person after notification is made under section
507(a), or
(B) by a substantial contributor (as defined in section
507(d)(2)) in his taxable year which includes the first day on
which action is taken by such organization which culminates in
the imposition of tax under section 507(c) and any subsequent
taxable year.
(2) Gift or bequest to taxable private foundation, section 4947
trust, etc.
No gift or bequest made to an organization shall be allowed as
a deduction under section 170, 545(b)(2), 556(b)(2), 642(c),
2055, 2106(a)(2), or 2522, if such gift or bequest is made -
(A) to a private foundation or a trust described in section
4947 in a taxable year for which it fails to meet the
requirements of subsection (e) (determined without regard to
subsection (e)(2)), or
(B) to any organization in a period for which it is not
treated as an organization described in section 501(c)(3) by
reason of subsection (a).
(3) Exception
Paragraph (1) shall not apply if the entire amount of the
unpaid portion of the tax imposed by section 507(c) is abated by
the Secretary under section 507(g).
(e) Governing instruments
(1) General rule
A private foundation shall not be exempt from taxation under
section 501(a) unless its governing instrument includes
provisions the effects of which are -
(A) to require its income for each taxable year to be
distributed at such time and in such manner as not to subject
the foundation to tax under section 4942, and
(B) to prohibit the foundation from engaging in any act of
self-dealing (as defined in section 4941(d)), from retaining
any excess business holdings (as defined in section 4943(c)),
from making any investments in such manner as to subject the
foundation to tax under section 4944, and from making any
taxable expenditures (as defined in section 4945(d)).
(2) Special rules for existing private foundations
In the case of any organization organized before January 1,
1970, paragraph (1) shall not apply -
(A) to any period after December 31, 1971, during the
pendency of any judicial proceeding begun before January 1,
1972, by the private foundation which is necessary to reform,
or to excuse such foundation from compliance with, its
governing instrument or any other instrument in order to meet
the requirements of paragraph (1), and
(B) to any period after the termination of any judicial
proceeding described in subparagraph (A) during which its
governing instrument or any other instrument does not permit it
to meet the requirements of paragraph (1).
-SOURCE-
(Added Pub. L. 91-172, title I, Sec. 101(a), Dec. 30, 1969, 83
Stat. 494; amended Pub. L. 94-455, title XIX, Secs. 1901(a)(71),
(b)(8)(E), 1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1776, 1794,
1834.)
-MISC1-
AMENDMENTS
1976 - Subsec. (a). Pub. L. 94-455, Sec. 1901(a)(71)(A), struck
out last sentence providing that for purposes of paragraph (2), the
time prescribed for giving notice under this subsection shall not
expire before the 90th day after the day on which regulations first
prescribed under this subsection become final.
Subsec. (a)(1), (2). Pub. L. 94-455, Sec. 1906(b)(13)(A), struck
out "or his delegate" in three places after "Secretary".
Subsec. (b). Pub. L. 94-455, Secs. 1901(a)(71)(A),
1906(b)(13)(A), struck out "or his delegate" in two places after
"Secretary" and "The time prescribed for giving notice under this
subsection shall not expire before the 90th day after the day on
which regulations first prescribed under this subsection become
final" after "a private foundation".
Subsec. (c)(2). Pub. L. 94-455, Sec. 1906(b)(13)(A), struck out
"or his delegate" after "Secretary".
Subsec. (c)(2)(A). Pub. L. 94-455, Sec. 1901(b)(8)(E),
substituted "(A) educational organizations described in section
170(b)(1)(A)(ii), and" for "(A) educational organizations which
normally maintain a regular faculty and curriculum and normally
have a regularly enrolled body of pupils or students in attendance
at the place where their educational activities are regularly
carried on; and" after "(b) or both - ".
Subsec. (c)(2)(B). Pub. L. 94-455, Sec. 1906(b)(13)(A), struck
out "or his delegate" after "Secretary".
Subsec. (d)(2)(A). Pub. L. 94-455, Sec. 1901(a)(71)(C),
substituted "(e)(2)" for "(e)(2)(B) and (C)" after "regard to
subsection".
Subsec. (d)(3). Pub. L. 94-455, Sec. 1906(b)(13)(A), struck out
"or his delegate" after "Secretary".
Subsec. (e)(2)(A). Pub. L. 94-455, Sec. 1901(a)(71)(B), struck
out subpar. (A) relating to taxable years beginning before 1972,
and redesignated subpars. (B) and (C) as (A) and (B), respectively.
Subsec. (e)(2)(B). Pub. L. 94-455, Sec. 1901(a)(71)(B),
redesignated subpar. (C) as (B) and substituted "(A)" for "(B)"
after "described in subparagraph".
Subsec. (e)(2)(C). Pub. L. 94-455, Sec. 1901(a)(71)(B),
redesignated subpar. (C) as (B).
EFFECTIVE DATE OF 1976 AMENDMENT
Amendment by section 1901(a)(71)(A)-(C), (b)(8)(E) of Pub. L.
94-455 applicable with respect to taxable years beginning after
Dec. 31, 1976, see section 1901(d) of Pub. L. 94-455, set out as a
note under section 2 of this title.
EFFECTIVE DATE
Section effective Jan. 1, 1970, except that subsecs. (a), (b),
and (c) effective Oct. 9, 1969, see section 101(k)(1), (3) of Pub.
L. 91-172, set out as a note under section 4940 of this title.
SAVINGS PROVISION
Limits on inclusion of provisions inconsistent with subsec. (e)
of this section in governing instruments, see section 101(l)(6) of
Pub. L. 91-172, set out as a note under section 4940 of this title.
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 170, 663, 681, 2055,
2522, 4947, 4948, 6104 of this title.
-End-
-CITE-
26 USC Sec. 509 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter F - Exempt Organizations
PART II - PRIVATE FOUNDATIONS
-HEAD-
Sec. 509. Private foundation defined
-STATUTE-
(a) General rule
For purposes of this title, the term "private foundation" means a
domestic or foreign organization described in section 501(c)(3)
other than -
(1) an organization described in section 170(b)(1)(A) (other
than in clauses (vii) and (viii));
(2) an organization which -
(A) normally receives more than one-third of its support in
each taxable year from any combination of -
(i) gifts, grants, contributions, or membership fees, and
(ii) gross receipts from admissions, sales of merchandise,
performance of services, or furnishing of facilities, in an
activity which is not an unrelated trade or business (within
the meaning of section 513), not including such receipts from
any person, or from any bureau or similar agency of a
governmental unit (as described in section 170(c)(1)), in any
taxable year to the extent such receipts exceed the greater
of $5,000 or 1 percent of the organization's support in such
taxable year,
from persons other than disqualified persons (as defined in
section 4946) with respect to the organization, from
governmental units described in section 170(c)(1), or from
organizations described in section 170(b)(1)(A) (other than in
clauses (vii) and (viii)), and
(B) normally receives not more than one-third of its support
in each taxable year from the sum of -
(i) gross investment income (as defined in subsection (e))
and
(ii) the excess (if any) of the amount of the unrelated
business taxable income (as defined in section 512) over the
amount of the tax imposed by section 511;
(3) an organization which -
(A) is organized, and at all times thereafter is operated,
exclusively for the benefit of, to perform the functions of, or
to carry out the purposes of one or more specified
organizations described in paragraph (1) or (2),
(B) is operated, supervised, or controlled by or in
connection with one or more organizations described in
paragraph (1) or (2), and
(C) is not controlled directly or indirectly by one or more
disqualified persons (as defined in section 4946) other than
foundation managers and other than one or more organizations
described in paragraph (1) or (2); and
(4) an organization which is organized and operated exclusively
for testing for public safety.
For purposes of paragraph (3), an organization described in
paragraph (2) shall be deemed to include an organization described
in section 501(c)(4), (5), or (6) which would be described in
paragraph (2) if it were an organization described in section
501(c)(3).
(b) Continuation of private foundation status
For purposes of this title, if an organization is a private
foundation (within the meaning of subsection (a)) on October 9,
1969, or becomes a private foundation on any subsequent date, such
organization shall be treated as a private foundation for all
periods after October 9, 1969, or after such subsequent date,
unless its status as such is terminated under section 507.
(c) Status of organization after termination of private foundation
status
For purposes of this part, an organization the status of which as
a private foundation is terminated under section 507 shall (except
as provided in section 507(b)(2)) be treated as an organization
created on the day after the date of such termination.
(d) Definition of support
For purposes of this part and chapter 42, the term "support"
includes (but is not limited to) -
(1) gifts, grants, contributions, or membership fees,
(2) gross receipts from admissions, sales of merchandise,
performance of services, or furnishing of facilities in any
activity which is not an unrelated trade or business (within the
meaning of section 513),
(3) net income from unrelated business activities, whether or
not such activities are carried on regularly as a trade or
business,
(4) gross investment income (as defined in subsection (e)),
(5) tax revenues levied for the benefit of an organization and
either paid to or expended on behalf of such organization, and
(6) the value of services or facilities (exclusive of services
or facilities generally furnished to the public without charge)
furnished by a governmental unit referred to in section 170(c)(1)
to an organization without charge.
Such term does not include any gain from the sale or other
disposition of property which would be considered as gain from the
sale or exchange of a capital asset, or the value of exemption from
any Federal, State, or local tax or any similar benefit.
(e) Definition of gross investment income
For purposes of subsection (d), the term "gross investment
income" means the gross amount of income from interest, dividends,
payments with respect to securities loans (as defined in section
512(a)(5)), rents, and royalties, but not including any such income
to the extent included in computing the tax imposed by section 511.
-SOURCE-
(Added Pub. L. 91-172, title I, Sec. 101(a), Dec. 30, 1969, 83
Stat. 496; amended Pub. L. 94-81, Sec. 3(a), Aug. 9, 1975, 89 Stat.
418; Pub. L. 95-345, Sec. 2(a)(1), Aug. 15, 1978, 92 Stat. 481.)
-MISC1-
AMENDMENTS
1978 - Subsec. (e). Pub. L. 95-345 inserted provision relating to
payments with respect to securities loans.
1975 - Subsec. (a)(2)(B). Pub. L. 94-81 designated existing
provisions as cl. (i) and added cl. (ii).
EFFECTIVE DATE OF 1978 AMENDMENT
Section 2(e) of Pub. L. 95-345, as amended by Pub. L. 99-514,
Sec. 2, Oct. 22, 1986, 100 Stat. 2095, provided that: "The
amendments made by this section [enacting section 1058 of this
title and amending sections 509, 512, 514, 851, and 4940 of this
title] apply with respect to -
"(1) amounts received after December 31, 1976, as payments with
respect to securities loans (as defined in section 512(a)(5) of
the Internal Revenue Code of 1986 [formerly I.R.C. 1954]), and
"(2) transfers of securities, under agreements described in
section 1058 of such Code, occurring after such date."
EFFECTIVE DATE OF 1975 AMENDMENT
Section 3(b) of Pub. L. 94-81 provided that: "The amendment made
by this section [amending this section] shall apply to unrelated
business taxable income derived from trades and businesses which
are acquired by the organization after June 30, 1975."
EFFECTIVE DATE
Section effective Jan. 1, 1970, see section 101(k)(1) of Pub. L.
91-172, set out as a note under section 4940 of this title.
SAVINGS PROVISION
Applicability of subsec. (a) of this section to testamentary
trusts, see section 101(l)(7) of Pub. L. 91-172, set out as a note
under section 4940 of this title.
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 170, 501, 507, 508, 514,
527, 542, 2055, 2503, 3121, 4940, 4942, 4945, 4947, 4958, 6033,
6043, 6104, 6111, 7428 of this title; title 16 sections 3838h,
3838q; title 42 section 410.
-End-
-CITE-
26 USC PART III - TAXATION OF BUSINESS INCOME OF CERTAIN
EXEMPT ORGANIZATIONS 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter F - Exempt Organizations
PART III - TAXATION OF BUSINESS INCOME OF CERTAIN EXEMPT
ORGANIZATIONS
-HEAD-
PART III - TAXATION OF BUSINESS INCOME OF CERTAIN EXEMPT
ORGANIZATIONS
-MISC1-
Sec.
511. Imposition of tax on unrelated business income of
charitable organizations, etc.(!1)
512. Unrelated business taxable income.
513. Unrelated trade or business.
514. Unrelated debt-financed income.
515. Taxes of foreign countries and possessions of the
United States.
AMENDMENTS
1969 - Pub. L. 91-172, title I, Secs. 101(a), 121(d)(3)(C), Dec.
30, 1969, 83 Stat. 492, 548, substituted "PART III" for "PART II"
as part designation and substituted "Unrelated debt-financed
income" for "Business leases" in item 514.
-SECREF-
PART REFERRED TO IN OTHER SECTIONS
This part is referred to in sections 501, 664 of this title.
-FOOTNOTE-
(!1) So in original. Does not conform to section catchline.
-End-
-CITE-
26 USC Sec. 511 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter F - Exempt Organizations
PART III - TAXATION OF BUSINESS INCOME OF CERTAIN EXEMPT
ORGANIZATIONS
-HEAD-
Sec. 511. Imposition of tax on unrelated business income of
charitable, etc., organizations
-STATUTE-
(a) Charitable, etc., organizations taxable at corporation rates
(1) Imposition of tax
There is hereby imposed for each taxable year on the unrelated
business taxable income (as defined in section 512) of every
organization described in paragraph (2) a tax computed as
provided in section 11. In making such computation for purposes
of this section, the term "taxable income" as used in section 11
shall be read as "unrelated business taxable income".
(2) Organizations subject to tax
(A) Organizations described in sections 401(a) and 501(c)
The tax imposed by paragraph (1) shall apply in the case of
any organization (other than a trust described in subsection
(b) or an organization described in section 501(c)(1)) which is
exempt, except as provided in this part or part II (relating to
private foundations), from taxation under this subtitle by
reason of section 501(a).
(B) State colleges and universities
The tax imposed by paragraph (1) shall apply in the case of
any college or university which is an agency or instrumentality
of any government or any political subdivision thereof, or
which is owned or operated by a government or any political
subdivision thereof, or by any agency or instrumentality of one
or more governments or political subdivisions. Such tax shall
also apply in the case of any corporation wholly owned by one
or more such colleges or universities.
(b) Tax on charitable, etc., trusts
(1) Imposition of tax
There is hereby imposed for each taxable year on the unrelated
business taxable income of every trust described in paragraph (2)
a tax computed as provided in section 1(e). In making such
computation for purposes of this section, the term "taxable
income" as used in section 1 shall be read as "unrelated business
taxable income" as defined in section 512.
(2) Charitable, etc., trusts subject to tax
The tax imposed by paragraph (1) shall apply in the case of any
trust which is exempt, except as provided in this part or part II
(relating to private foundations), from taxation under this
subtitle by reason of section 501(a) and which, if it were not
for such exemption, would be subject to subchapter J (sec. 641
and following, relating to estates, trusts, beneficiaries, and
decedents).
(c) Special rule for section 501(c)(2) corporations
If a corporation described in section 501(c)(2) -
(1) pays any amount of its net income for a taxable year to an
organization exempt from taxation under section 501(a) (or which
would pay such an amount but for the fact that the expenses of
collecting its income exceed its income), and
(2) such corporation and such organization file a consolidated
return for the taxable year,
such corporation shall be treated, for purposes of the tax imposed
by subsection (a), as being organized and operated for the same
purposes as such organization, in addition to the purposes
described in section 501(c)(2).
-SOURCE-
(Aug. 16, 1954, ch. 736, 68A Stat. 169; Pub. L. 86-667, Sec. 3,
July 14, 1960, 74 Stat. 535; Pub. L. 89-352, Sec. 2, Feb. 2, 1966,
80 Stat. 4; Pub. L. 91-172, title I, Sec. 121(a)(1)-(3), title III,
Sec. 301(b)(8), title VIII, Sec. 803(d)(2), Dec. 30, 1969, 83 Stat.
536, 585, 684; Pub. L. 95-30, title I, Sec. 101(d)(6), May 23,
1977, 91 Stat. 133; Pub. L. 95-600, title III, Sec. 301(b)(5),
title IV, Sec. 421(e)(3), Nov. 6, 1978, 92 Stat. 2821, 2876; Pub.
L. 97-248, title II, Sec. 201(d)(5), formerly Sec. 201(c)(5), Sept.
3, 1982, 96 Stat. 419, renumbered Sec. 201(d)(5), Pub. L. 97-448,
title III, Sec. 306(a)(1)(A)(i), Jan. 12, 1983, 96 Stat. 2400; Pub.
L. 100-647, title I, Sec. 1007(g)(6), Nov. 10, 1988, 102 Stat.
3435.)
-MISC1-
AMENDMENTS
1988 - Subsec. (d). Pub. L. 100-647 struck out subsec. (d) which
read as follows: "Tax Preferences. -
"(1) Organizations taxable at corporate rates. - If an
organization is subject to tax on unrelated business taxable
income pursuant to subsection (a), the tax imposed by section 56
shall apply to such organizations with respect to items of tax
preference which enter into the computation of unrelated business
taxable income in the same manner as section 56 applies to
corporations.
"(2) Organizations taxable as trusts. - If an organization is
subject to tax on unrelated business taxable income pursuant to
subsection (b), the taxes imposed by section 55 shall apply to
such organization with respect to items of tax preference which
enter into the computation of unrelated business taxable income."
1982 - Subsec. (d)(2). Pub. L. 97-248 substituted "section 55"
for "section 55 and section 56 (as the case may be)".
1978 - Subsec. (a)(1). Pub. L. 95-600, Sec. 301(b)(5)(A),
substituted "a tax" for "a normal tax and a surtax".
Subsec. (a)(2). Pub. L. 95-600, Sec. 301(b)(5)(B), substituted
"tax" for "taxes" wherever appearing.
Subsec. (d). Pub. L. 95-600, Sec. 421(e)(3), substituted
provisions relating to organizations taxable at corporate rates and
organizations taxable as trusts, for provisions relating to
imposition of the tax imposed by section 56 of this title to an
organization subject to tax under this section for tax preferences
computed in unrelated business taxable income.
1977 - Subsec. (b)(1). Pub. L. 95-30 substituted "section 1(e)"
for "section 1(d)".
1969 - Subsec. (a)(2)(A). Pub. L. 91-172, Sec. 121(a)(1), removed
reference, in heading, to pars. (2), (3), (5), (6), (14)(B), (C),
and (17) of section 501(c) of this title, and, in text, struck out
exemptions to churches, conventions, or associations of churches,
from the imposition of tax on their unrelated business income, made
corporations organized under section 501(c)(1) of this title (i.e.
organized under Acts of Congress), exempt from such tax, but made
all such exemptions subservient to the exceptions in part II and
section 501(a) of this title.
Subsec. (b)(1). Pub. L. 91-172, Sec. 803(d)(2), substituted
section 1(d) for section 1 in reference to section under which the
computation of the tax dealing with the imposition of tax on the
unrelated business taxable income of trusts, is computed.
Subsec. (b)(2). Pub. L. 91-172, Sec. 121(a)(2), pluralized
"trust" in heading and in text made the imposition of tax on the
unrelated business income of exempt trusts subject to provisions of
part II, and, for purposes of determining trusts exempt from
taxation, substituted reference to section 501(a) for reference to
"section 501(c)(3) or (17) or section 401(a)".
Subsec. (c). Pub. L. 91-172, Sec. 121(a)(3), added subsec. (c).
Former subsec. (c), covering the effective date, was struck out.
Subsec. (d). Pub. L. 91-172, Sec. 301(b)(8), added subsec. (d).
1966 - Subsec. (a)(2)(A). Pub. L. 89-352 inserted "(14)(B) or
(C)," after "(6)," in heading and in text.
1960 - Subsec. (a)(2). Pub. L. 86-667, Sec. 3(a), included
organizations described in section 501(c)(17) within subpar. (A).
Subsec. (b). Pub. L. 86-667, Sec. 3(b), inserted a reference to
section 501(c)(17).
EFFECTIVE DATE OF 1988 AMENDMENT
Amendment by Pub. L. 100-647 effective, except as otherwise
provided, as if included in the provision of the Tax Reform Act of
1986, Pub. L. 99-514, to which such amendment relates, see section
1019(a) of Pub. L. 100-647, set out as a note under section 1 of
this title.
EFFECTIVE DATE OF 1982 AMENDMENT
Amendment by Pub. L. 97-248 applicable to taxable years beginning
after Dec. 31, 1982, see section 201(e)(1) of Pub. L. 97-248, set
out as a note under section 5 of this title.
EFFECTIVE DATE OF 1978 AMENDMENT
Amendment by section 301(b)(5)(A), (B) of Pub. L. 95-600
applicable to taxable years beginning after Dec. 31, 1978, see
section 301(c) of Pub. L. 95-600, set out as a note under section
11 of this title.
Amendment by section 421(e)(3) of Pub. L. 95-600 applicable to
taxable years beginning after Dec. 31, 1978, see section 421(g) of
Pub. L. 95-600, set out as a note under section 5 of this title.
EFFECTIVE DATE OF 1977 AMENDMENT
Amendment by Pub. L. 95-30 applicable to taxable years beginning
after Dec. 31, 1976, see section 106(a) of Pub. L. 95-30, set out
as a note under section 1 of this title.
EFFECTIVE DATE OF 1969 AMENDMENT
Section 121(g) of Pub. L. 91-172, as amended by Pub. L. 99-514,
Sec. 2, Oct. 22, 1986, 100 Stat. 2095, provided that: "The
amendments made by this section [amending this section and sections
48, 501, 502, 503, 512 to 514, 681, 801, 810, 1443, 1504, and 7605
of this title] (other than by subsections (b)(3) and (e) [enacting
sections 277 and 6050 of this title]) shall apply to taxable years
beginning after December 31, 1969. The amendments made by
subsection (b)(3) [enacting section 277 of this title] shall apply
to taxable years beginning after December 31, 1970. The amendments
made by subsection (e) [enacting section 6050 of this title] shall
apply with respect to transfers of property after December 31,
1969. Where an organization makes a bargain purchase of property
before October 9, 1969, which is subject to a mortgage which was
placed on the property more than 5 years before the purchase, and
the organization paid the seller a total amount no greater than the
amount of the seller's cost (including attorneys' fees) directly
related to the transfer of such property to the organization (but
in any event no more than 10 percent of the value of the seller's
equity in the property), the indebtedness secured by such mortgage
shall not be treated, notwithstanding the amendments made by
subsection (d)(1) [amending section 514 of this title], as
acquisition indebtedness for purposes of section 514(c)(1) of the
Internal Revenue Code of 1986 [formerly I.R.C. 1954] during a
period of 10 years following the date of the transaction."
Amendment by section 301(b)(8) of Pub. L. 91-172 applicable to
taxable years ending after Dec. 31, 1969, see section 301(c) of
Pub. L. 91-172, set out as a note under section 5 of this title.
Amendment by section 803(d)(2) of Pub. L. 91-172 applicable to
taxable years beginning after Dec. 31, 1970, see section 803(f) of
Pub. L. 91-172, set out as a note under section 1 of this title.
EFFECTIVE DATE OF 1966 AMENDMENT
Section 3 of Pub. L. 89-352 provided in part that: "The amendment
made by section 2 [amending this section] shall apply to taxable
years beginning after the date of the enactment of this Act [Feb.
2, 1966]."
EFFECTIVE DATE OF 1960 AMENDMENT
Amendment by Pub. L. 86-667 applicable to taxable years beginning
after Dec. 31, 1959, see section 6 of Pub. L. 86-667, set out as a
note under section 501 of this title.
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 11, 12, 50, 168, 220,
223, 337, 408, 448, 501, 509, 512, 513, 514, 515, 527, 529, 530,
772, 856, 860E, 904, 995, 1201, 1245, 1250, 1443, 1563, 2651, 4940,
6654, 6655, 7611, 7871 of this title.
-End-
-CITE-
26 USC Sec. 512 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter F - Exempt Organizations
PART III - TAXATION OF BUSINESS INCOME OF CERTAIN EXEMPT
ORGANIZATIONS
-HEAD-
Sec. 512. Unrelated business taxable income
-STATUTE-
(a) Definition
For purposes of this title -
(1) General rule
Except as otherwise provided in this subsection, the term
"unrelated business taxable income" means the gross income
derived by any organization from any unrelated trade or business
(as defined in section 513) regularly carried on by it, less the
deductions allowed by this chapter which are directly connected
with the carrying on of such trade or business, both computed
with the modifications provided in subsection (b).
(2) Special rule for foreign organizations
In the case of an organization described in section 511 which
is a foreign organization, the unrelated business taxable income
shall be -
(A) its unrelated business taxable income which is derived
from sources within the United States and which is not
effectively connected with the conduct of a trade or business
within the United States, plus
(B) its unrelated business taxable income which is
effectively connected with the conduct of a trade or business
within the United States.
(3) Special rules applicable to organizations described in
paragraph (7), (9), (17), or (20) of section 501(c)
(A) General rule
In the case of an organization described in paragraph (7),
(9), (17), or (20) of section 501(c), the term "unrelated
business taxable income" means the gross income (excluding any
exempt function income), less the deductions allowed by this
chapter which are directly connected with the production of the
gross income (excluding exempt function income), both computed
with the modifications provided in paragraphs (6), (10), (11),
and (12) of subsection (b). For purposes of the preceding
sentence, the deductions provided by sections 243, 244, and 245
(relating to dividends received by corporations) shall be
treated as not directly connected with the production of gross
income.
(B) Exempt function income
For purposes of subparagraph (A), the term "exempt function
income" means the gross income from dues, fees, charges, or
similar amounts paid by members of the organization as
consideration for providing such members or their dependents or
guests goods, facilities, or services in furtherance of the
purposes constituting the basis for the exemption of the
organization to which such income is paid. Such term also means
all income (other than an amount equal to the gross income
derived from any unrelated trade or business regularly carried
on by such organization computed as if the organization were
subject to paragraph (1)), which is set aside -
(i) for a purpose specified in section 170(c)(4), or
(ii) in the case of an organization described in paragraph
(9), (17), or (20) of section 501(c), to provide for the
payment of life, sick, accident, or other benefits,
including reasonable costs of administration directly connected
with a purpose described in clause (i) or (ii). If during the
taxable year, an amount which is attributable to income so set
aside is used for a purpose other than that described in clause
(i) or (ii), such amount shall be included, under subparagraph
(A), in unrelated business taxable income for the taxable year.
(C) Applicability to certain corporations described in section
501(c)(2)
In the case of a corporation described in section 501(c)(2),
the income of which is payable to an organization described in
paragraph (7), (9), (17), or (20) of section 501(c),
subparagraph (A) shall apply as if such corporation were the
organization to which the income is payable. For purposes of
the preceding sentence, such corporation shall be treated as
having exempt function income for a taxable year only if it
files a consolidated return with such organization for such
year.
(D) Nonrecognition of gain
If property used directly in the performance of the exempt
function of an organization described in paragraph (7), (9),
(17), or (20) of section 501(c) is sold by such organization,
and within a period beginning 1 year before the date of such
sale, and ending 3 years after such date, other property is
purchased and used by such organization directly in the
performance of its exempt function, gain (if any) from such
sale shall be recognized only to the extent that such
organization's sales price of the old property exceeds the
organization's cost of purchasing the other property. For
purposes of this subparagraph, the destruction in whole or in
part, theft, seizure, requisition, or condemnation of property,
shall be treated as the sale of such property, and rules
similar to the rules provided by subsections (b), (c), (e), and
(j) of section 1034 (as in effect on the day before the date of
the enactment of the Taxpayer Relief Act of 1997) shall apply.
(E) Limitation on amount of setaside in the case of
organizations described in paragraph (9), (17), or (20) of
section 501(c)
(i) In general
In the case of any organization described in paragraph (9),
(17), or (20) of section 501(c), a set-aside for any purpose
specified in clause (ii) of subparagraph (B) may be taken
into account under subparagraph (B) only to the extent that
such set-aside does not result in an amount of assets set
aside for such purpose in excess of the account limit
determined under section 419A (without regard to subsection
(f)(6) thereof) for the taxable year (not taking into account
any reserve described in section 419A(c)(2)(A) for
post-retirement medical benefits).
(ii) Treatment of existing reserves for post-retirement
medical or life insurance benefits
(I) Clause (i) shall not apply to any income attributable
to an existing reserve for post-retirement medical or life
insurance benefits.
(II) For purposes of subclause (I), the term "reserve for
post-retirement medical or life insurance benefits" means
the greater of the amount of assets set aside for purposes
of post-retirement medical or life insurance benefits to be
provided to covered employees as of the close of the last
plan year ending before the date of the enactment of the
Tax Reform Act of 1984 or on July 18, 1984.
(III) All payments during plan years ending on or after
the date of the enactment of the Tax Reform Act of 1984 of
post-retirement medical benefits or life insurance benefits
shall be charged against the reserve referred to in
subclause (II). Except to the extent provided in
regulations prescribed by the Secretary, all plans of an
employer shall be treated as 1 plan for purposes of the
preceding sentence.
(iii) Treatment of tax exempt organizations
This subparagraph shall not apply to any organization if
substantially all of the contributions to such organization
are made by employers who were exempt from tax under this
chapter throughout the 5-taxable year period ending with the
taxable year in which the contributions are made.
(4) Special rule applicable to organizations described in section
501(c)(19)
In the case of an organization described in section 501(c)(19),
the term "unrelated business taxable income" does not include any
amount attributable to payments for life, sick, accident, or
health insurance with respect to members of such organizations or
their dependents which is set aside for the purpose of providing
for the payment of insurance benefits or for a purpose specified
in section 170(c)(4). If an amount set aside under the preceding
sentence is used during the taxable year for a purpose other than
a purpose described in the preceding sentence, such amount shall
be included, under paragraph (1), in unrelated business taxable
income for the taxable year.
(5) Definition of payments with respect to securities loans
(A) The term "payments with respect to securities loans"
includes all amounts received in respect of a security (as
defined in section 1236(c)) transferred by the owner to another
person in a transaction to which section 1058 applies (whether
or not title to the security remains in the name of the lender)
including -
(i) amounts in respect of dividends, interest, or other
distributions,
(ii) fees computed by reference to the period beginning
with the transfer of securities by the owner and ending with
the transfer of identical securities back to the transferor
by the transferee and the fair market value of the security
during such period,
(iii) income from collateral security for such loan, and
(iv) income from the investment of collateral security.
(B) Subparagraph (A) shall apply only with respect to
securities transferred pursuant to an agreement between the
transferor and the transferee which provides for -
(i) reasonable procedures to implement the obligation of
the transferee to furnish to the transferor, for each
business day during such period, collateral with a fair
market value not less than the fair market value of the
security at the close of business on the preceding business
day,
(ii) termination of the loan by the transferor upon notice
of not more than 5 business days, and
(iii) return to the transferor of securities identical to
the transferred securities upon termination of the loan.
(b) Modifications
The modifications referred to in subsection (a) are the
following:
(1) There shall be excluded all dividends, interest, payments
with respect to securities loans (as defined in section
512(a)(5)), amounts received or accrued as consideration for
entering into agreements to make loans, and annuities, and all
deductions directly connected with such income.
(2) There shall be excluded all royalties (including overriding
royalties) whether measured by production or by gross or taxable
income from the property, and all deductions directly connected
with such income.
(3) In the case of rents -
(A) Except as provided in subparagraph (B), there shall be
excluded -
(i) all rents from real property (including property
described in section 1245(a)(3)(C)), and
(ii) all rents from personal property (including for
purposes of this paragraph as personal property any property
described in section 1245(a)(3)(B)) leased with such real
property, if the rents attributable to such personal property
are an incidental amount of the total rents received or
accrued under the lease, determined at the time the personal
property is placed in service.
(B) Subparagraph (A) shall not apply -
(i) if more than 50 percent of the total rent received or
accrued under the lease is attributable to personal property
described in subparagraph (A)(ii), or
(ii) if the determination of the amount of such rent
depends in whole or in part on the income or profits derived
by any person from the property leased (other than an amount
based on a fixed percentage or percentages of receipts or
sales).
(C) There shall be excluded all deductions directly connected
with rents excluded under subparagraph (A).
(4) Notwithstanding paragraph (1), (2), (3), or (5), in the
case of debt-financed property (as defined in section 514) there
shall be included, as an item of gross income derived from an
unrelated trade or business, the amount ascertained under section
514(a)(1), and there shall be allowed, as a deduction, the amount
ascertained under section 514(a)(2).
(5) There shall be excluded all gains or losses from the sale,
exchange, or other disposition of property other than -
(A) stock in trade or other property of a kind which would
properly be includible in inventory if on hand at the close of
the taxable year, or
(B) property held primarily for sale to customers in the
ordinary course of the trade or business.
There shall also be excluded all gains or losses recognized, in
connection with the organization's investment activities, from
the lapse or termination of options to buy or sell securities (as
defined in section 1236(c)) or real property and all gains or
losses from the forfeiture of good-faith deposits (that are
consistent with established business practice) for the purchase,
sale, or lease of real property in connection with the
organization's investment activities. This paragraph shall not
apply with respect to the cutting of timber which is considered,
on the application of section 631, as a sale or exchange of such
timber.
(6) The net operating loss deduction provided in section 172
shall be allowed, except that -
(A) the net operating loss for any taxable year, the amount
of the net operating loss carryback or carryover to any taxable
year, and the net operating loss deduction for any taxable year
shall be determined under section 172 without taking into
account any amount of income or deduction which is excluded
under this part in computing the unrelated business taxable
income; and
(B) the terms "preceding taxable year" and "preceding taxable
years" as used in section 172 shall not include any taxable
year for which the organization was not subject to the
provisions of this part.
(7) There shall be excluded all income derived from research
for (A) the United States, or any of its agencies or
instrumentalities, or (B) any State or political subdivision
thereof; and there shall be excluded all deductions directly
connected with such income.
(8) In the case of a college, university, or hospital, there
shall be excluded all income derived from research performed for
any person, and all deductions directly connected with such
income.
(9) In the case of an organization operated primarily for
purposes of carrying on fundamental research the results of which
are freely available to the general public, there shall be
excluded all income derived from research performed for any
person, and all deductions directly connected with such income.
(10) In the case of any organization described in section
511(a), the deduction allowed by section 170 (relating to
charitable etc. contributions and gifts) shall be allowed
(whether or not directly connected with the carrying on of the
trade or business), but shall not exceed 10 percent of the
unrelated business taxable income computed without the benefit of
this paragraph.
(11) In the case of any trust described in section 511(b), the
deduction allowed by section 170 (relating to charitable etc.
contributions and gifts) shall be allowed (whether or not
directly connected with the carrying on of the trade or
business), and for such purpose a distribution made by the trust
to a beneficiary described in section 170 shall be considered as
a gift or contribution. The deduction allowed by this paragraph
shall be allowed with the limitations prescribed in section
170(b)(1)(A) and (B) determined with reference to the unrelated
business taxable income computed without the benefit of this
paragraph (in lieu of with reference to adjusted gross income).
(12) Except for purposes of computing the net operating loss
under section 172 and paragraph (6), there shall be allowed a
specific deduction of $1,000. In the case of a diocese, province
of a religious order, or a convention or association of churches,
there shall also be allowed, with respect to each parish,
individual church, district, or other local unit, a specific
deduction equal to the lower of -
(A) $1,000, or
(B) the gross income derived from any unrelated trade or
business regularly carried on by such local unit.
(13) Special rules for certain amounts received from controlled
entities. -
(A) In general. - If an organization (in this paragraph
referred to as the "controlling organization") receives or
accrues (directly or indirectly) a specified payment from
another entity which it controls (in this paragraph referred to
as the "controlled entity"), notwithstanding paragraphs (1),
(2), and (3), the controlling organization shall include such
payment as an item of gross income derived from an unrelated
trade or business to the extent such payment reduces the net
unrelated income of the controlled entity (or increases any net
unrelated loss of the controlled entity). There shall be
allowed all deductions of the controlling organization directly
connected with amounts treated as derived from an unrelated
trade or business under the preceding sentence.
(B) Net unrelated income or loss. - For purposes of this
paragraph -
(i) Net unrelated income. - The term "net unrelated income"
means -
(I) in the case of a controlled entity which is not
exempt from tax under section 501(a), the portion of such
entity's taxable income which would be unrelated business
taxable income if such entity were exempt from tax under
section 501(a) and had the same exempt purposes as the
controlling organization, or
(II) in the case of a controlled entity which is exempt
from tax under section 501(a), the amount of the unrelated
business taxable income of the controlled entity.
(ii) Net unrelated loss. - The term "net unrelated loss"
means the net operating loss adjusted under rules similar to
the rules of clause (i).
(C) Specified payment. - For purposes of this paragraph, the
term "specified payment" means any interest, annuity, royalty,
or rent.
(D) Definition of control. - For purposes of this paragraph -
(i) Control. - The term "control" means -
(I) in the case of a corporation, ownership (by vote or
value) of more than 50 percent of the stock in such
corporation,
(II) in the case of a partnership, ownership of more than
50 percent of the profits interests or capital interests in
such partnership, or
(III) in any other case, ownership of more than 50
percent of the beneficial interests in the entity.
(ii) Constructive ownership. - Section 318 (relating to
constructive ownership of stock) shall apply for purposes of
determining ownership of stock in a corporation. Similar
principles shall apply for purposes of determining ownership
of interests in any other entity.
(E) Related persons. - The Secretary shall prescribe such
rules as may be necessary or appropriate to prevent avoidance
of the purposes of this paragraph through the use of related
persons.
[(14) Repealed. Pub. L. 101-508, title XI, Sec. 11801(a)(23),
Nov. 5, 1990, 104 Stat. 1388-521.]
(15) Except as provided in paragraph (4), in the case of a
trade or business -
(A) which consists of providing services under license issued
by a Federal regulatory agency,
(B) which is carried on by a religious order or by an
educational organization described in section 170(b)(1)(A)(ii)
maintained by such religious order, and which was so carried on
before May 27, 1959, and
(C) less than 10 percent of the net income of which for each
taxable year is used for activities which are not related to
the purpose constituting the basis for the religious order's
exemption,
there shall be excluded all gross income derived from such trade
or business and all deductions directly connected with the
carrying on of such trade or business, so long as it is
established to the satisfaction of the Secretary that the rates
or other charges for such services are competitive with rates or
other charges charged for similar services by persons not exempt
from taxation.
(16)(A) Notwithstanding paragraph (5)(B), there shall be
excluded all gains or losses from the sale, exchange, or other
disposition of any real property described in subparagraph (B) if
-
(i) such property was acquired by the organization from -
(I) a financial institution described in section 581 or
591(a) which is in conservatorship or receivership, or
(II) the conservator or receiver of such an institution (or
any government agency or corporation succeeding to the rights
or interests of the conservator or receiver),
(ii) such property is designated by the organization within
the 9-month period beginning on the date of its acquisition as
property held for sale, except that not more than one-half (by
value determined as of such date) of property acquired in a
single transaction may be so designated,
(iii) such sale, exchange, or disposition occurs before the
later of -
(I) the date which is 30 months after the date of the
acquisition of such property, or
(II) the date specified by the Secretary in order to assure
an orderly disposition of property held by persons described
in subparagraph (A), and
(iv) while such property was held by the organization, the
aggregate expenditures on improvements and development
activities included in the basis of the property are (or were)
not in excess of 20 percent of the net selling price of such
property.
(B) Property is described in this subparagraph if it is real
property which -
(i) was held by the financial institution at the time it
entered into conservatorship or receivership, or
(ii) was foreclosure property (as defined in section
514(c)(9)(H)(v)) which secured indebtedness held by the
financial institution at such time.
For purposes of this subparagraph, real property includes an
interest in a mortgage.
(17) Treatment of certain amounts derived from foreign
corporations. -
(A) In general. - Notwithstanding paragraph (1), any amount
included in gross income under section 951(a)(1)(A) shall be
included as an item of gross income derived from an unrelated
trade or business to the extent the amount so included is
attributable to insurance income (as defined in section 953)
which, if derived directly by the organization, would be
treated as gross income from an unrelated trade or business.
There shall be allowed all deductions directly connected with
amounts included in gross income under the preceding sentence.
(B) Exception. -
(i) In general. - Subparagraph (A) shall not apply to
income attributable to a policy of insurance or reinsurance
with respect to which the person (directly or indirectly)
insured is -
(I) such organization,
(II) an affiliate of such organization which is exempt
from tax under section 501(a), or
(III) a director or officer of, or an individual who
(directly or indirectly) performs services for, such
organization or affiliate but only if the insurance covers
primarily risks associated with the performance of services
in connection with such organization or affiliate.
(ii) Affiliate. - For purposes of this subparagraph -
(I) In general. - The determination as to whether an
entity is an affiliate of an organization shall be made
under rules similar to the rules of section 168(h)(4)(B).
(II) Special rule. - Two or more organizations (and any
affiliates of such organizations) shall be treated as
affiliates if such organizations are colleges or
universities described in section 170(b)(1)(A)(ii) or
organizations described in section 170(b)(1)(A)(iii) and
participate in an insurance arrangement that provides for
any profits from such arrangement to be returned to the
policyholders in their capacity as such.
(C) Regulations. - The Secretary shall prescribe such
regulations as may be necessary or appropriate to carry out the
purposes of this paragraph, including regulations for the
application of this paragraph in the case of income paid
through 1 or more entities or between 2 or more chains of
entities.
(c) Special rules for partnerships
(1) In general
If a trade or business regularly carried on by a partnership of
which an organization is a member is an unrelated trade or
business with respect to such organization, such organization in
computing its unrelated business taxable income shall, subject to
the exceptions, additions, and limitations contained in
subsection (b), include its share (whether or not distributed) of
the gross income of the partnership from such unrelated trade or
business and its share of the partnership deductions directly
connected with such gross income.
(2) Special rule where partnership year is different from
organization's year
If the taxable year of the organization is different from that
of the partnership, the amounts to be included or deducted in
computing the unrelated business taxable income under paragraph
(1) shall be based upon the income and deductions of the
partnership for any taxable year of the partnership ending within
or with the taxable year of the organization.
(d) Treatment of dues of agricultural or horticultural
organizations
(1) In general
If -
(A) an agricultural or horticultural organization described
in section 501(c)(5) requires annual dues to be paid in order
to be a member of such organization, and
(B) the amount of such required annual dues does not exceed
$100,
in no event shall any portion of such dues be treated as derived
by such organization from an unrelated trade or business by
reason of any benefits or privileges to which members of such
organization are entitled.
(2) Indexation of $100 amount
In the case of any taxable year beginning in a calendar year
after 1995, the $100 amount in paragraph (1) shall be increased
by an amount equal to -
(A) $100, multiplied by
(B) the cost-of-living adjustment determined under section
1(f)(3) for the calendar year in which the taxable year begins,
by substituting "calendar year 1994" for "calendar year 1992"
in subparagraph (B) thereof.
(3) Dues
For purposes of this subsection, the term "dues" means any
payment (whether or not designated as dues) which is required to
be made in order to be recognized by the organization as a member
of the organization.
(e) Special rules applicable to S corporations
(1) In general
If an organization described in section 1361(c)(6) holds stock
in an S corporation -
(A) such interest shall be treated as an interest in an
unrelated trade or business, and
(B) notwithstanding any other provision of this part -
(i) all items of income, loss, or deduction taken into
account under section 1366(a), and
(ii) any gain or loss on the disposition of the stock in
the S corporation,
shall be taken into account in computing the unrelated business
taxable income of such organization.
(2) Basis reduction
Except as provided in regulations, for purposes of paragraph
(1), the basis of any stock acquired by purchase (as defined in
section 1361(e)(1)(C)) shall be reduced by the amount of any
dividends received by the organization with respect to the stock.
(3) Exception for ESOPs
This subsection shall not apply to employer securities (within
the meaning of section 409(l)) held by an employee stock
ownership plan described in section 4975(e)(7).
-SOURCE-
(Aug. 16, 1954, ch. 736, 68A Stat. 170; Pub. L. 85-367, Sec. 1(a),
Apr. 7, 1958, 72 Stat. 80; Pub. L. 88-380, Sec. 1, July 17, 1964,
78 Stat. 333; Pub. L. 89-809, title I, Sec. 104(g), Nov. 13, 1966,
80 Stat. 1559; Pub. L. 91-172, title I, Sec. 121(b)(1), (2), Dec.
30, 1969, 83 Stat. 537, 538; Pub. L. 92-418, Sec. 1(b), Aug. 29,
1972, 86 Stat. 656; Pub. L. 94-396, Sec. 1(a), Sept. 3, 1976, 90
Stat. 1201; Pub. L. 94-455, title XIX, Secs. 1901(b)(8)(F),
1906(b)(13)(A), 1951(b)(8)(A), Oct. 4, 1976, 90 Stat. 1794, 1834,
1839; Pub. L. 94-568, Sec. 1(b), Oct. 20, 1976, 90 Stat. 2697; Pub.
L. 95-345, Sec. 2(a)(2), (b), Aug. 15, 1978, 92 Stat. 481; Pub. L.
97-448, title I, Sec. 102(m)(3), Jan. 12, 1983, 96 Stat. 2374; Pub.
L. 98-369, div. A, title V, Sec. 511(b), July 18, 1984, 98 Stat.
860; Pub. L. 99-514, title XVIII, Sec. 1851(a)(10), Oct. 22, 1986,
100 Stat. 2861; Pub. L. 100-203, title X, Sec. 10213(a), Dec. 22,
1987, 101 Stat. 1330-406; Pub. L. 100-647, title I, Sec.
1018(t)(2)(B), Nov. 10, 1988, 102 Stat. 3587; Pub. L. 101-508,
title XI, Sec. 11801(a)(23), Nov. 5, 1990, 104 Stat. 1388-521; Pub.
L. 103-66, title XIII, Secs. 13145(a), 13147(a), 13148(a), (b),
Aug. 10, 1993, 107 Stat. 443, 444; Pub. L. 104-188, title I, Secs.
1115(a), 1316(c), 1603(a), Aug. 20, 1996, 110 Stat. 1761, 1786,
1835; Pub. L. 105-34, title III, Sec. 312(d)(5), title X, Sec.
1041(a), title XV, Sec. 1523(a), title XVI, Sec. 1601(c)(4)(A),
(D), Aug. 5, 1997, 111 Stat. 840, 938, 1070, 1087; Pub. L. 105-206,
title VI, Secs. 6010(j)(1), (2), 6023(8), July 22, 1998, 112 Stat.
815, 825.)
-STATAMEND-
ADJUSTMENT OF AMOUNT OF ANNUAL DUES THRESHOLD FOR TAXABLE YEARS
BEGINNING IN 2004
For adjustment of maximum amount of annual dues paid to
agricultural or horticultural organizations under subsection (d)(1)
of this section for taxable years beginning in 2004, see section
3.21 of Revenue Procedure 2003-85, set out as a note under section
1 of this title.
-REFTEXT-
REFERENCES IN TEXT
The date of the enactment of the Taxpayer Relief Act of 1997,
referred to in subsec. (a)(3)(D), is the date of enactment of Pub.
L. 105-34, which was approved Aug. 5, 1997.
The date of the enactment of the Tax Reform Act of 1984, referred
to in subsec. (a)(3)(E)(ii)(II), (III), is the date of enactment of
division A of Pub. L. 98-369, which was approved July 18, 1984.
-MISC1-
AMENDMENTS
1998 - Subsec. (b)(13)(A). Pub. L. 105-206, Sec. 6010(j)(1),
inserted "or accrues" after "receives" in first sentence.
Subsec. (b)(13)(B)(i)(I). Pub. L. 105-206, Sec. 6010(j)(2),
struck out "(as defined in section 513A(a)(5)(A))" after "exempt
purposes".
Subsec. (b)(17)(B)(ii)(II). Pub. L. 105-206, Sec. 6023(8),
substituted "rule" for "Rule" in subcl. heading.
1997 - Subsec. (a)(3)(D). Pub. L. 105-34, Sec. 312(d)(5),
inserted "(as in effect on the day before the date of the enactment
of the Taxpayer Relief Act of 1997)" after "1034".
Subsec. (b)(13). Pub. L. 105-34, Sec. 1041(a), amended par. (13)
generally. Prior to amendment, par. (13) related to inclusion in
gross income of controlling organization of amounts of interest,
annuities, royalties, and rents derived from a controlled
organization.
Subsec. (e)(1). Pub. L. 105-34, Sec. 1601(c)(4)(D), substituted
"section 1361(c)(6)" for "section 1361(c)(7)".
Subsec. (e)(2). Pub. L. 105-34, Sec. 1601(c)(4)(A), substituted
"as defined in section 1361(e)(1)(C)" for "within the meaning of
section 1012".
Subsec. (e)(3). Pub. L. 105-34, Sec. 1523(a), added par. (3).
1996 - Subsec. (b)(17). Pub. L. 104-188, Sec. 1603(a), added par.
(17).
Subsec. (d). Pub. L. 104-188, Sec. 1115(a), added subsec. (d).
Subsec. (e). Pub. L. 104-188, Sec. 1316(c), added subsec. (e).
1993 - Subsec. (b)(1). Pub. L. 103-66, Sec. 13148(a), inserted
"amounts received or accrued as consideration for entering into
agreements to make loans," before "and annuities".
Subsec. (b)(5). Pub. L. 103-66, Sec. 13148(b), in second
sentence, substituted "all gains or losses recognized, in
connection with the organization's investment activities, from" for
"all gains on", struck out ", written by the organization in
connection with its investment activities," after "termination of
options", and inserted before period at end "or real property and
all gains or losses from the forfeiture of good-faith deposits
(that are consistent with established business practice) for the
purchase, sale, or lease of real property in connection with the
organization's investment activities".
Subsec. (b)(16). Pub. L. 103-66, Sec. 13147(a), added par. (16).
Subsec. (c)(2), (3). Pub. L. 103-66, Sec. 13145(a), redesignated
par. (3) as (2), substituted "paragraph (1)" for "paragraph (1) or
(2)", and struck out heading and text of former par. (2). Text read
as follows: "Notwithstanding any other provision of this section -
"(A) any organization's share (whether or not distributed) of
the gross income of a publicly traded partnership (as defined in
section 469(k)(2)) shall be treated as gross income derived from
an unrelated trade or business, and
"(B) such organization's share of the partnership deductions
shall be allowed in computing unrelated business taxable income."
1990 - Subsec. (b)(14). Pub. L. 101-508 struck out par. (14)
which read as follows: "Except as provided in paragraph (4), in the
case of a church, or convention or association of churches, for
taxable years beginning before January 1, 1976, there shall be
excluded all gross income derived from a trade or business and all
deductions directly connected with the carrying on of such trade or
business if such trade or business was carried on by such
organization or its predecessor before May 27, 1969."
1988 - Subsec. (a)(3)(E)(ii)(II). Pub. L. 100-647 substituted
"subclause (I)" for "subclause (II)" and a period for comma at end.
1987 - Subsec. (c). Pub. L. 100-203 substituted "for
partnerships" for "applicable to partnerships" in heading and
amended text generally. Prior to amendment, text read as follows:
"If a trade or business regularly carried on by a partnership of
which an organization is a member is an unrelated trade or business
with respect to such organization, such organization in computing
its unrelated business taxable income shall, subject to the
exceptions, additions, and limitations contained in subsection (b),
include its share (whether or not distributed) of the gross income
of the partnership from such unrelated trade or business and its
share of the partnership deductions directly connected with such
gross income. If the taxable year of the organization is different
from that of the partnership, the amounts to be so included or
deducted in computing the unrelated business taxable income shall
be based upon the income and deductions of the partnership for any
taxable year of the partnership ending within or with the taxable
year of the organization."
1986 - Subsec. (a)(3)(E)(i). Pub. L. 99-514, Sec. 1851(a)(10)(A),
substituted "determined under section 419A (without regard to
subsection (f)(6) thereof)" for "determined under section 419A(c)".
Subsec. (a)(3)(E)(ii). Pub. L. 99-514, Sec. 1851(a)(10)(B), (C),
redesignated cl. (iii) as (ii), in subcl. I substituted "an
existing reserve" for "a existing reserve", and substituted new
subcl. (II) for former subcl. (II) which read as follows: "For
purposes of subclause (I), the term 'existing reserve or
post-retirement medical or life insurance benefit' means the amount
of assets set aside as of the close of the last plan year ending
before the date of the enactment of the Tax Reform Act of 1984 for
purposes of post-retirement medical benefits or life insurance
benefits to be provided to covered employees." Former cl. (ii),
which provided that no set aside for assets used in the provision
of benefits described in cl. (ii) of subpar. (B), could be taken
into account, was struck out.
Subsec. (a)(3)(E)(iii), (iv). Pub. L. 99-514, Sec.
1851(a)(10)(B), (D), redesignated former cl. (iv) as (iii) and
substituted "subparagraph shall not" for "paragraph shall not".
Former cl. (iii) redesignated (ii).
1984 - Subsec. (a)(3). Pub. L. 98-369, Sec. 511(b)(1)(A),
substituted "paragraph (7), (9), (17), or (20) of section 501(c)"
for "section 501(c)(7) or (9)" wherever appearing in heading and in
text.
Subsec. (a)(3)(B)(ii). Pub. L. 98-369, Sec. 511(b)(1)(B),
substituted "paragraph (9), (17), or (20) of section 501(c)" for
"section 501(c)(9)".
Subsec. (a)(3)(C), (D). Pub. L. 98-369, Sec. 511(b)(1)(A),
substituted in subpars. (C) and (D) "paragraph (7), (9), (17), or
(20) of section 501(c)" for "section 501(c)(7) or (9)" wherever
appearing.
Subsec. (a)(3)(E). Pub. L. 98-369, Sec. 511(b)(2), added subpar.
(E).
1983 - Subsec. (b)(10). Pub. L. 97-448 substituted "10 percent"
for "5 percent".
1978 - Subsec. (a)(5). Pub. L. 95-345, Sec. 2(b), added par. (5).
Subsec. (b)(1). Pub. L. 95-345, Sec. 2(a)(2), inserted provision
relating to payments with respect to securities loans.
1976 - Subsec. (a)(3)(A). Pub. L. 94-568 provided that for
purposes of the general rule, the deductions provided by sections
243, 244, and 245 (relating to dividends received by corporations)
shall be treated as not directly connected with the production of
gross income.
Subsec. (b). Pub. L. 94-455, Sec. 1906(b)(13)(A), struck out "or
his delegate" after "Secretary".
Subsec. (b)(5). Pub. L. 94-396 inserted provision relating to
exclusion of gains on the lapse or termination of options to buy or
sell securities.
Subsec. (b)(13), (14). Pub. L. 94-455, Sec. 1951(b)(8)(A),
redesignated pars. (15) and (16) as (13) and (14), respectively.
Former pars. (13) and (14), relating to exceptions, additions, and
limitations applicable in determining unrelated business taxable
income, were struck out.
Subsec. (b)(15). Pub. L. 94-455, Secs. 1901(b)(8)(F),
1906(b)(13)(A), 1951(b)(8)(A), redesignated par. (17) as (15) and
substituted in subpar. (B) "educational organization described in
section 170(b)(1)(A)(ii)" for "educational institution (as defined
in section 151(e)(4))" after "order or by an", and struck out "or
his delegate" after "Secretary". Former par. (15) redesignated
(13).
Subsec. (b)(16), (17). Pub. L. 94-455, Sec. 1951(b)(8)(A),
redesignated pars. (16) and (17) as (14) and (15), respectively.
1972 - Subsec. (a)(4). Pub. L. 92-418 added par. (4).
1969 - Subsec. (a). Pub. L. 91-172, Sec. 121(b)(1), designated
existing provisions as pars. (1) and (2)(B) and added pars. (2)(A)
and (3).
Subsec. (b). Pub. L. 91-172, Sec. 121(b)(2)(D), substituted
"Modifications" for "Exceptions, additions, and limitations", in
heading, and, in text preceding par. (1) substituted "The
modifications referred to in subsection (a)" for "The exceptions,
additions, and limitations applicable in determining unrelated
business taxable income".
Subsec. (b)(3)(A). Pub. L. 91-172, Sec. 121(b)(2)(A), inserted
reference to exceptions set out in subsec. (b)(3)(B) in text
preceding cl. (i), substituted "property described in section
1245(a)(3)(C)" for "personal property leased with the real
property" in parenthetical of cl. (i), and added cl. (ii).
Subsec. (b)(3)(B). Pub. L. 91-172, Sec. 121(b)(2)(A), added
subpar. (B).
Subsec. (b)(3)(C). Pub. L. 91-172, Sec. 121(b)(2)(A), substituted
"rents excluded under subparagraph (A)" for "such rents".
Subsec. (b)(4). Pub. L. 91-172, Sec. 121(b)(2)(A), inserted
reference to pars. (1), (3) and (5) of this subsec., and
substituted "debt financed property" for "a business lease".
Subsec. (b)(12). Pub. L. 91-172, Sec. 121(b)(2)(B), made the
allowance of the specific $1,000 deduction inapplicable for the
purposes of computing the net operating loss under section 172 of
this title and par. (6) of this subsec., and provided for the
allowance of specific deductions equal to the lower of $1,000 or
the gross income derived from any unrelated trade or business
carried on by a parish, individual church, district, or other local
unit.
Subsec. (b)(15) to (17). Pub. L. 91-172, Sec. 121(b)(2)(C), added
pars. (15) to (17).
1966 - Subsec. (a). Pub. L. 89-809 substituted ", the unrelated
business taxable income shall be its unrelated business taxable
income which is effectively connected with the conduct of a trade
or business within the United States" for ", the unrelated business
taxable income shall be its unrelated business taxable income
derived from sources within the United States determined under
subchapter N (sec. 861 and following), relating to tax based on
income from sources within or without the United States".
1964 - Subsec. (b)(14). Pub. L. 88-380 added par. (14).
1958 - Subsec. (b)(13). Pub. L. 85-367 added par. (13).
EFFECTIVE DATE OF 1998 AMENDMENT
Amendment by section 6023(8) of Pub. L. 105-206 effective July
22, 1998, see section 6023(32) of Pub. L. 105-206, set out as a
note under section 34 of this title.
Amendment by section 6010(j)(1), (2) of Pub. L. 105-206
effective, except as otherwise provided, as if included in the
provisions of the Taxpayer Relief Act of 1997, Pub. L. 105-34, to
which such amendment relates, see section 6024 of Pub. L. 105-206,
set out as a note under section 1 of this title.
EFFECTIVE DATE OF 1997 AMENDMENT
Amendment by section 312(d)(5) of Pub. L. 105-34 applicable to
sales and exchanges after May 6, 1997, with certain exceptions, see
section 312(d)[(e)] of Pub. L. 105-34, set out as a note under
section 121 of this title.
Section 1041(b) of Pub. L. 105-34, as amended by Pub. L. 105-206,
title VI, Sec. 6010(j)(3), July 22, 1998, 112 Stat. 815, provided
that:
"(1) In general. - Except as provided in paragraph (2), the
amendments made by this section [amending this section] shall apply
to taxable years beginning after the date of the enactment of this
Act [Aug. 5, 1997].
"(2) Binding contracts. - The amendments made by this section
shall not apply to any amount received or accrued during the first
2 taxable years beginning on or after the date of the enactment of
this Act if such amount is received or accrued pursuant to a
written binding contract in effect on June 8, 1997, and at all
times thereafter before such amount is received or accrued. The
preceding sentence shall not apply to any amount which would (but
for the exercise of an option to accelerate payment of such amount)
be received or accrued after such 2 taxable years."
Section 1523(b) of Pub. L. 105-34 provided that: "The amendments
made by this section [amending this section] shall apply to taxable
years beginning after December 31, 1997."
Amendment by section 1601(c)(4)(A), (D) of Pub. L. 105-34
effective as if included in the provisions of the Small Business
Job Protection Act of 1996, Pub. L. 104-188, to which it relates,
see section 1601(j) of Pub. L. 105-34, set out as a note under
section 23 of this title.
EFFECTIVE DATE OF 1996 AMENDMENT
Section 1115(b) of Pub. L. 104-188 provided that:
"(1) In general. - The amendment made by this section [amending
this section] shall apply to taxable years beginning after December
31, 1986.
"(2) Transitional rule. - If -
"(A) for purposes of applying part III of subchapter F of
chapter 1 of the Internal Revenue Code of 1986 to any taxable
year beginning before January 1, 1987, an agricultural or
horticultural organization did not treat any portion of
membership dues received by it as income derived in an unrelated
trade or business, and
"(B) such organization had a reasonable basis for not treating
such dues as income derived in an unrelated trade or business,
then, for purposes of applying such part III to any such taxable
year, in no event shall any portion of such dues be treated as
derived in an unrelated trade or business.
"(3) Reasonable basis. - For purposes of paragraph (2), an
organization shall be treated as having a reasonable basis for not
treating membership dues as income derived in an unrelated trade or
business if the taxpayer's treatment of such dues was in reasonable
reliance on any of the following:
"(A) Judicial precedent, published rulings, technical advice
with respect to the organization, or a letter ruling to the
organization.
"(B) A past Internal Revenue Service audit of the organization
in which there was no assessment attributable to the
reclassification of membership dues for purposes of the tax on
unrelated business income.
"(C) Long-standing recognized practice of agricultural or
horticultural organizations."
Amendment by section 1316(c) of Pub. L. 104-188 applicable to
taxable years beginning after Dec. 31, 1997, see section 1316(f) of
Pub. L. 104-188, set out as a note under section 170 of this title.
Section 1603(b) of Pub. L. 104-188 provided that: "The amendment
made by this section [amending this section] shall apply to amounts
included in gross income in any taxable year beginning after
December 31, 1995."
EFFECTIVE DATE OF 1993 AMENDMENT
Section 13145(b) of Pub. L. 103-66 provided that: "The amendments
made by subsection (a) [amending this section] shall apply to
partnership years beginning on or after January 1, 1994."
Section 13147(b) of Pub. L. 103-66 provided that: "The amendment
made by subsection (a) [amending this section] shall apply to
property acquired on or after January 1, 1994."
Section 13148(c) of Pub. L. 103-66 provided that: "The amendments
made by this section [amending this section] shall apply to amounts
received on or after January 1, 1994."
EFFECTIVE DATE OF 1988 AMENDMENT
Amendment by Pub. L. 100-647 effective, except as otherwise
provided, as if included in the provision of the Tax Reform Act of
1986, Pub. L. 99-514, to which such amendment relates, see section
1019(a) of Pub. L. 100-647, set out as a note under section 1 of
this title.
EFFECTIVE DATE OF 1987 AMENDMENT
Section 10213(b) of Pub. L. 100-203 provided that: "The amendment
made by subsection (a) [amending this section] shall apply to
partnership interests acquired after December 17, 1987."
EFFECTIVE DATE OF 1986 AMENDMENT
Amendment by Pub. L. 99-514 effective, except as otherwise
provided, as if included in the provisions of the Tax Reform Act of
1984, Pub. L. 98-369, div. A, to which such amendment relates, see
section 1881 of Pub. L. 99-514, set out as a note under section 48
of this title.
EFFECTIVE DATE OF 1984 AMENDMENT
Amendment by Pub. L. 98-369 applicable to taxable years ending
after Dec. 31, 1985, with such amendments treated as a change in
the rate of tax imposed by chapter 1 of this title for purposes of
section 15 of this title, see section 511(e)(6) of Pub. L. 98-369,
set out as an Effective Date note under section 419 of this title.
EFFECTIVE DATE OF 1983 AMENDMENT
Amendment by Pub. L. 97-448 effective, except as otherwise
provided, as if it had been included in the provision of the
Economic Recovery Tax Act of 1981, Pub. L. 97-34, to which such
amendment relates, see section 109 of Pub. L. 97-448, set out as a
note under section 1 of this title.
EFFECTIVE DATE OF 1978 AMENDMENT
Amendment by Pub. L. 95-345 applicable with respect to amounts
received after Dec. 31, 1976, as payments with respect to
securities loans (as defined in subsec. (a)(5) of this section),
and transfers of securities, under agreements described in section
1058 of this title, occurring after such date, see section 2(e) of
Pub. L. 95-345, set out as a note under section 509 of this title.
EFFECTIVE DATE OF 1976 AMENDMENTS
Amendment by Pub. L. 94-568 applicable to taxable years beginning
after Oct. 20, 1976, see section 1(d) of Pub. L. 94-568, set out as
a note under section 501 of this title.
Amendment by section 1901(b)(8)(F) of Pub. L. 94-455 applicable
with respect to taxable years beginning after Dec. 31, 1976, see
section 1901(d) of Pub. L. 94-455, set out as a note under section
2 of this title.
Amendment by section 1951(b)(8)(A) of Pub. L. 94-455 applicable
with respect to taxable years beginning after Dec. 31, 1976, see
section 1951(d) of Pub. L. 94-455, set out as a note under section
72 of this title.
Section 1(b) of Pub. L. 94-396 provided that: "The amendment made
by subsection (a) [amending this section] shall apply to gain from
options which lapse or terminate on or after January 1, 1976, in
taxable years ending on or after such date."
EFFECTIVE DATE OF 1972 AMENDMENT
Amendment by Pub. L. 92-418 applicable to taxable years beginning
after Dec. 31, 1969, see section 1(c) of Pub. L. 92-418, set out as
a note under section 501 of this title.
EFFECTIVE DATE OF 1969 AMENDMENT
Amendment by Pub. L. 91-172 applicable to taxable years beginning
after Dec. 31, 1969, see section 121(g) of Pub. L. 91-172, set out
as a note under section 511 of this title.
EFFECTIVE DATE OF 1966 AMENDMENT
Amendment by Pub. L. 89-809 applicable with respect to taxable
years beginning after Dec. 31, 1966, see section 104(n) of Pub. L.
89-809, set out as a note under section 11 of this title.
EFFECTIVE DATE OF 1964 AMENDMENT
Section 2 of Pub. L. 88-380 provided that: "The amendment made by
the first section of this Act [amending this section] shall apply
with respect to taxable years beginning after December 31, 1963."
EFFECTIVE DATE OF 1958 AMENDMENT
Section 1(b) of Pub. L. 85-367 provided that: "The amendment made
by subsection (a) [amending this section] shall apply to taxable
years of trusts beginning after December 31, 1955."
SAVINGS PROVISION
For provisions that nothing in amendment by Pub. L. 101-508 be
construed to affect treatment of certain transactions occurring,
property acquired, or items of income, loss, deduction, or credit
taken into account prior to Nov. 5, 1990, for purposes of
determining liability for tax for periods ending after Nov. 5,
1990, see section 11821(b) of Pub. L. 101-508, set out as a note
under section 29 of this title.
Section 1951(b)(8)(B) of Pub. L. 94-455 provided that:
"Notwithstanding subparagraph (A) [amending this section], income
received in a taxable year beginning after December 31, 1975, shall
be excluded from gross income in determining unrelated business
taxable income, if such income would have been excluded by
paragraph (13) or (14) of section 512(b) if received in a taxable
year beginning before such date. Any deductions directly connected
with income excluded under the preceding sentence in determining
unrelated business taxable income shall also be excluded for such
purpose."
PLAN AMENDMENTS NOT REQUIRED UNTIL JANUARY 1, 1989
For provisions directing that if any amendments made by subtitle
A or subtitle C of title XI [Secs. 1101-1147 and 1171-1177] or
title XVIII [Secs. 1800-1899A] of Pub. L. 99-514 require an
amendment to any plan, such plan amendment shall not be required to
be made before the first plan year beginning on or after Jan. 1,
1989, see section 1140 of Pub. L. 99-514, as amended, set out as a
note under section 401 of this title.
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 263, 419A, 502, 509, 511,
513, 514, 664, 681, 772, 851, 856, 878, 995, 1443, 4940, 4943,
4976, 6031 of this title.
-End-
-CITE-
26 USC Sec. 513 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter F - Exempt Organizations
PART III - TAXATION OF BUSINESS INCOME OF CERTAIN EXEMPT
ORGANIZATIONS
-HEAD-
Sec. 513. Unrelated trade or business
-STATUTE-
(a) General rule
The term "unrelated trade or business" means, in the case of any
organization subject to the tax imposed by section 511, any trade
or business the conduct of which is not substantially related
(aside from the need of such organization for income or funds or
the use it makes of the profits derived) to the exercise or
performance by such organization of its charitable, educational, or
other purpose or function constituting the basis for its exemption
under section 501 (or, in the case of an organization described in
section 511(a)(2)(B), to the exercise or performance of any purpose
or function described in section 501(c)(3)), except that such term
does not include any trade or business -
(1) in which substantially all the work in carrying on such
trade or business is performed for the organization without
compensation; or
(2) which is carried on, in the case of an organization
described in section 501(c)(3) or in the case of a college or
university described in section 511(a)(2)(B), by the organization
primarily for the convenience of its members, students, patients,
officers, or employees, or, in the case of a local association of
employees described in section 501(c)(4) organized before May 27,
1969, which is the selling by the organization of items of
work-related clothes and equipment and items normally sold
through vending machines, through food dispensing facilities, or
by snack bars, for the convenience of its members at their usual
places of employment; or
(3) which is the selling of merchandise, substantially all of
which has been received by the organization as gifts or
contributions.
(b) Special rule for trusts
The term "unrelated trade or business" means, in the case of -
(1) a trust computing its unrelated business taxable income
under section 512 for purposes of section 681; or
(2) a trust described in section 401(a), or section 501(c)(17),
which is exempt from tax under section 501(a);
any trade or business regularly carried on by such trust or by a
partnership of which it is a member.
(c) Advertising, etc., activities
For purposes of this section, the term "trade or business"
includes any activity which is carried on for the production of
income from the sale of goods or the performance of services. For
purposes of the preceding sentence, an activity does not lose
identity as a trade or business merely because it is carried on
within a larger aggregate of similar activities or within a larger
complex of other endeavors which may, or may not, be related to the
exempt purposes of the organization. Where an activity carried on
for profit constitutes an unrelated trade or business, no part of
such trade or business shall be excluded from such classification
merely because it does not result in profit.
(d) Certain activities of trade shows, State fairs, etc.
(1) General rule
The term "unrelated trade or business" does not include
qualified public entertainment activities of an organization
described in paragraph (2)(C), or qualified convention and trade
show activities of an organization described in paragraph (3)(C).
(2) Qualified public entertainment activities
For purposes of this subsection -
(A) Public entertainment activity
The term "public entertainment activity" means any
entertainment or recreational activity of a kind traditionally
conducted at fairs or expositions promoting agricultural and
educational purposes, including, but not limited to, any
activity one of the purposes of which is to attract the public
to fairs or expositions or to promote the breeding of animals
or the development of products or equipment.
(B) Qualified public entertainment activity
The term "qualified public entertainment activity" means a
public entertainment activity which is conducted by a
qualifying organization described in subparagraph (C) in -
(i) conjunction with an international, national, State,
regional, or local fair or exposition,
(ii) accordance with the provisions of State law which
permit the activity to be operated or conducted solely by
such an organization, or by an agency, instrumentality, or
political subdivision of such State, or
(iii) accordance with the provisions of State law which
permit such an organization to be granted a license to
conduct not more than 20 days of such activity on payment to
the State of a lower percentage of the revenue from such
licensed activity than the State requires from organizations
not described in section 501(c)(3), (4), or (5).
(C) Qualifying organization
For purposes of this paragraph, the term "qualifying
organization" means an organization which is described in
section 501(c) (3), (4), or (5) which regularly conducts, as
one of its substantial exempt purposes, an agricultural and
educational fair or exposition.
(3) Qualified convention and trade show activities
(A) Convention and trade show activities
The term "convention and trade show activity" means any
activity of a kind traditionally conducted at conventions,
annual meetings, or trade shows, including, but not limited to,
any activity one of the purposes of which is to attract persons
in an industry generally (without regard to membership in the
sponsoring organization) as well as members of the public to
the show for the purpose of displaying industry products or to
stimulate interest in, and demand for, industry products or
services, or to educate persons engaged in the industry in the
development of new products and services or new rules and
regulations affecting the industry.
(B) Qualified convention and trade show activity
The term "qualified convention and trade show activity" means
a convention and trade show activity carried out by a
qualifying organization described in subparagraph (C) in
conjunction with an international, national, State, regional,
or local convention, annual meeting, or show conducted by an
organization described in subparagraph (C) if one of the
purposes of such organization in sponsoring the activity is the
promotion and stimulation of interest in, and demand for, the
products and services of that industry in general or to educate
persons in attendance regarding new developments or products
and services related to the exempt activities of the
organization, and the show is designed to achieve such purpose
through the character of the exhibits and the extent of the
industry products displayed.
(C) Qualifying organization
For purposes of this paragraph, the term "qualifying
organization" means an organization described in section
501(c)(3), (4), (5), or (6) which regularly conducts as one of
its substantial exempt purposes a show which stimulates
interest in, and demand for, the products of a particular
industry or segment of such industry or which educates persons
in attendance regarding new developments or products and
services related to the exempt activities of the organization.
(4) Such activities not to affect exempt status
An organization described in section 501(c) (3), (4), or (5)
shall not be considered as not entitled to the exemption allowed
under section 501(a) solely because of qualified public
entertainment activities conducted by it.
(e) Certain hospital services
In the case of a hospital described in section 170(b)(1)(A)(iii),
the term "unrelated trade or business" does not include the
furnishing of one or more of the services described in section
501(e)(1)(A) to one or more hospitals described in section
170(b)(1)(A)(iii) if -
(1) such services are furnished solely to such hospitals which
have facilities to serve not more than 100 inpatients;
(2) such services, if performed on its own behalf by the
recipient hospital, would constitute activities in exercising or
performing the purpose or function constituting the basis for its
exemption; and
(3) such services are provided at a fee or cost which does not
exceed the actual cost of providing such services, such cost
including straight line depreciation and a reasonable amount for
return on capital goods used to provide such services.
(f) Certain bingo games
(1) In general
The term "unrelated trade or business" does not include any
trade or business which consists of conducting bingo games.
(2) Bingo game defined
For purposes of paragraph (1), the term "bingo game" means any
game of bingo -
(A) of a type in which usually -
(i) the wagers are placed,
(ii) the winners are determined, and
(iii) the distribution of prizes or other property is made,
in the presence of all persons placing wagers in such game,
(B) the conducting of which is not an activity ordinarily
carried out on a commercial basis, and
(C) the conducting of which does not violate any State or
local law.
(g) Certain pole rentals
In the case of a mutual or cooperative telephone or electric
company, the term "unrelated trade or business" does not include
engaging in qualified pole rentals (as defined in section
501(c)(12)(D)).
(h) Certain distributions of low cost articles without obligation
to purchase and exchanges and rentals of member lists
(1) In general
In the case of an organization which is described in section
501 and contributions to which are deductible under paragraph (2)
or (3) of section 170(c), the term "unrelated trade or business"
does not include -
(A) activities relating to the distribution of low cost
articles if the distribution of such articles is incidental to
the solicitation of charitable contributions, or
(B) any trade or business which consists of -
(i) exchanging with another such organization names and
addresses of donors to (or members of) such organization, or
(ii) renting such names and addresses to another such
organization.
(2) Low cost article defined
For purposes of this subsection -
(A) In general
The term "low cost article" means any article which has a
cost not in excess of $5 to the organization which distributes
such item (or on whose behalf such item is distributed).
(B) Aggregation rule
If more than 1 item is distributed by or on behalf of an
organization to a single distributee in any calendar year, the
aggregate of the items so distributed in such calendar year to
such distributee shall be treated as 1 article for purposes of
subparagraph (A).
(C) Indexation of $5 amount
In the case of any taxable year beginning in a calendar year
after 1987, the $5 amount in subparagraph (A) shall be
increased by an amount equal to -
(i) $5, multiplied by
(ii) the cost-of-living adjustment determined under section
1(f)(3) for the calendar year in which the taxable year
begins, by substituting "calendar year 1987" for "calendar
year 1992" in subparagraph (B) thereof.
(3) Distribution which is incidental to the solicitation of
charitable contributions described
For purposes of this subsection, any distribution of low cost
articles by an organization shall be treated as a distribution
incidental to the solicitation of charitable contributions only
if -
(A) such distribution is not made at the request of the
distributee,
(B) such distribution is made without the express consent of
the distributee, and
(C) the articles so distributed are accompanied by -
(i) a request for a charitable contribution (as defined in
section 170(c)) by the distributee to such organization, and
(ii) a statement that the distributee may retain the low
cost article regardless of whether such distributee makes a
charitable contribution to such organization.
(i) Treatment of certain sponsorship payments
(1) In general
The term "unrelated trade or business" does not include the
activity of soliciting and receiving qualified sponsorship
payments.
(2) Qualified sponsorship payments
For purposes of this subsection -
(A) In general
The term "qualified sponsorship payment" means any payment
made by any person engaged in a trade or business with respect
to which there is no arrangement or expectation that such
person will receive any substantial return benefit other than
the use or acknowledgement of the name or logo (or product
lines) of such person's trade or business in connection with
the activities of the organization that receives such payment.
Such a use or acknowledgement does not include advertising such
person's products or services (including messages containing
qualitative or comparative language, price information, or
other indications of savings or value, an endorsement, or an
inducement to purchase, sell, or use such products or
services).
(B) Limitations
(i) Contingent payments
The term "qualified sponsorship payment" does not include
any payment if the amount of such payment is contingent upon
the level of attendance at one or more events, broadcast
ratings, or other factors indicating the degree of public
exposure to one or more events.
(ii) Safe harbor does not apply to periodicals and qualified
convention and trade show activities
The term "qualified sponsorship payment" does not include -
(I) any payment which entitles the payor to the use or
acknowledgement of the name or logo (or product lines) of
the payor's trade or business in regularly scheduled and
printed material published by or on behalf of the payee
organization that is not related to and primarily
distributed in connection with a specific event conducted
by the payee organization, or
(II) any payment made in connection with any qualified
convention or trade show activity (as defined in subsection
(d)(3)(B)).
(3) Allocation of portions of single payment
For purposes of this subsection, to the extent that a portion
of a payment would (if made as a separate payment) be a qualified
sponsorship payment, such portion of such payment and the other
portion of such payment shall be treated as separate payments.
-SOURCE-
(Aug. 16, 1954, ch. 736, 68A Stat. 172; Pub. L. 86-667, Sec. 4,
July 14, 1960, 74 Stat. 536; Pub. L. 91-172, title I, Sec.
121(b)(4), (c), Dec. 30, 1969, 83 Stat. 541, 542; Pub. L. 94-455,
title XIII, Secs. 1305(a), 1311(a), Oct. 4, 1976, 90 Stat. 1716,
1729; Pub. L. 95-502, title III, Sec. 301(a), Oct. 21, 1978, 92
Stat. 1702; Pub. L. 96-605, title I, Sec. 106(b), Dec. 28, 1980, 94
Stat. 3524; Pub. L. 99-514, title XVI, Secs. 1601(a), 1602(a), (b),
Oct. 22, 1986, 100 Stat. 2766, 2767; Pub. L. 101-508, title XI,
Sec. 11101(d)(1)(G), Nov. 5, 1990, 104 Stat. 1388-405; Pub. L.
103-66, title XIII, Sec. 13201(b)(3)(H), Aug. 10, 1993, 107 Stat.
459; Pub. L. 105-34, title IX, Sec. 965(a), Aug. 5, 1997, 111 Stat.
893.)
-STATAMEND-
ADJUSTMENT OF LOW COST ARTICLE LIMITATION FOR TAXABLE YEARS
BEGINNING IN 2004
For adjustment of "low cost article" limitation under subsection
(h)(2) of this section for taxable years beginning in 2004, see
section 3.22(1) of Revenue Procedure 2003-85, set out as a note
under section 1 of this title.
-MISC1-
AMENDMENTS
1997 - Subsec. (i). Pub. L. 105-34 added subsec. (i).
1993 - Subsec. (h)(2)(C)(ii). Pub. L. 103-66 substituted
"calendar year 1992" for "calendar year 1989".
1990 - Subsec. (h)(2)(C)(ii). Pub. L. 101-508 inserted before
period at end ", by substituting 'calendar year 1987' for 'calendar
year 1989' in subparagraph (B) thereof".
1986 - Subsec. (d)(3)(B). Pub. L. 99-514, Sec. 1602(a), inserted
"or to educate persons in attendance regarding new developments or
products and services related to the exempt activities of the
organization".
Subsec. (d)(3)(C). Pub. L. 99-514, Sec. 1602(b), substituted
"section 501(c)(3), (4), (5), or (6)" for "section 501(c)(5) or
(6)" and inserted "or which educates persons in attendance
regarding new developments or products and services related to the
exempt activities of the organization".
Subsec. (h). Pub. L. 99-514, Sec. 1601(a), added subsec. (h).
1980 - Subsec. (g). Pub. L. 96-605 added subsec. (g).
1978 - Subsec. (f). Pub. L. 95-502 added subsec. (f).
1976 - Subsec. (d). Pub. L. 94-455, Sec. 1305(a), added subsec.
(d).
Subsec. (e). Pub. L. 94-455, Sec. 1311(a), added subsec. (e).
1969 - Subsec. (a)(2). Pub. L. 91-172, Sec. 121(b)(4), inserted
reference to local associations of employees described in section
501(c)(4) of this title and organized before May 27, 1969.
Subsec. (c). Pub. L. 91-172, Sec. 121(c), substituted
"Advertising, etc., activities" for "Special rule for certain
publishing businesses", in heading, and, in text, substituted
provisions extending definition of trade or business to include any
activity carried on for the production of income from the sale of
goods or the performance of services, for provisions referring to
publishing businesses carried on by an organization during a
taxable year beginning before Jan. 1, 1953.
1960 - Subsec. (b)(2). Pub. L. 86-667 included trusts described
in section 501(c)(17).
EFFECTIVE DATE OF 1997 AMENDMENT
Section 965(b) of Pub. L. 105-34 provided that: "The amendment
made by this section [amending this section] shall apply to
payments solicited or received after December 31, 1997."
EFFECTIVE DATE OF 1993 AMENDMENT
Amendment by Pub. L. 103-66 applicable to taxable years beginning
after Dec. 31, 1992, see section 13201(c) of Pub. L. 103-66, set
out as a note under section 1 of this title.
EFFECTIVE DATE OF 1990 AMENDMENT
Amendment by Pub. L. 101-508 applicable to taxable years
beginning after Dec. 31, 1990, see section 11101(e) of Pub. L.
101-508, set out as a note under section 1 of this title.
EFFECTIVE DATE OF 1986 AMENDMENT
Section 1601(b) of Pub. L. 99-514 provided that: "The amendment
made by this section [amending this section] shall apply to
distributions of low cost articles and exchanges and rentals of
member lists after the date of the enactment of this Act [Oct. 22,
1986]."
Section 1602(c) of Pub. L. 99-514 provided that: "The amendments
made by this section [amending this section] shall apply to
activities in taxable years beginning after the date of the
enactment of this Act [Oct. 22, 1986]."
EFFECTIVE DATE OF 1980 AMENDMENT
Section 106(c)(2) of Pub. L. 96-605 provided that: "The amendment
made by subsection (b) [amending this section] shall apply to
taxable years beginning after December 31, 1969."
EFFECTIVE DATE OF 1978 AMENDMENT
Section 301(b) of Pub. L. 95-502 provided that: "The amendment
made by subsection (a) [amending this section] shall apply to
taxable years beginning after December 31, 1969."
EFFECTIVE DATE OF 1976 AMENDMENT
Section 1305(b) of Pub. L. 94-455 provided that: "The amendments
made by subsection (a) [amending this section] apply to qualified
public entertainment activities in taxable years beginning after
December 31, 1962, and to qualified convention and trade show
activities in taxable years beginning after the date of enactment
of this Act [Oct. 4, 1976]."
Section 1311(b) of Pub. L. 94-455, as amended by Pub. L. 99-514,
Sec. 2, Oct. 22, 1986, 100 Stat. 2095, provided that: "The
amendment made by this section [amending this section] shall apply
to all taxable years to which the Internal Revenue Code of 1986
[formerly I.R.C. 1954] [this title] applies."
EFFECTIVE DATE OF 1969 AMENDMENT
Amendment by Pub. L. 91-172 applicable to taxable years beginning
after Dec. 31, 1969, see section 121(g) of Pub. L. 91-172, set out
as a note under section 511 of this title.
EFFECTIVE DATE OF 1960 AMENDMENT
Amendment by Pub. L. 86-667 applicable to taxable years beginning
after Dec. 31, 1959, see section 6 of Pub. L. 86-667, set out as a
note under section 501 of this title.
CONDUCTING OF CERTAIN GAMES OF CHANCE NOT TREATED AS UNRELATED
TRADE OR BUSINESS
Pub. L. 98-369, div. A, title III, Sec. 311, July 18, 1984, 98
Stat. 786, as amended by Pub. L. 99-514, Sec. 2, title XVIII, Sec.
1834, Oct. 22, 1986, 100 Stat. 2095, 2852, provided that:
"(a) General Rule. - For purposes of section 513 of the Internal
Revenue Code of 1986 [formerly I.R.C. 1954] (defining unrelated
trade or business), the term 'unrelated trade or business' does not
include any trade or business which consists of conducting any game
of chance if -
"(1) such game of chance is conducted by a nonprofit
organization,
"(2) the conducting of such game by such organization does not
violate any State or local law, and
"(3) as of October 5, 1983 -
"(A) there was a State law (originally enacted on April 22,
1977) in effect which permitted the conducting of such game of
chance by such nonprofit organization, but
"(B) the conducting of such game of chance by organizations
which were not nonprofit organizations would have violated such
law.
"(b) Effective Date. - Subsection (a) shall apply to games of
chance conducted after June 30, 1981, in taxable years ending after
such date."
[Section 1834 of Pub. L. 99-514, as amended by Pub. L. 100-647,
title VI, Sec. 6201, Nov. 10, 1988, 102 Stat. 3730, provided in
part that: "The amendment made by this section [amending section
311 of Pub. L. 98-369, set out above] shall apply to games of
chance conducted after October 22, 1986, in taxable years ending
after such date".]
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 144, 145, 150, 414, 501,
509, 512, 514, 527, 593, 1245, 1250, 3121, 4942, 7611 of this
title; title 16 section 2708; title 29 section 1002; title 39
section 3626; title 42 section 410.
-End-
-CITE-
26 USC Sec. 514 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter F - Exempt Organizations
PART III - TAXATION OF BUSINESS INCOME OF CERTAIN EXEMPT
ORGANIZATIONS
-HEAD-
Sec. 514. Unrelated debt-financed income
-STATUTE-
(a) Unrelated debt-financed income and deductions
In computing under section 512 the unrelated business taxable
income for any taxable year -
(1) Percentage of income taken into account
There shall be included with respect to each debt-financed
property as an item of gross income derived from an unrelated
trade or business an amount which is the same percentage (but not
in excess of 100 percent) of the total gross income derived
during the taxable year from or on account of such property as
(A) the average acquisition indebtedness (as defined in
subsection (c)(7)) for the taxable year with respect to the
property is of (B) the average amount (determined under
regulations prescribed by the Secretary) of the adjusted basis of
such property during the period it is held by the organization
during such taxable year.
(2) Percentage of deductions taken into account
There shall be allowed as a deduction with respect to each
debt-financed property an amount determined by applying (except
as provided in the last sentence of this paragraph) the
percentage derived under paragraph (1) to the sum determined
under paragraph (3). The percentage derived under this paragraph
shall not be applied with respect to the deduction of any capital
loss resulting from the carryback or carryover of net capital
losses under section 1212.
(3) Deductions allowable
The sum referred to in paragraph (2) is the sum of the
deductions under this chapter which are directly connected with
the debt-financed property or the income therefrom, except that
if the debt-financed property is of a character which is subject
to the allowance for depreciation provided in section 167, the
allowance shall be computed only by use of the straight-line
method.
(b) Definition of debt-financed property
(1) In general
For purposes of this section, the term "debt-financed property"
means any property which is held to produce income and with
respect to which there is an acquisition indebtedness (as defined
in subsection (c)) at any time during the taxable year (or, if
the property was disposed of during the taxable year, with
respect to which there was an acquisition indebtedness at any
time during the 12-month period ending with the date of such
disposition), except that such term does not include -
(A)(i) any property substantially all the use of which is
substantially related (aside from the need of the organization
for income or funds) to the exercise or performance by such
organization of its charitable, educational, or other purpose
or function constituting the basis for its exemption under
section 501 (or, in the case of an organization described in
section 511(a)(2)(B), to the exercise or performance of any
purpose or function designated in section 501(c)(3)), or (ii)
any property to which clause (i) does not apply, to the extent
that its use is so substantially related;
(B) except in the case of income excluded under section
512(b)(5), any property to the extent that the income from such
property is taken into account in computing the gross income of
any unrelated trade or business;
(C) any property to the extent that the income from such
property is excluded by reason of the provisions of paragraph
(7), (8), or (9) of section 512(b) in computing the gross
income of any unrelated trade or business; or
(D) any property to the extent that it is used in any trade
or business described in paragraph (1), (2), or (3) of section
513(a).
For purposes of subparagraph (A), substantially all the use of a
property shall be considered to be substantially related to the
exercise or performance by an organization of its charitable,
educational, or other purpose or function constituting the basis
for its exemption under section 501 if such property is real
property subject to a lease to a medical clinic entered into
primarily for purposes which are substantially related (aside
from the need of such organization for income or funds or the use
it makes of the rents derived) to the exercise or performance by
such organization of its charitable, educational, or other
purpose or function constituting the basis for its exemption
under section 501.
(2) Special rule for related uses
For purposes of applying paragraphs (1) (A), (C), and (D), the
use of any property by an exempt organization which is related to
an organization shall be treated as use by such organization.
(3) Special rules when land is acquired for exempt use within 10
years
(A) Neighborhood land
If an organization acquires real property for the principal
purpose of using the land (commencing within 10 years of the
time of acquisition) in the manner described in paragraph
(1)(A) and at the time of acquisition the property is in the
neighborhood of other property owned by the organization which
is used in such manner, the real property acquired for such
future use shall not be treated as debt-financed property so
long as the organization does not abandon its intent to so use
the land within the 10-year period. The preceding sentence
shall not apply for any period after the expiration of the
10-year period, and shall apply after the first 5 years of the
10-year period only if the organization establishes to the
satisfaction of the Secretary that it is reasonably certain
that the land will be used in the described manner before the
expiration of the 10-year period.
(B) Other cases
If the first sentence of subparagraph (A) is inapplicable
only because -
(i) the acquired land is not in the neighborhood referred
to in subparagraph (A), or
(ii) the organization (for the period after the first 5
years of the 10-year period) is unable to establish to the
satisfaction of the Secretary that it is reasonably certain
that the land will be used in the manner described
inparagraph (1)(A) before the expiration of the 10-year
period,
but the land is converted to such use by the organization
within the 10-year period, the real property (subject to the
provisions of subparagraph (D)) shall not be treated as
debt-financed property for any period before such conversion.
For purposes of this subparagraph, land shall not be treated as
used in the manner described in paragraph (1)(A) by reason of
the use made of any structure which was on the land when
acquired by the organization.
(C) Limitations
Subparagraphs (A) and (B) -
(i) shall apply with respect to any structure on the land
when acquired by the organization, or to the land occupied by
the structure, only if (and so long as) the intended future
use of the land in the manner described in paragraph (1)(A)
requires that the structure be demolished or removed in order
to use the land in such manner;
(ii) shall not apply to structures erected on the land
after the acquisition of the land; and
(iii) shall not apply to property subject to a lease which
is a business lease (as defined in this section immediately
before the enactment of the Tax Reform Act of 1976).
(D) Refund of taxes when subparagraph (B) applies
If an organization for any taxable year has not used land in
the manner to satisfy the actual use condition of subparagraph
(B) before the time prescribed by law (including extensions
thereof) for filing the return for such taxable year, the tax
for such year shall be computed without regard to the
application of subparagraph (B), but if and when such use
condition is satisfied, the provisions of subparagraph (B)
shall then be applied to such taxable year. If the actual use
condition of subparagraph (B) is satisfied for any taxable year
after such time for filing the return, and if credit or refund
of any overpayment for the taxable year resulting from the
satisfaction of such use condition is prevented at the close of
the taxable year in which the use condition is satisfied, by
the operation of any law or rule of law (other than chapter 74,
relating to closing agreements and compromises), credit or
refund of such overpayment may nevertheless be allowed or made
if claim therefor is filed before the expiration of 1 year
after the close of the taxable year in which the use condition
is satisfied.
(E) Special rule for churches
In applying this paragraph to a church or convention or
association of churches, in lieu of the 10-year period referred
to in subparagraphs (A) and (B) a 15-year period shall be
applied, and subparagraphs (A) and (B)(ii) shall apply whether
or not the acquired land meets the neighborhood test.
(c) Acquisition indebtedness
(1) General rule
For purposes of this section, the term "acquisition
indebtedness" means, with respect to any debt-financed property,
the unpaid amount of -
(A) the indebtedness incurred by the organization in
acquiring or improving such property;
(B) the indebtedness incurred before the acquisition or
improvement of such property if such indebtedness would not
have been incurred but for such acquisition or improvement; and
(C) the indebtedness incurred after the acquisition or
improvement of such property if such indebtedness would not
have been incurred but for such acquisition or improvement and
the incurrence of such indebtedness was reasonably foreseeable
at the time of such acquisition or improvement.
(2) Property acquired subject to mortgage, etc.
For purposes of this subsection -
(A) General rule
Where property (no matter how acquired) is acquired subject
to a mortgage or other similar lien, the amount of the
indebtedness secured by such mortgage or lien shall be
considered as an indebtedness of the organization incurred in
acquiring such property even though the organization did not
assume or agree to pay such indebtedness.
(B) Exceptions
Where property subject to a mortgage is acquired by an
organization by bequest or devise, the indebtedness secured by
the mortgage shall not be treated as acquisition indebtedness
during a period of 10 years following the date of the
acquisition. If an organization acquires property by gift
subject to a mortgage which was placed on the property more
than 5 years before the gift, which property was held by the
donor more than 5 years before the gift, the indebtedness
secured by such mortgage shall not be treated as acquisition
indebtedness during a period of 10 years following the date of
such gift. This subparagraph shall not apply if the
organization, in order to acquire the equity in the property by
bequest, devise, or gift, assumes and agrees to pay the
indebtedness secured by the mortgage, or if the organization
makes any payment for the equity in the property owned by the
decedent or the donor.
(C) Liens for taxes or assessments
Where State law provides that -
(i) a lien for taxes, or
(ii) a lien for assessments,
made by a State or a political subdivision thereof attaches to
property prior to the time when such taxes or assessments
become due and payable, then such lien shall be treated as
similar to a mortgage (within the meaning of subparagraph (A))
but only after such taxes or assessments become due and payable
and the organization has had an opportunity to pay such taxes
or assessments in accordance with State law.
(3) Extension of obligations
For purposes of this section, an extension, renewal, or
refinancing of an obligation evidencing a pre-existing
indebtedness shall not be treated as the creation of a new
indebtedness.
(4) Indebtedness incurred in performing exempt purpose
For purposes of this section, the term "acquisition
indebtedness" does not include indebtedness the incurrence of
which is inherent in the performance or exercise of the purpose
or function constituting the basis of the organization's
exemption, such as the indebtedness incurred by a credit union
described in section 501(c)(14) in accepting deposits from its
members.
(5) Annuities
For purposes of this section, the term "acquisition
indebtedness" does not include an obligation to pay an annuity
which -
(A) is the sole consideration (other than a mortgage to which
paragraph (2)(B) applies) issued in exchange for property if,
at the time of the exchange, the value of the annuity is less
than 90 percent of the value of the property received in the
exchange,
(B) is payable over the life of one individual in being at
the time the annuity is issued, or over the lives of two
individuals in being at such time, and
(C) is payable under a contract which -
(i) does not guarantee a minimum amount of payments or
specify a maximum amount of payments, and
(ii) does not provide for any adjustment of the amount of
the annuity payments by reference to the income received from
the transferred property or any other property.
(6) Certain Federal financing
For purposes of this section, the term "acquisition
indebtedness" does not include an obligation, to the extent that
it is insured by the Federal Housing Administration, to finance
the purchase, rehabilitation, or construction of housing for low
and moderate income persons.
(7) Average acquisition indebtedness
For purposes of this section, the term "average acquisition
indebtedness" for any taxable year with respect to a
debt-financed property means the average amount, determined under
regulations prescribed by the Secretary of the acquisition
indebtedness during the period the property is held by the
organization during the taxable year, except that for the purpose
of computing the percentage of any gain or loss to be taken into
account on a sale or other disposition of debt-financed property,
such term means the highest amount of the acquisition
indebtedness with respect to such property during the 12-month
period ending with the date of the sale or other disposition.
(8) Securities subject to loans
For purposes of this section -
(A) payments with respect to securities loans (as defined in
section 512(a)(5)) shall be deemed to be derived from the
securities loaned and not from collateral security or the
investment of collateral security from such loans,
(B) any deductions which are directly connected with
collateral security for such loan, or with the investment of
collateral security, shall be deemed to be deductions which are
directly connected with the securities loaned, and
(C) an obligation to return collateral security shall not be
treated as acquisition indebtedness (as defined in paragraph
(1)).
(9) Real property acquired by a qualified organization
(A) In general
Except as provided in subparagraph (B), the term "acquisition
indebtedness" does not, for purposes of this section, include
indebtedness incurred by a qualified organization in acquiring
or improving any real property. For purposes of this paragraph,
an interest in a mortgage shall in no event be treated as real
property.
(B) Exceptions
The provisions of subparagraph (A) shall not apply in any
case in which -
(i) the price for the acquisition or improvement is not a
fixed amount determined as of the date of the acquisition or
the completion of the improvement;
(ii) the amount of any indebtedness or any other amount
payable with respect to such indebtedness, or the time for
making any payment of any such amount, is dependent, in whole
or in part, upon any revenue, income, or profits derived from
such real property;
(iii) the real property is at any time after the
acquisition leased by the qualified organization to the
person selling such property to such organization or to any
person who bears a relationship described in section 267(b)
or 707(b) to such person;
(iv) the real property is acquired by a qualified trust
from, or is at any time after the acquisition leased by such
trust to, any person who -
(I) bears a relationship which is described in
subparagraph (C), (E), or (G) of section 4975(e)(2) to any
plan with respect to which such trust was formed, or
(II) bears a relationship which is described in
subparagraph (F) or (H) of section 4975(e)(2) to any person
described in subclause (I);
(v) any person described in clause (iii) or (iv) provides
the qualified organization with financing in connection with
the acquisition or improvement; or
(vi) the real property is held by a partnership unless the
partnership meets the requirements of clauses (i) through (v)
and unless -
(I) all of the partners of the partnership are qualified
organizations,
(II) each allocation to a partner of the partnership
which is a qualified organization is a qualified allocation
(within the meaning of section 168(h)(6)), or
(III) such partnership meets the requirements of
subparagraph (E).
For purposes of subclause (I) of clause (vi), an organization
shall not be treated as a qualified organization if any income
of such organization is unrelated business taxable income.
(C) Qualified organization
For purposes of this paragraph, the term "qualified
organization" means -
(i) an organization described in section 170(b)(1)(A)(ii)
and its affiliated support organizations described in section
509(a)(3);
(ii) any trust which constitutes a qualified trust under
section 401; or
(iii) an organization described in section 501(c)(25).
(D) Other pass-thru entities; tiered entities
Rules similar to the rules of subparagraph (B)(vi) shall also
apply in the case of any pass-thru entity other than a
partnership and in the case of tiered partnerships and other
entities.
(E) Certain allocations permitted
(i) In general
A partnership meets the requirements of this subparagraph
if -
(I) the allocation of items to any partner which is a
qualified organization cannot result in such partner having
a share of the overall partnership income for any taxable
year greater than such partner's share of the overall
partnership loss for the taxable year for which such
partner's loss share will be the smallest, and
(II) each allocation with respect to the partnership has
substantial economic effect within the meaning of section
704(b)(2).
For purposes of this clause, items allocated under section
704(c) shall not be taken into account.
(ii) Special rules
(I) Chargebacks
Except as provided in regulations, a partnership may
without violating the requirements of this subparagraph
provide for chargebacks with respect to disproportionate
losses previously allocated to qualified organizations and
disproportionate income previously allocated to other
partners. Any chargeback referred to in the preceding
sentence shall not be at a ratio in excess of the ratio
under which the loss or income (as the case may be) was
allocated.
(II) Preferred rates of return, etc.
To the extent provided in regulations, a partnership may
without violating the requirements of this subparagraph
provide for reasonable preferred returns or reasonable
guaranteed payments.
(iii) Regulations
The Secretary shall prescribe such regulations as may be
necessary to carry out the purposes of this subparagraph,
including regulations which may provide for exclusion or
segregation of items.
(F) Special rules for organizations described in section
501(c)(25)
(i) In general
In computing under section 512 the unrelated business
taxable income of a disqualified holder of an interest in an
organization described in section 501(c)(25), there shall be
taken into account -
(I) as gross income derived from an unrelated trade or
business, such holder's pro rata share of the items of
income described in clause (ii)(I) of such organization,
and
(II) as deductions allowable in computing unrelated
business taxable income, such holder's pro rata share of
the items of deduction described in clause (ii)(II) of such
organization.
Such amounts shall be taken into account for the taxable year
of the holder in which (or with which) the taxable year of
such organization ends.
(ii) Description of amounts
For purposes of clause (i) -
(I) gross income is described in this clause to the
extent such income would (but for this paragraph) be
treated under subsection (a) as derived from an unrelated
trade or business, and
(II) any deduction is described in this clause to the
extent it would (but for this paragraph) be allowable under
subsection (a)(2) in computing unrelated business taxable
income.
(iii) Disqualified holder
For purposes of this subparagraph, the term "disqualified
holder" means any shareholder (or beneficiary) which is not
described in clause (i) or (ii) of subparagraph (C).
(G) Special rules for purposes of the exceptions
Except as otherwise provided by regulations -
(i) Small leases disregarded
For purposes of clauses (iii) and (iv) of subparagraph (B),
a lease to a person described in such clause (iii) or (iv)
shall be disregarded if no more than 25 percent of the
leasable floor space in a building (or complex of buildings)
is covered by the lease and if the lease is on commercially
reasonable terms.
(ii) Commercially reasonable financing
Clause (v) of subparagraph (B) shall not apply if the
financing is on commercially reasonable terms.
(H) Qualifying sales by financial institutions
(i) In general
In the case of a qualifying sale by a financial
institution, except as provided in regulations, clauses (i)
and (ii) of subparagraph (B) shall not apply with respect to
financing provided by such institution for such sale.
(ii) Qualifying sale
For purposes of this clause, there is a qualifying sale by
a financial institution if -
(I) a qualified organization acquires property described
in clause (iii) from a financial institution and any gain
recognized by the financial institution with respect to the
property is ordinary income,
(II) the stated principal amount of the financing
provided by the financial institution does not exceed the
amount of the outstanding indebtedness (including accrued
but unpaid interest) of the financial institution with
respect to the property described in clause (iii)
immediately before the acquisition referred to in clause
(iii) or (v), whichever is applicable, and
(III) the present value (determined as of the time of the
sale and by using the applicable Federal rate determined
under section 1274(d)) of the maximum amount payable
pursuant to the financing that is determined by reference
to the revenue, income, or profits derived from the
property cannot exceed 30 percent of the total purchase
price of the property (including the contingent payments).
(iii) Property to which subparagraph applies
Property is described in this clause if such property is
foreclosure property, or is real property which -
(I) was acquired by the qualified organization from a
financial institution which is in conservatorship or
receivership, or from the conservator or receiver of such
an institution, and
(II) was held by the financial institution at the time it
entered into conservatorship or receivership.
(iv) Financial institution
For purposes of this subparagraph, the term "financial
institution" means -
(I) any financial institution described in section 581 or
591(a),
(II) any other corporation which is a direct or indirect
subsidiary of an institution referred to in subclause (I)
but only if, by virtue of being affiliated with such
institution, such other corporation is subject to
supervision and examination by a Federal or State agency
which regulates institutions referred to in subclause (I),
and
(III) any person acting as a conservator or receiver of
an entity referred to in subclause (I) or (II) (or any
government agency or corporation succeeding to the rights
or interest of such person).
(v) Foreclosure property
For purposes of this subparagraph, the term "foreclosure
property" means any real property acquired by the financial
institution as the result of having bid on such property at
foreclosure, or by operation of an agreement or process of
law, after there was a default (or a default was imminent) on
indebtedness which such property secured.
(d) Basis of debt-financed property acquired in corporate
liquidation
For purposes of this subtitle, if the property was acquired in a
complete or partial liquidation of a corporation in exchange for
its stock, the basis of the property shall be the same as it would
be in the hands of the transferor corporation, increased by the
amount of gain recognized to the transferor corporation upon such
distribution and by the amount of any gain to the organization
which was included, on account of such distribution, in unrelated
business taxable income under subsection (a).
(e) Allocation rules
Where debt-financed property is held for purposes described in
subsection (b)(1)(A), (B), (C), or (D) as well as for other
purposes, proper allocation shall be made with respect to basis,
indebtedness, and income and deductions. The allocations required
by this section shall be made in accordance with regulations
prescribed by the Secretary to the extent proper to carry out the
purposes of this section.
(f) Personal property leased with real property
For purposes of this section, the term "real property" includes
personal property of the lessor leased by it to a lessee of its
real estate if the lease of such personal property is made under,
or in connection with, the lease of such real estate.
(g) Regulations
The Secretary shall prescribe such regulations as may be
necessary or appropriate to carry out the purposes of this section,
including regulations to prevent the circumvention of any provision
of this section through the use of segregated asset accounts.
-SOURCE-
(Aug. 16, 1954, ch. 736, 68A Stat. 172; Pub. L. 86-667, Sec. 5,
July 14, 1960, 74 Stat. 536; Pub. L. 91-172, title I, Sec.
121(d)(1), (3)(A), (B), Dec. 30, 1969, 83 Stat. 543, 548; Pub. L.
93-625, Sec. 7(b)(2), Jan. 3, 1975, 88 Stat. 2115; Pub. L. 94-455,
title XIII, Sec. 1308(a), title XIX, Secs. 1901(a)(72),
1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1729, 1776, 1834; Pub. L.
95-345, Sec. 2(c), Aug. 15, 1978, 92 Stat. 482; Pub. L. 96-605,
title I, Sec. 110(a), Dec. 28, 1980, 94 Stat. 3525; Pub. L. 98-369,
div. A, title I, Sec. 174(b)(5)(B), title X, Sec. 1034(a), (b),
July 18, 1984, 98 Stat. 707, 1039, 1040; Pub. L. 99-514, title II,
Sec. 201(d)(9), title XVI, Sec. 1603(b), title XVIII, Sec. 1878(e),
Oct. 22, 1986, 100 Stat. 2141, 2768, 2903; Pub. L. 100-203, title
X, Sec. 10214(a), (b), Dec. 22, 1987, 101 Stat. 1330-407; Pub. L.
100-647, title I, Secs. 1016(a)(5)(A), (6), 1018(u)(13), title II,
Sec. 2004(h), Nov. 10, 1988, 102 Stat. 3574, 3575, 3590, 3603; Pub.
L. 101-239, title VII, Sec. 7811(l), Dec. 19, 1989, 103 Stat. 2412;
Pub. L. 103-66, title XIII, Sec. 13144(a), (b), Aug. 10, 1993, 107
Stat. 441, 442.)
-REFTEXT-
REFERENCES IN TEXT
The Tax Reform Act of 1976, referred to in subsec.
(b)(3)(C)(iii), is Pub. L. 94-455, Oct. 4, 1976, 90 Stat. 1520, as
amended, which was enacted Oct. 4, 1976. For complete
classification of this Act to the Code, see Tables.
-MISC1-
AMENDMENTS
1993 - Subsec. (c)(9)(A). Pub. L. 103-66, Sec. 13144(b)(1),
inserted at end "For purposes of this paragraph, an interest in a
mortgage shall in no event be treated as real property."
Subsec. (c)(9)(B). Pub. L. 103-66, Sec. 13144(b)(2), struck out
at end "For purposes of this paragraph, an interest in a mortgage
shall in no event be treated as real property."
Subsec. (c)(9)(G), (H). Pub. L. 103-66, Sec. 13144(a), added
subpars. (G) and (H).
1989 - Subsec. (c)(9)(E), (F). Pub. L. 101-239 redesignated the
subpar. (E), relating to special rules for organizations described
in section 501(c)(25), as (F).
1988 - Subsec. (c)(9)(B). Pub. L. 100-647, Sec. 1016(a)(6),
substituted "this paragraph" for "clause (vi)" in last sentence.
Pub. L. 100-647, Sec. 1018(u)(13)(A), amended directory language
of Pub. L. 99-514, Sec. 1878(e)(1), (3), to clarify that general
amendment by section 1878(e)(3) included concluding provision as
well as cl. (vi) and that amendment by section 1878(e)(1) should
have been to the concluding provisions as amended by section
1878(e)(3).
Subsec. (c)(9)(E). Pub. L. 100-647, Sec. 1016(a)(5)(A), added
subpar. (E) relating to special rules for organizations described
in section 501(c)(25).
Subsec. (c)(9)(E)(i). Pub. L. 100-647, Sec. 2004(h)(2), in
subsec. (c)(9)(E), relating to certain allocations permitted,
redesignated subcls. (II) and (III) as (I) and (II), respectively,
and struck out former subcl. (I) which read as follows: "the
allocation of items to any partner other than a qualified
organization cannot result in such partner having a share of the
overall partnership loss for any taxable year greater than such
partner's share of the overall partnership income for the taxable
year for which such partner's income share will be the smallest,".
Subsec. (c)(9)(E)(iii). Pub. L. 100-647, Sec. 2004(h)(1), in
subsec. (c)(9)(E) relating to certain allocations permitted, added
cl. (iii).
1987 - Subsec. (c)(9)(B)(vi). Pub. L. 100-203, Sec. 10214(a),
amended cl. (vi) generally. Prior to amendment, cl. (vi) read as
follows: "the real property is held by a partnership (which does
not fail to meet the requirements of clauses (i) through (v)), and
-
"(I) any partner of the partnership is not a qualified
organization, and
"(II) the principal purpose of any allocation to any partner of
the partnership which is a qualified organization which is not a
qualified allocation (within the meaning of section 168(h)(6)) is
the avoidance of income tax."
Subsec. (c)(9)(E). Pub. L. 100-203, Sec. 10214(b), added subpar.
(E).
1986 - Subsec. (c)(9)(B). Pub. L. 99-514, Sec. 1878(e)(1), as
amended by Pub. L. 100-647, Sec. 1018(u)(13)(A), which directed
amendment of penultimate sentence by substituting "is unrelated
business taxable income" for "would be unrelated business taxable
income (determined without regard to this paragraph)", was executed
by making the substitution for "would be unrelated business taxable
income (determined without regard to this paragraph", as the
probable intent of Congress.
Pub. L. 99-514, Sec. 1878(e)(3), as amended by Pub. L. 100-647,
Sec. 1018(u)(13)(B), amended concluding provisions generally. Prior
to amendment, concluding provisions read as follows: "For purposes
of clause (vi)(I), an organization shall not be treated as a
qualified organization if any income of such organization would be
unrelated business taxable income (determined without regard to
this paragraph)."
Subsec. (c)(9)(B)(vi). Pub. L. 99-514, Sec. 1878(e)(3), as
amended by Pub. L. 100-647, Sec. 1018(u)(13)(B), amended cl. (vi)
generally. Prior to amendment, cl. (vi) read as follows: "the real
property is held by a partnership unless the partnership meets the
requirements of clauses (i) through (v) and unless -
"(I) all of the partners of the partnership are qualified
organizations, or
"(II) each allocation to a partner of the partnership which is
a qualified organization is a qualified allocation (within the
meaning of section 168(j)(9))."
Subsec. (c)(9)(B)(vi)(II). Pub. L. 99-514, Sec. 201(d)(9),
substituted "section 168(h)(6)" for "section 168(j)(9)".
Subsec. (c)(9)(C)(i). Pub. L. 99-514, Sec. 1878(e)(2),
substituted "section 509(a)(3)" for "section 509(a)".
Subsec. (c)(9)(C)(iii). Pub. L. 99-514, Sec. 1603(b), added cl.
(iii).
1984 - Subsec. (c)(9). Pub. L. 98-369, Sec. 1034(a), amended par.
(9) generally, substituting provisions relating to real property
acquired by a qualified organization for provisions relating to
real property acquired by a qualified trust, with "qualified
organization" expanded to include trusts constituting qualified
trusts under section 401 of this title as well as organizations
described in section 170(b)(1)(A)(ii) of this title and their
affiliated support organizations described in section 509(a) of
this title.
Subsec. (c)(9)(B)(iii). Pub. L. 98-369, Sec. 174(b)(5)(B),
inserted reference to section 707(b).
Subsec. (g). Pub. L. 98-369, Sec. 1034(b), added subsec. (g).
1980 - Subsec. (c)(9). Pub. L. 96-605 added par. (9).
1978 - Subsec. (c)(8). Pub. L. 95-345 added par. (8).
1976 - Subsecs. (a)(1), (b)(3)(A), (B)(ii). Pub. L. 94-455, Sec.
1906(b)(13)(A), struck out "or his delegate" after "Secretary".
Subsec. (b)(3)(C)(iii). Pub. L. 94-455, Sec. 1901(a)(72)(C),
substituted "(as defined in this section immediately before the
enactment of the Tax Reform Act of 1976)" for "as (defined in
subsection (f))" after "is a business lease".
Subsec. (c)(1). Pub. L. 94-455, Sec. 1901(a)(72)(A), struck out
exception following subpar. (C) that in any taxable year beginning
before January 1, 1972, any acquisition indebtedness incurred prior
to June 28, 1966, would not be taken into account except for
business lease indebtedness of certain organizations.
Subsec. (c)(2)(C). Pub. L. 94-455, Sec. 1308(a), added subpar.
(C).
Subsecs. (c)(7), (e). Pub. L. 94-455, Sec. 1906(b)(13)(A), struck
out "or his delegate" after "Secretary".
Subsec. (f). Pub. L. 94-455, Sec. 1901(a)(72(B), struck out
subsec. (f) relating to definition of business lease, special rules
applicable to such leases, and exceptions to the definition and
applicable rules, and redesignated subsec. (h) as (f).
Subsec. (g). Pub. L. 94-455, Sec. 1901(a)(72)(B), struck out
subsec. (g) relating to definition and special rules applicable to
business lease indebtedness.
Subsec. (h). Pub. L. 94-455, Sec. 1901(a)(72)(B), redesignated
subsec. (h) as (f).
1975 - Subsec. (b)(3)(D). Pub. L. 93-625 struck out last sentence
providing for allowance and payment of interest on any overpayment
for a taxable year resulting from application of subpar. (B) after
actual use condition was satisfied at rate of 4 in lieu of 6
percent per annum.
1969 - Subsec. (a). Pub. L. 91-172, Sec. 121(d)(1), substituted
"Unrelated debt-financed income" for "Business leases" in heading
and substituted in text material covering unrelated debt-financed
income and deductions for material covering business lease rents
and deductions.
Subsecs. (b) to (e). Pub. L. 91-172, Sec. 121(d)(1), (3)(A),
added subsecs. (b), (c), (d) and (e). Former subsecs. (b), (c), and
(d) redesignated (f), (g), and (h), respectively.
Subsec. (f). Pub. L. 91-172, Sec. 121(d)(3)(A), (B), redesignated
subsec. (b) as subsec. (f), and, in par. (1) of subsec. (f) as so
redesignated, substituted reference to subsec. (g) for reference to
subsec. (c).
Subsecs. (g), (h). Pub. L. 91-172, Sec. 121(d)(3)(A),
redesignated subsecs. (c) and (d) as (g) and (h), respectively.
1960 - Subsec. (c)(8). Pub. L. 86-667 added par. (8).
EFFECTIVE DATE OF 1993 AMENDMENT
Section 13144(c) of Pub. L. 103-66 provided that:
"(1) In general. - The amendments made by this section [amending
this section] shall apply to acquisitions on or after January 1,
1994.
"(2) Small leases. - The provisions of section 514(c)(9)(G)(i) of
the Internal Revenue Code of 1986 shall, in addition to any leases
to which the provisions apply by reason of paragraph (1), apply to
leases entered into on or after January 1, 1994."
EFFECTIVE DATE OF 1989 AMENDMENT
Amendment by Pub. L. 101-239 effective, except as otherwise
provided, as if included in the provision of the Technical and
Miscellaneous Revenue Act of 1988, Pub. L. 100-647, to which such
amendment relates, see section 7817 of Pub. L. 101-239, set out as
a note under section 1 of this title.
EFFECTIVE DATE OF 1988 AMENDMENT
Section 1016(a)(5)(B) of Pub. L. 100-647 provided that: "The
amendment made by subparagraph (A) [amending this section] shall
apply with respect to interests in the organization acquired after
June 10, 1987, except that such amendment shall not apply to any
such interest acquired after June 10, 1987, pursuant to a binding
written contract in effect on June 10, 1987, and at all times
thereafter before such acquisition."
Amendment by sections 1016(a)(6) and 1018(u)(13) of Pub. L.
100-647 effective, except as otherwise provided, as if included in
the provision of the Tax Reform Act of 1986, Pub. L. 99-514, to
which such amendment relates, see section 1019(a) of Pub. L.
100-647, set out as a note under section 1 of this title.
Amendment by section 2004(h) of Pub. L. 100-647 effective, except
as otherwise provided, as if included in the provisions of the
Revenue Act of 1987, Pub. L. 100-203, title X, to which such
amendment relates, see section 2004(u) of Pub. L. 100-647, set out
as a note under section 56 of this title.
EFFECTIVE DATE OF 1987 AMENDMENT
Section 10214(c) of Pub. L. 100-203 provided that: "The
amendments made by this section [amending this section] shall apply
to -
"(1) property acquired by the partnership after October 13,
1987, and
"(2) partnership interests acquired after October 13, 1987,
except that such amendments shall not apply in the case of any
property (or partnership interest) acquired pursuant to a written
binding contract in effect on October 13, 1987, and at all times
thereafter before such property (or interest) is acquired."
EFFECTIVE DATE OF 1986 AMENDMENT
Amendment by section 201(d)(9) of Pub. L. 99-514 applicable to
property placed in service after Dec. 31, 1986, in taxable years
ending after such date, with exceptions, see sections 203 and 204
of Pub. L. 99-514, set out as a note under section 168 of this
title.
Amendment by section 201(d)(9) of Pub. L. 99-514 not applicable
to any property placed in service before Jan. 1, 1994, if such
property placed in service as part of specified rehabilitations,
and not applicable to certain additional rehabilitations, see
section 251(d)(2), (3) of Pub. L. 99-514, set out as a note under
section 46 of this title.
Amendment by section 1603(b) of Pub. L. 99-514 applicable to
taxable years beginning after Dec. 31, 1986, see section 1603(c) of
Pub. L. 99-514, set out as a note under section 501 of this title.
Amendment by section 1878(e) of Pub. L. 99-514 effective, except
as otherwise provided, as if included in the provisions of the Tax
Reform Act of 1984, Pub. L. 98-369, div. A, to which such amendment
relates, see section 1881 of Pub. L. 99-514, set out as a note
under section 48 of this title.
EFFECTIVE DATE OF 1984 AMENDMENT
Amendment by section 174(b)(5)(B) of Pub. L. 98-369 applicable to
transactions after Dec. 31, 1983, in taxable years ending after
that date, see section 174(c)(2)(A) of Pub. L. 98-369, set out as a
note under section 267 of this title.
Section 1034(c) of Pub. L. 98-369 provided that:
"(1) In general. - The amendments made by this section [amending
this section] shall apply to indebtedness incurred after the date
of the enactment of this Act [July 18, 1984].
"(2) Exception for indebtedness on certain property acquired
before january 1, 1985. -
"(A) The amendment made by subsection (a) [amending this
section] shall not apply to any indebtedness incurred before
January 1, 1985, by a partnership described in subparagraph (B)
if such indebtedness is incurred with respect to property
acquired (directly or indirectly) by such partnership before such
date.
"(B) A partnership is described in this subparagraph if -
"(i) before October 21, 1983, the partnership was organized,
a request for exemption with respect to such partnership was
filed with the Department of Labor, and a private placement
memorandum stating the maximum number of units in the
partnership that would be offered had been circulated,
"(ii) the interest in the property to be acquired, directly
or indirectly (including through acquiring an interest in
another partnership) by such partnership was described in such
private placement memorandum, and
"(iii) the marketing of partnership interests in such
partnership is completed not later than 2 years after the later
of the date of enactment of this Act [July 18, 1984] or the
date of publication in the Federal Register of such exemption
by the Department of Labor and the aggregate number of units in
such partnership sold does not exceed the amount described in
clause (i).
"(3) Exception for indebtedness on certain property acquired
before january 1, 1986. -
"(A) The amendment made by subsection (a) [amending this
section] shall not apply to any indebtedness incurred before
January 1, 1986, by a partnership described in subparagraph (B)
if such indebtedness is incurred with respect to property
acquired (directly or indirectly) by such partnership before such
date.
"(B) A partnership is described in this paragraph if -
"(i) before March 6, 1984, the partnership was organized and
publicly announced, the maximum amount of interests which would
be sold in such partnership, and
"(ii) the marketing of partnership interests in such
partnership is completed not later than the 90th day after the
date of the enactment of this Act [July 18, 1984] and the
aggregate amount of interests in such partnership sold does not
exceed the maximum amount described in clause (i).
For purposes of clause (i), the maximum amount taken into account
shall be the greatest of the amounts shown in the registration
statement, prospectus, or partnership agreement.
"(C) Binding contracts. - For purposes of this paragraph,
property shall be deemed to have been acquired before January 1,
1986, if such property is acquired pursuant to a written contract
which, on January 1, 1986, and at all times thereafter, required
the acquisition of such property and such property is placed in
service not later than 6 months after the date such contract was
entered into."
EFFECTIVE DATE OF 1980 AMENDMENT
Section 110(c) of Pub. L. 96-605 provided that: "The amendment
made by subsection (a) [amending this section] shall apply to
taxable years beginning after December 31, 1980."
EXTENSION OF 1980 AMENDMENT OF THIS SECTION TO OTHER PERSONS
Section 110(b) of Pub. L. 96-605 provided that: "The amendment
made by subsection (a) [amending this section] shall not be
considered a precedent with respect to extending such amendment (or
similar rules) to any other person."
EFFECTIVE DATE OF 1978 AMENDMENT
Amendment by Pub. L. 95-345 applicable with respect to amounts
received after Dec. 31, 1976, as payments with respect to
securities loans (as defined in section 512(a)(5) of this title),
and transfers of securities, under agreements described in section
1058 of this title, occurring after such date, see section 2(e) of
Pub. L. 95-345, set out as a note under section 509 of this title.
EFFECTIVE DATE OF 1976 AMENDMENT
Section 1308(b) of Pub. L. 94-455 provided that: "The amendment
made by this section [amending this section] shall apply to taxable
years ending after December 31, 1969."
Amendment by section 1901(a)(72) of Pub. L. 94-455 applicable
with respect to taxable years beginning after Dec. 31, 1976, see
section 1901(d) of Pub. L. 94-455, set out as a note under section
2 of this title.
EFFECTIVE DATE OF 1975 AMENDMENT
Amendment by Pub. L. 93-625 effective July 1, 1975, and
applicable to amounts outstanding on such date or arising
thereafter, see section 7(e) of Pub. L. 93-625, set out as an
Effective Date note under section 6621 of this title.
EFFECTIVE DATE OF 1969 AMENDMENT
Amendment by Pub. L. 91-172 applicable to taxable years beginning
after Dec. 31, 1969, and to the manner of treatment to be accorded
indebtednesses secured by certain mortgages on properties
bargain-purchased before Oct. 9, 1969, see section 121(g) of Pub.
L. 91-172, set out as a note under section 511 of this title.
EFFECTIVE DATE OF 1960 AMENDMENT
Amendment by Pub. L. 86-667 applicable to taxable years beginning
after Dec. 31, 1959, see section 6 of Pub. L. 86-667, set out as a
note under section 501 of this title.
PLAN AMENDMENTS NOT REQUIRED UNTIL JANUARY 1, 1989
For provisions directing that if any amendments made by subtitle
A or subtitle C of title XI [Secs. 1101-1147 and 1171-1177] or
title XVIII [Secs. 1800-1899A] of Pub. L. 99-514 require an
amendment to any plan, such plan amendment shall not be required to
be made before the first plan year beginning on or after Jan. 1,
1989, see section 1140 of Pub. L. 99-514, as amended, set out as a
note under section 401 of this title.
TRANSITION RULE FOR ACQUISITION INDEBTEDNESS WITH RESPECT TO
CERTAIN LAND
Section 1607 of Pub. L. 99-514 provided that: "For purposes of
applying section 514(c) of the Internal Revenue Code of 1986, with
respect to a disposition during calendar year 1986 or calendar year
1987 of land acquired during calendar year 1984, the term
'acquisition indebtedness' does not include indebtedness incurred
in connection with bonds issued after January 1, 1984, and before
July 19, 1984, on behalf of an organization which is a community
college and which is described in section 511(a)(2)(B) of such
Code."
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 50, 168, 512, 529, 4942
of this title.
-End-
-CITE-
26 USC Sec. 515 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter F - Exempt Organizations
PART III - TAXATION OF BUSINESS INCOME OF CERTAIN EXEMPT
ORGANIZATIONS
-HEAD-
Sec. 515. Taxes of foreign countries and possessions of the United
States
-STATUTE-
The amount of taxes imposed by foreign countries and possessions
of the United States shall be allowed as a credit against the tax
of an organization subject to the tax imposed by section 511 to the
extent provided in section 901; and in the case of the tax imposed
by section 511, the term "taxable income" as used in section 901
shall be read as "unrelated business taxable income".
-SOURCE-
(Aug. 16, 1954, ch. 736, 68A Stat. 176.)
-End-
-CITE-
26 USC PART IV - FARMERS' COOPERATIVES 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter F - Exempt Organizations
PART IV - FARMERS' COOPERATIVES
-HEAD-
PART IV - FARMERS' COOPERATIVES
-MISC1-
Sec.
521. Exemption of farmers' cooperatives from tax.
[522. Repealed.]
AMENDMENTS
1969 - Pub. L. 91-172, title I, Sec. 101(a), Dec. 30, 1969, 83
Stat. 492, substituted "PART IV" for "PART III" as part
designation.
1962 - Pub. L. 87-834, Sec. 17(b)(5), Oct. 16, 1962, 76 Stat.
1051, struck out item 522 "Tax on farmers' cooperatives".
-SECREF-
PART REFERRED TO IN OTHER SECTIONS
This part is referred to in section 501 of this title.
-End-
-CITE-
26 USC Sec. 521 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter F - Exempt Organizations
PART IV - FARMERS' COOPERATIVES
-HEAD-
Sec. 521. Exemption of farmers' cooperatives from tax
-STATUTE-
(a) Exemption from tax
A farmers' cooperative organization described in subsection
(b)(1) shall be exempt from taxation under this subtitle except as
otherwise provided in part I of subchapter T (sec. 1381 and
following). Notwithstanding part I of subchapter T (sec. 1381 and
following), such an organization shall be considered an
organization exempt from income taxes for purposes of any law which
refers to organizations exempt from income taxes.
(b) Applicable rules
(1) Exempt farmers' cooperatives
The farmers' cooperatives exempt from taxation to the extent
provided in subsection (a) are farmers', fruit growers', or like
associations organized and operated on a cooperative basis (A)
for the purpose of marketing the products of members or other
producers, and turning back to them the proceeds of sales, less
the necessary marketing expenses, on the basis of either the
quantity or the value of the products furnished by them, or (B)
for the purpose of purchasing supplies and equipment for the use
of members or other persons, and turning over such supplies and
equipment to them at actual cost, plus necessary expenses.
(2) Organizations having capital stock
Exemption shall not be denied any such association because it
has capital stock, if the dividend rate of such stock is fixed at
not to exceed the legal rate of interest in the State of
incorporation or 8 percent per annum, whichever is greater, on
the value of the consideration for which the stock was issued,
and if substantially all such stock (other than nonvoting
preferred stock, the owners of which are not entitled or
permitted to participate, directly or indirectly, in the profits
of the association, upon dissolution or otherwise, beyond the
fixed dividends) is owned by producers who market their products
or purchase their supplies and equipment through the association.
(3) Organizations maintaining reserve
Exemption shall not be denied any such association because
there is accumulated and maintained by it a reserve required by
State law or a reasonable reserve for any necessary purpose.
(4) Transactions with nonmembers
Exemption shall not be denied any such association which
markets the products of nonmembers in an amount the value of
which does not exceed the value of the products marketed for
members, or which purchases supplies and equipment for nonmembers
in an amount the value of which does not exceed the value of the
supplies and equipment purchased for members, provided the value
of the purchases made for persons who are neither members nor
producers does not exceed 15 percent of the value of all its
purchases.
(5) Business for the United States
Business done for the United States or any of its agencies
shall be disregarded in determining the right to exemption under
this section.
(6) Netting of losses
Exemption shall not be denied any such association because such
association computes its net earnings for purposes of determining
any amount available for distribution to patrons in the manner
described in paragraph (1) of section 1388(j).
-SOURCE-
(Aug. 16, 1954, ch. 736, 68A Stat. 176; Pub. L. 87-834, Sec.
17(b)(1), Oct. 16, 1962, 76 Stat. 1051; Pub. L. 99-272, title XIII,
Sec. 13210(b), Apr. 7, 1986, 100 Stat. 324.)
-MISC1-
AMENDMENTS
1986 - Subsec. (b)(6). Pub. L. 99-272 added par. (6).
1962 - Subsec. (a). Pub. L. 87-834 substituted "part I of
subchapter T (sec. 1381 and following)" for "section 522" in two
places.
EFFECTIVE DATE OF 1986 AMENDMENT
Amendment by Pub. L. 99-272 applicable to taxable years beginning
after Dec. 31, 1962, see section 13210(c) of Pub. L. 99-272, set
out as a note under section 1388 of this title.
EFFECTIVE DATE OF 1962 AMENDMENT
Amendment by Pub. L. 87-834 applicable, except as otherwise
provided, to taxable years of organizations described in section
1381(a) of this title beginning after Dec. 31, 1962, see section
17(c) of Pub. L. 87-834, set out as an Effective Date note under
section 1381 of this title.
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 1, 50, 52, 168, 246, 337,
854, 860E, 1022, 1245, 1250, 1381, 1388, 3306, 4421, 6044 of this
title; title 15 section 77c.
-End-
-CITE-
26 USC Sec. 522 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter F - Exempt Organizations
PART IV - FARMERS' COOPERATIVES
-HEAD-
[Sec. 522. Repealed. Pub. L. 87-834, Sec. 17(b)(2), Oct. 16, 1962,
76 Stat. 1051]
-MISC1-
Section, act Aug. 16, 1954, ch. 736, 68A Stat. 177, related to
tax on farmers' cooperatives.
EFFECTIVE DATE OF REPEAL
Repeal applicable, except as otherwise provided, to taxable years
of organizations described in section 1381(a) of this title
beginning after Dec. 31, 1962, see section 17(c) of Pub. L. 87-834,
set out as an Effective Date note under section 1381 of this title.
-End-
-CITE-
26 USC PART V - SHIPOWNERS' PROTECTION AND INDEMNITY
ASSOCIATIONS 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter F - Exempt Organizations
PART V - SHIPOWNERS' PROTECTION AND INDEMNITY ASSOCIATIONS
-HEAD-
PART V - SHIPOWNERS' PROTECTION AND INDEMNITY ASSOCIATIONS
-MISC1-
Sec.
526. Shipowners' protection and indemnity associations.
AMENDMENTS
1969 - Pub. L. 91-172, title I, Sec. 101(a), Dec. 30, 1969, 83
Stat. 492, substituted "PART V" for "PART IV" as part designation.
-End-
-CITE-
26 USC Sec. 526 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter F - Exempt Organizations
PART V - SHIPOWNERS' PROTECTION AND INDEMNITY ASSOCIATIONS
-HEAD-
Sec. 526. Shipowners' protection and indemnity associations
-STATUTE-
There shall not be included in gross income the receipts of
shipowners' mutual protection and indemnity associations not
organized for profit, and no part of the net earnings of which
inures to the benefit of any private shareholder; but such
corporations shall be subject as other persons to the tax on their
taxable income from interest, dividends, and rents.
-SOURCE-
(Aug. 16, 1954, ch. 736, 68A Stat. 178.)
-End-
-CITE-
26 USC PART VI - POLITICAL ORGANIZATIONS 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter F - Exempt Organizations
PART VI - POLITICAL ORGANIZATIONS
-HEAD-
PART VI - POLITICAL ORGANIZATIONS
-MISC1-
Sec.
527. Political organizations.
-SECREF-
PART REFERRED TO IN OTHER SECTIONS
This part is referred to in section 501 of this title.
-End-
-CITE-
26 USC Sec. 527 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter F - Exempt Organizations
PART VI - POLITICAL ORGANIZATIONS
-HEAD-
Sec. 527. Political organizations
-STATUTE-
(a) General rule
A political organization shall be subject to taxation under this
subtitle only to the extent provided in this section. A political
organization shall be considered an organization exempt from income
taxes for the purpose of any law which refers to organizations
exempt from income taxes.
(b) Tax imposed
(1) In general
A tax is hereby imposed for each taxable year on the political
organization taxable income of every political organization. Such
tax shall be computed by multiplying the political organization
taxable income by the highest rate of tax specified in section
11(b).
(2) Alternative tax in case of capital gains
If for any taxable year any political organization has a net
capital gain, then, in lieu of the tax imposed by paragraph (1),
there is hereby imposed a tax (if such a tax is less than the tax
imposed by paragraph (1)) which shall consist of the sum of -
(A) a partial tax, computed as provided by paragraph (1), on
the political organization taxable income determined by
reducing such income by the amount of such gain, and
(B) an amount determined as provided in section 1201(a) on
such gain.
(c) Political organization taxable income defined
(1) Taxable income defined
For purposes of this section, the political organization
taxable income of any organization for any taxable year is an
amount equal to the excess (if any) of -
(A) the gross income for the taxable year (excluding any
exempt function income), over
(B) the deductions allowed by this chapter which are directly
connected with the production of the gross income (excluding
exempt function income), computed with the modifications
provided in paragraph (2).
(2) Modifications
For purposes of this subsection -
(A) there shall be allowed a specific deduction of $100,
(B) no net operating loss deduction shall be allowed under
section 172, and
(C) no deduction shall be allowed under part VIII of
subchapter B (relating to special deductions for corporations).
(3) Exempt function income
For purposes of this subsection, the term "exempt function
income" means any amount received as -
(A) a contribution of money or other property,
(B) membership dues, a membership fee or assessment from a
member of the political organization,
(C) proceeds from a political fundraising or entertainment
event, or proceeds from the sale of political campaign
materials, which are not received in the ordinary course of any
trade or business, or
(D) proceeds from the conducting of any bingo game (as
defined in section 513(f)(2)),
to the extent such amount is segregated for use only for the
exempt function of the political organization.
(d) Certain uses not treated as income to candidate
For purposes of this title, if any political organization -
(1) contributes any amount to or for the use of any political
organization which is treated as exempt from tax under subsection
(a) of this section,
(2) contributes any amount to or for the use of any
organization described in paragraph (1) or (2) of section 509(a)
which is exempt from tax under section 501(a), or
(3) deposits any amount in the general fund of the Treasury or
in the general fund of any State or local government,
such amount shall be treated as an amount not diverted for the
personal use of the candidate or any other person. No deduction
shall be allowed under this title for the contribution or deposit
of any amount described in the preceding sentence.
(e) Other definitions
For purposes of this section -
(1) Political organization
The term "political organization" means a party, committee,
association, fund, or other organization (whether or not
incorporated) organized and operated primarily for the purpose of
directly or indirectly accepting contributions or making
expenditures, or both, for an exempt function.
(2) Exempt function
The term "exempt function" means the function of influencing or
attempting to influence the selection, nomination, election, or
appointment of any individual to any Federal, State, or local
public office or office in a political organization, or the
election of Presidential or Vice-Presidential electors, whether
or not such individual or electors are selected, nominated,
elected, or appointed. Such term includes the making of
expenditures relating to an office described in the preceding
sentence which, if incurred by the individual, would be allowable
as a deduction under section 162(a).
(3) Contributions
The term "contributions" has the meaning given to such term by
section 271(b)(2).
(4) Expenditures
The term "expenditures" has the meaning given to such term by
section 271(b)(3).
(5) Qualified State or local political organization
(A) In general
The term "qualified State or local political organization"
means a political organization -
(i) all the exempt functions of which are solely for the
purposes of influencing or attempting to influence the
selection, nomination, election, or appointment of any
individual to any State or local public office or office in a
State or local political organization,
(ii) which is subject to State law that requires the
organization to report (and it so reports) -
(I) information regarding each separate expenditure from
and contribution to such organization, and
(II) information regarding the person who makes such
contribution or receives such expenditure,
which would otherwise be required to be reported under this
section, and
(iii) with respect to which the reports referred to in
clause (ii) are (I) made public by the agency with which such
reports are filed, and (II) made publicly available for
inspection by the organization in the manner described in
section 6104(d).
(B) Certain State law differences disregarded
An organization shall not be treated as failing to meet the
requirements of subparagraph (A)(ii) solely by reason of 1 or
more of the following:
(i) The minimum amount of any expenditure or contribution
required to be reported under State law is not more than $300
greater than the minimum amount required to be reported under
subsection (j).
(ii) The State law does not require the organization to
identify 1 or more of the following:
(I) The employer of any person who makes contributions to
the organization.
(II) The occupation of any person who makes contributions
to the organization.
(III) The employer of any person who receives
expenditures from the organization.
(IV) The occupation of any person who receives
expenditures from the organization.
(V) The purpose of any expenditure of the organization.
(VI) The date any contribution was made to the
organization.
(VII) The date of any expenditure of the organization.
(C) De minimis errors
An organization shall not fail to be treated as a qualified
State or local political organization solely because such
organization makes de minimis errors in complying with the
State reporting requirements and the public inspection
requirements described in subparagraph (A) as long as the
organization corrects such errors within a reasonable period
after the organization becomes aware of such errors.
(D) Participation of Federal candidate or office holder
The term "qualified State or local political organization"
shall not include any organization otherwise described in
subparagraph (A) if a candidate for nomination or election to
Federal elective public office or an individual who holds such
office -
(i) controls or materially participates in the direction of
the organization,
(ii) solicits contributions to the organization (unless the
Secretary determines that such solicitations resulted in de
minimis contributions and were made without the prior
knowledge and consent, whether explicit or implicit, of the
organization or its officers, directors, agents, or
employees), or
(iii) directs, in whole or in part, disbursements by the
organization.
(f) Exempt organization, which is not political organization, must
include certain amounts in gross income
(1) In general
If an organization described in section 501(c) which is exempt
from tax under section 501(a) expends any amount during the
taxable year directly (or through another organization) for an
exempt function (within the meaning of subsection (e)(2)), then,
notwithstanding any other provision of law, there shall be
included in the gross income of such organization for the taxable
year, and shall be subject to tax under subsection (b) as if it
constituted political organization taxable income, an amount
equal to the lesser of -
(A) the net investment income of such organization for the
taxable year, or
(B) the aggregate amount so expended during the taxable year
for such an exempt function.
(2) Net investment income
For purposes of this subsection, the term "net investment
income" means the excess of -
(A) the gross amount of income from interest, dividends,
rents, and royalties, plus the excess (if any) of gains from
the sale or exchange of assets over the losses from the sale or
exchange of assets, over
(B) the deductions allowed by this chapter which are directly
connected with the production of the income referred to in
subparagraph (A).
For purposes of the preceding sentence, there shall not be taken
into account items taken into account for purposes of the tax
imposed by section 511 (relating to tax on unrelated business
income).
(3) Certain separate segregated funds
For purposes of this subsection and subsection (e)(1), a
separate segregated fund (within the meaning of section 610 of
title 18) or of any similar State statute, or within the meaning
of any State statute which permits the segregation of dues moneys
for exempt functions (within the meaning of subsection (e)(2))
which is maintained by an organization described in section
501(c) which is exempt from tax under section 501(a) shall be
treated as a separate organization.
(g) Treatment of newsletter funds
(1) In general
For purposes of this section, a fund established and maintained
by an individual who holds, has been elected to, or is a
candidate (within the meaning of paragraph (3)) for nomination or
election to, any Federal, State, or local elective public office,
for use by such individual exclusively for the preparation and
circulation of such individual's newsletter shall, except as
provided in paragraph (2), be treated as if such fund constituted
a political organization.
(2) Additional modifications
In the case of any fund described in paragraph (1) -
(A) the exempt function shall be only the preparation and
circulation of the newsletter, and
(B) the specific deduction provided by subsection (c)(2)(A)
shall not be allowed.
(3) Candidate
For purposes of paragraph (1), the term "candidate" means, with
respect to any Federal, State, or local elective public office,
an individual who -
(A) publicly announces that he is a candidate for nomination
or election to such office, and
(B) meets the qualifications prescribed by law to hold such
office.
(h) Special rule for principal campaign committees
(1) In general
In the case of a political organization, which is a principal
campaign committee, paragraph (1) of subsection (b) shall be
applied by substituting "the appropriate rates" for "the highest
rate".
(2) Principal campaign committee defined
(A) In general
For purposes of this subsection, the term "principal campaign
committee" means the political committee designated by a
candidate for Congress as his principal campaign committee for
purposes of -
(i) section 302(e) of the Federal Election Campaign Act of
1971 (2 U.S.C. 432(e)), and
(ii) this subsection.
(B) Designation
A candidate may have only 1 designation in effect under
subparagraph (A)(ii) at any time and such designation -
(i) shall be made at such time and in such manner as the
Secretary may prescribed by regulations, and
(ii) once made, may be revoked only with the consent of the
Secretary.
Nothing in this subsection shall be construed to require any
designation where there is only one political committee with
respect to a candidate.
(i) Organizations must notify Secretary that they are section 527
organizations
(1) In general
Except as provided in paragraph (5), an organization shall not
be treated as an organization described in this section -
(A) unless it has given notice to the Secretary
electronically that it is to be so treated, or
(B) if the notice is given after the time required under
paragraph (2), the organization shall not be so treated for any
period before such notice is given or, in the case of any
material change in the information required under paragraph
(3), for the period beginning on the date on which the material
change occurs and ending on the date on which such notice is
given.
(2) Time to give notice
The notice required under paragraph (1) shall be transmitted
not later than 24 hours after the date on which the organization
is established or, in the case of any material change in the
information required under paragraph (3), not later than 30 days
after such material change.
(3) Contents of notice
The notice required under paragraph (1) shall include
information regarding -
(A) the name and address of the organization (including any
business address, if different) and its electronic mailing
address,
(B) the purpose of the organization,
(C) the names and addresses of its officers, highly
compensated employees, contact person, custodian of records,
and members of its Board of Directors,
(D) the name and address of, and relationship to, any related
entities (within the meaning of section 168(h)(4)),
(E) whether the organization intends to claim an exemption
from the requirements of subsection (j) or section 6033, and
(F) such other information as the Secretary may require to
carry out the internal revenue laws.
(4) Effect of failure
In the case of an organization failing to meet the requirements
of paragraph (1) for any period, the taxable income of such
organization shall be computed by taking into account any exempt
function income (and any deductions directly connected with the
production of such income) or, in the case of a failure relating
to a material change, by taking into account such income and
deductions only during the period beginning on the date on which
the material change occurs and ending on the date on which notice
is given under this subsection. For purposes of the preceding
sentence, the term "exempt function income" means any amount
described in a subparagraph of subsection (c)(3), whether or not
segregated for use for an exempt function.
(5) Exceptions
This subsection shall not apply to any organization -
(A) to which this section applies solely by reason of
subsection (f)(1),
(B) which reasonably anticipates that it will not have gross
receipts of $25,000 or more for any taxable year, or
(C) which is a political committee of a State or local
candidate or which is a State or local committee of a political
party.
(6) Coordination with other requirements
This subsection shall not apply to any person required (without
regard to this subsection) to report under the Federal Election
Campaign Act of 1971 (2 U.S.C. 431 et seq.) as a political
committee.
(j) Required disclosure of expenditures and contributions
(1) Penalty for failure
In the case of -
(A) a failure to make the required disclosures under
paragraph (2) at the time and in the manner prescribed
therefor, or
(B) a failure to include any of the information required to
be shown by such disclosures or to show the correct
information,
there shall be paid by the organization an amount equal to the
rate of tax specified in subsection (b)(1) multiplied by the
amount to which the failure relates. For purposes of subtitle F,
the amount imposed by this paragraph shall be assessed and
collected in the same manner as penalties imposed by section
6652(c).
(2) Required disclosure
A political organization which accepts a contribution, or makes
an expenditure, for an exempt function during any calendar year
shall file with the Secretary either -
(A)(i) in the case of a calendar year in which a regularly
scheduled election is held -
(I) quarterly reports, beginning with the first quarter of
the calendar year in which a contribution is accepted or
expenditure is made, which shall be filed not later than the
fifteenth day after the last day of each calendar quarter,
except that the report for the quarter ending on December 31
of such calendar year shall be filed not later than January
31 of the following calendar year,
(II) a pre-election report, which shall be filed not later
than the twelfth day before (or posted by registered or
certified mail not later than the fifteenth day before) any
election with respect to which the organization makes a
contribution or expenditure, and which shall be complete as
of the twentieth day before the election, and
(III) a post-general election report, which shall be filed
not later than the thirtieth day after the general election
and which shall be complete as of the twentieth day after
such general election, and
(ii) in the case of any other calendar year, a report
covering the period beginning January 1 and ending June 30,
which shall be filed no later than July 31 and a report
covering the period beginning July 1 and ending December 31,
which shall be filed no later than January 31 of the following
calendar year, or
(B) monthly reports for the calendar year, beginning with the
first month of the calendar year in which a contribution is
accepted or expenditure is made, which shall be filed not later
than the twentieth day after the last day of the month and
shall be complete as if the last day of the month, except that,
in lieu of filing the reports otherwise due in November and
December of any year in which a regularly scheduled general
election is held, a pre-general election report shall be filed
in accordance with subparagraph (A)(i)(II), a post-general
election report shall be filed in accordance with subparagraph
(A)(i)(III), and a year end report shall be filed not later
than January 31 of the following calendar year.
(3) Contents of report
A report required under paragraph (2) shall contain the
following information:
(A) The amount, date, and purpose of each expenditure made to
a person if the aggregate amount of expenditures to such person
during the calendar year equals or exceeds $500 and the name
and address of the person (in the case of an individual,
including the occupation and name of employer of such
individual).
(B) The name and address (in the case of an individual,
including the occupation and name of employer of such
individual) of all contributors which contributed an aggregate
amount of $200 or more to the organization during the calendar
year and the amount and date of the contribution.
Any expenditure or contribution disclosed in a previous reporting
period is not required to be included in the current reporting
period.
(4) Contracts to spend or contribute
For purposes of this subsection, a person shall be treated as
having made an expenditure or contribution if the person has
contracted or is otherwise obligated to make the expenditure or
contribution.
(5) Coordination with other requirements
This subsection shall not apply -
(A) to any person required (without regard to this
subsection) to report under the Federal Election Campaign Act
of 1971 (2 U.S.C. 431 et seq.) as a political committee,
(B) to any State or local committee of a political party or
political committee of a State or local candidate,
(C) to any organization which is a qualified State or local
political organization,
(D) to any organization which reasonably anticipates that it
will not have gross receipts of $25,000 or more for any taxable
year,
(E) to any organization to which this section applies solely
by reason of subsection (f)(1), or
(F) with respect to any expenditure which is an independent
expenditure (as defined in section 301 of such Act).
(6) Election
For purposes of this subsection, the term "election" means -
(A) a general, special, primary, or runoff election for a
Federal office,
(B) a convention or caucus of a political party which has
authority to nominate a candidate for Federal office,
(C) a primary election held for the selection of delegates to
a national nominating convention of a political party, or
(D) a primary election held for the expression of a
preference for the nomination of individuals for election to
the office of President.
(7) Electronic filing
Any report required under paragraph (2) with respect to any
calendar year shall be filed in electronic form if the
organization has, or has reason to expect to have, contributions
exceeding $50,000 or expenditures exceeding $50,000 in such
calendar year.
(k) Public availability of notices and reports
(1) In general
The Secretary shall make any notice described in subsection
(i)(1) or report described in subsection (j)(7) available for
public inspection on the Internet not later than 48 hours after
such notice or report has been filed (in addition to such public
availability as may be made under section 6104(d)(7)).
(2) Access
The Secretary shall make the entire database of notices and
reports which are made available to the public under paragraph
(1) searchable by the following items (to the extent the items
are required to be included in the notices and reports):
(A) Names, States, zip codes, custodians of records,
directors, and general purposes of the organizations.
(B) Entities related to the organizations.
(C) Contributors to the organizations.
(D) Employers of such contributors.
(E) Recipients of expenditures by the organizations.
(F) Ranges of contributions and expenditures.
(G) Time periods of the notices and reports.
Such database shall be downloadable.
(l) Authority to waive
The Secretary may waive all or any portion of the -
(1) tax assessed on an organization by reason of the failure of
the organization to comply with the requirements of subsection
(i), or
(2) amount imposed under subsection (j) for a failure to comply
with the requirements thereof,
on a showing that such failure was due to reasonable cause and not
due to willful neglect.
-SOURCE-
(Added Pub. L. 93-625, Sec. 10(a), Jan. 3, 1975, 88 Stat. 2116;
amended Pub. L. 94-455, title XIX, Sec. 1901(b)(33)(C), Oct. 4,
1976, 90 Stat. 1801; Pub. L. 95-502, title III, Sec. 302(a), Oct.
21, 1978, 92 Stat. 1702; Pub. L. 95-600, title III, Sec. 301(b)(6),
Nov. 6, 1978, 92 Stat. 2821; Pub. L. 97-34, title I, Sec. 128(a),
Aug. 13, 1981, 95 Stat. 203; Pub. L. 98-369, div. A, title IV, Sec.
474(r)(16), title VII, Sec. 722(c), July 18, 1984, 98 Stat. 843,
973; Pub. L. 99-514, title I, Sec. 112(b)(1), Oct. 22, 1986, 100
Stat. 2108; Pub. L. 100-647, title I, Sec. 1001(b)(3)(B), Nov. 10,
1988, 102 Stat. 3349; Pub. L. 106-230, Secs. 1(a), 2(a), July 1,
2000, 114 Stat. 477, 479; Pub. L. 107-276, Secs. 1(a), 2(a), (b),
5(a), 6(a)-(c), (e)-(g), Nov. 2, 2002, 116 Stat. 1929, 1932-1934.)
-REFTEXT-
REFERENCES IN TEXT
Section 610 of title 18, referred to in subsec. (f)(3), was
repealed by Pub. L. 94-283, title II, Sec. 201(a), May 11, 1976, 90
Stat. 496. See section 441b of Title 2, The Congress.
The Federal Election Campaign Act of 1971, referred to in
subsecs. (i)(6) and (j)(5)(A), is Pub. L. 92-225, Feb. 7, 1972, 86
Stat. 3, as amended, which is classified principally to chapter 14
(Sec. 431 et seq.) of Title 2, The Congress. Section 301 of the Act
is classified to section 431 of Title 2. For complete
classification of this Act to the Code, see Short Title note set
out under section 431 of Title 2 and Tables.
-MISC1-
AMENDMENTS
2002 - Subsec. (e)(5). Pub. L. 107-276, Sec. 2(b), added par.
(5).
Subsec. (i)(1)(A). Pub. L. 107-276, Sec. 6(c), substituted
"electronically" for ", electronically and in writing,".
Subsec. (i)(1)(B). Pub. L. 107-276, Sec. 6(g)(1), which directed
the insertion of "or, in the case of any material change in the
information required under paragraph (3), for the period beginning
on the date on which the material change occurs and ending on the
date on which such notice is given" after "given", was executed by
making the insertion after "given" the second time appearing, to
reflect the probable intent of Congress.
Subsec. (i)(2). Pub. L. 107-276, Sec. 6(g)(2), inserted "or, in
the case of any material change in the information required under
paragraph (3), not later than 30 days after such material change"
after "established".
Subsec. (i)(3)(E), (F). Pub. L. 107-276, Sec. 6(f), added subpar.
(E) and redesignated former subpar. (E) as (F).
Subsec. (i)(4). Pub. L. 107-276, Sec. 6(g)(3), which directed the
insertion of "or, in the case of a failure relating to a material
change, by taking into account such income and deductions only
during the period beginning on the date on which the material
change occurs and ending on the date on which notice is given under
this subsection" before period at end, was executed by making the
insertion before period at end of first sentence, to reflect the
probable intent of Congress.
Pub. L. 107-276, Sec. 6(a), inserted at end "For purposes of the
preceding sentence, the term 'exempt function income' means any
amount described in a subparagraph of subsection (c)(3), whether or
not segregated for use for an exempt function."
Subsec. (i)(5)(C). Pub. L. 107-276, Sec. 1(a), added subpar. (C).
Subsec. (j)(1). Pub. L. 107-276, Sec. 6(b), inserted at end "For
purposes of subtitle F, the amount imposed by this paragraph shall
be assessed and collected in the same manner as penalties imposed
by section 6652(c)."
Subsec. (j)(3)(A). Pub. L. 107-276, Sec. 6(e)(1)(A), inserted ",
date, and purpose" after "The amount".
Subsec. (j)(3)(B). Pub. L. 107-276, Sec. 6(e)(1)(B), inserted
"and date" after "the amount".
Subsec. (j)(5)(C) to (F). Pub. L. 107-276, Sec. 2(a), added
subpar. (C) and redesignated former subpars. (C) to (E) as (D) to
(F), respectively.
Subsec. (j)(7). Pub. L. 107-276, Sec. 6(e)(2), added par. (7).
Subsec. (k). Pub. L. 107-276, Sec. 6(e)(3), added subsec. (k).
Former subsec. (k) redesignated (l).
Pub. L. 107-276, Sec. 5(a), added subsec. (k).
Subsec. (l). Pub. L. 107-276, Sec. 6(e)(3), redesignated subsec.
(k) as (l).
2000 - Subsec. (i). Pub. L. 106-230, Sec. 1(a), added subsec.
(i).
Subsec. (j). Pub. L. 106-230, Sec. 2(a), added subsec. (j).
1988 - Subsec. (e)(2). Pub. L. 100-647 inserted at end "Such term
includes the making of expenditures relating to an office described
in the preceding sentence which, if incurred by the individual,
would be allowable as a deduction under section 162(a)."
1986 - Subsec. (g)(1). Pub. L. 99-514, Sec. 112(b)(1)(A),
substituted "paragraph (3)" for "section 24(c)(2)".
Subsec. (g)(3). Pub. L. 99-514, Sec. 112(b)(1)(B), added par.
(3).
1984 - Subsec. (g)(1). Pub. L. 98-369, Sec. 474(r)(16),
substituted "section 24(c)(2)" for "section 41(c)(2)".
Subsec. (h)(2)(B). Pub. L. 98-369, Sec. 722(c), inserted "Nothing
in this subsection shall be construed to require any designation
where there is only one political committee with respect to a
candidate."
1981 - Subsec. (h). Pub. L. 97-34 added subsec. (h).
1978 - Subsec. (b)(1). Pub. L. 95-600 substituted "Such tax shall
be computed by multiplying the political organization taxable
income by the highest rate of tax specified in section 11(b)" for
"Such tax shall consist of a normal tax and a surtax computed as
provided in section 11 as though the political organization were a
corporation and as though the political organization taxable income
were the taxable income referred to in section 11" and struck out
provision that for purposes of this subsection, the surtax
exemption provided by section 11(d) not be allowed.
Subsec. (c)(3)(D). Pub. L. 95-502 added subpar. (D).
1976 - Subsec. (b)(2). Pub. L. 94-455 substituted "net capital
gain" for "net section 1201 gain" after "organization has a".
EFFECTIVE DATE OF 2002 AMENDMENT
Pub. L. 107-276, Sec. 1(b), Nov. 2, 2002, 116 Stat. 1929,
provided that: "The amendments made by subsection (a) [amending
this section] shall take effect as if included in the amendments
made by Public Law 106-230."
Pub. L. 107-276, Sec. 2(c), Nov. 2, 2002, 116 Stat. 1931,
provided that: "The amendments made by this section [amending this
section] shall take effect as if included in the amendments made by
Public Law 106-230."
Pub. L. 107-276, Sec. 5(b), Nov. 2, 2002, 116 Stat. 1932,
provided that: "The amendment made by subsection (a) [amending this
section] shall apply to any tax assessed or amount imposed after
June 30, 2000."
Pub. L. 107-276, Sec. 6(h)(1), (2), Nov. 2, 2002, 116 Stat. 1934,
provided that:
"(1) Subsections (a) and (b). - The amendments made by
subsections (a) and (b) [amending this section] shall apply to
failures occurring on or after the date of the enactment of this
Act [Nov. 2, 2002].
"(2) Subsection (c). - The amendments made by subsection (c)
[amending this section] shall take effect as if included in the
amendments made by Public Law 106-230."
Pub. L. 107-276, Sec. 6(h)(4)-(6), Nov. 2, 2002, 116 Stat. 1934,
provided that:
"(4) Subsections (e)(1) and (f). - The amendments made by
subsections (e)(1) and (f) [amending this section] shall apply to
reports and notices required to be filed more than 30 days after
the date of the enactment of this Act [Nov. 2, 2002].
"(5) Subsections (e)(2) and (e)(3). - The amendments made by
subsections (e)(2) and (e)(3) [amending this section] shall apply
to reports required to be filed on or after June 30, 2003.
"(6) Subsection (g). -
"(A) In general. - The amendments made by subsection (g)
[amending this section] shall apply to material changes on or
after the date of the enactment of this Act.
"(B) Transition rule. - In the case of a material change
occurring during the 30-day period beginning on the date of the
enactment of this Act, a notice under section 527(i) of the
Internal Revenue Code of 1986 (as amended by this Act) shall not
be required to be filed under such section before the later of -
"(i) 30 days after the date of such material change, or
"(ii) 45 days after the date of the enactment of this Act
[Nov. 2, 2002]."
EFFECTIVE DATE OF 2000 AMENDMENT
Pub. L. 106-230, Sec. 1(d), July 1, 2000, 114 Stat. 479, provided
that:
"(1) In general. - Except as provided in paragraphs (2) and (3),
the amendments made by this section [amending this section and
sections 6104 and 6652 of this title] shall take effect on the date
of the enactment of this section [July 1, 2000].
"(2) Organizations already in existence. - In the case of an
organization established before the date of the enactment of this
section, the time to file the notice under section 527(i)(2) of the
Internal Revenue Code of 1986, as added by this section, shall be
30 days after the date of the enactment of this section.
"(3) Information availability. - The amendment made by subsection
(b)(2) [amending section 6104 of this title] shall take effect on
the date that is 45 days after the date of the enactment of this
section."
Pub. L. 106-230, Sec. 2(d), July 1, 2000, 114 Stat. 482, provided
that: "The amendment made by subsection (a) [amending this section]
shall apply to expenditures made and contributions received after
the date of the enactment of this Act [July 1, 2000], except that
such amendment shall not apply to expenditures made, or
contributions received, after such date pursuant to a contract
entered into on or before such date."
EFFECTIVE DATE OF 1988 AMENDMENT
Amendment by Pub. L. 100-647 effective, except as otherwise
provided, as if included in the provision of the Tax Reform Act of
1986, Pub. L. 99-514, to which such amendment relates, see section
1019(a) of Pub. L. 100-647, set out as a note under section 1 of
this title.
EFFECTIVE DATE OF 1986 AMENDMENT
Amendment by Pub. L. 99-514 applicable to taxable years beginning
after Dec. 31, 1986, see section 151(a) of Pub. L. 99-514, set out
as a note under section 1 of this title.
EFFECTIVE DATE OF 1984 AMENDMENT
Amendment by section 474(r)(16) of Pub. L. 98-369 applicable to
taxable years beginning after Dec. 31, 1983, and to carrybacks from
such years, see section 475(a) of Pub. L. 98-369, set out as a note
under section 21 of this title.
Section 722(c) of Pub. L. 98-369 provided that the amendment made
by that section is effective for taxable years beginning after Dec.
31, 1981.
EFFECTIVE DATE OF 1981 AMENDMENT
Section 128(b) of Pub. L. 97-34 provided that: "The amendments
made by this section [amending this section] shall apply to taxable
years beginning after December 31, 1981."
EFFECTIVE DATE OF 1978 AMENDMENT
Amendment by section 301(b)(6) of Pub. L. 95-600 applicable to
taxable years beginning after Dec. 31, 1978, see section 301(c) of
Pub. L. 95-600, set out as a note under section 11 of this title.
EFFECTIVE DATE OF 1978 AMENDMENT; ELECTION CAMPAIGN CONTRIBUTIONS;
COLLATERAL
Section 302(b) of Pub. L. 95-502, as amended by Pub. L. 99-514,
Sec. 2, Oct. 22, 1986, 100 Stat. 2095, provided that:
"(1) The amendment made by subsection (a) [amending this section]
shall apply to taxable years beginning after December 31, 1974,
except that notwithstanding any other provision of law to the
contrary, no amounts held at the date of enactment of this bill
[Oct. 21, 1978] by an organization described in section 527(e)(1)
of the Internal Revenue Code of 1986 [formerly I.R.C. 1954] in
escrow, in separate accounts for the payment of Federal taxes, or
in any other fund which are proceeds described in section
527(c)(3)(D) of such Code may be used, directly or indirectly, to
make a contribution or expenditure (as defined in section 301(e)
and (f) of the Federal Election Campaign Act of 1971; 2 U.S.C.
431(f)) in connection with any election held before January 1,
1979.
"(2) Such amounts as described in (1) above shall not be
considered as security or collateral for any loan by any State or
national bank or any other person or organization."
EFFECTIVE DATE OF 1976 AMENDMENT
Amendment by Pub. L. 94-455 applicable with respect to taxable
years beginning after Dec. 31, 1976, see section 1901(d) of Pub. L.
94-455, set out as a note under section 2 of this title.
EFFECTIVE DATE
Section 10(e) of Pub. L. 93-625 provided that: "The amendments
made by subsections (a), (b), (c), and (d) [enacting this section
and amending sections 501 and 6012 of this title] shall apply to
taxable years beginning after December 31, 1974."
NOTIFICATION OF INTERACTION OF REPORTING REQUIREMENTS
Pub. L. 107-276, Sec. 4, Nov. 2, 2002, 116 Stat. 1932, provided
that:
"(a) In General. - The Secretary of the Treasury, in consultation
with the Federal Election Commission, shall publicize -
"(1) the effect of the amendments made by this Act [amending
this section and sections 6012, 6033, 6104, and 7207 of this
title], and
"(2) the interaction of requirements to file a notification or
report under section 527 of the Internal Revenue Code of 1986 and
reports under the Federal Election Campaign Act of 1971 [2 U.S.C.
431 et seq.].
"(b) Information. - Information provided under subsection (a)
shall be included in any appropriate form, instruction, notice, or
other guidance issued to the public by the Secretary of the
Treasury or the Federal Election Commission regarding reporting
requirements of political organizations (as defined in section 527
of the Internal Revenue Code of 1986) or reporting requirements
under the Federal Election Campaign Act of 1971 [2 U.S.C. 431 et
seq.]."
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 84, 2501, 6012, 6033,
6104, 6113, 6652, 6711, 7207 of this title; title 2 sections 441b,
441i.
-End-
-CITE-
26 USC PART VII - CERTAIN HOMEOWNERS ASSOCIATIONS 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter F - Exempt Organizations
PART VII - CERTAIN HOMEOWNERS ASSOCIATIONS
-HEAD-
PART VII - CERTAIN HOMEOWNERS ASSOCIATIONS
-MISC1-
Sec.
528. Certain homeowners associations.
AMENDMENTS
1976 - Pub. L. 94-455, title XXI, Sec. 2101(a), Oct. 4, 1976, 90
Stat. 1897, added part heading and analysis for part VII.
-End-
-CITE-
26 USC Sec. 528 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter F - Exempt Organizations
PART VII - CERTAIN HOMEOWNERS ASSOCIATIONS
-HEAD-
Sec. 528. Certain homeowners associations
-STATUTE-
(a) General rule
A homeowners association (as defined in subsection (c)) shall be
subject to taxation under this subtitle only to the extent provided
in this section. A homeowners association shall be considered an
organization exempt from income taxes for the purpose of any law
which refers to organizations exempt from income taxes.
(b) Tax imposed
A tax is hereby imposed for each taxable year on the homeowners
association taxable income of every homeowners association. Such
tax shall be equal to 30 percent of the homeowners association
taxable income (32 percent of such income in the case of a
timeshare association).
(c) Homeowners association defined
For purposes of this section -
(1) Homeowners association
The term "homeowners association" means an organization which
is a condominium management association, a residential real
estate management association, or a timeshare association if -
(A) such organization is organized and operated to provide
for the acquisition, construction, management, maintenance, and
care of association property,
(B) 60 percent or more of the gross income of such
organization for the taxable year consists solely of amounts
received as membership dues, fees, or assessments from -
(i) owners of residential units in the case of a
condominium management association,
(ii) owners of residences or residential lots in the case
of a residential real estate management association, or
(iii) owners of timeshare rights to use, or timeshare
ownership interests in, association property in the case of a
timeshare association,
(C) 90 percent or more of the expenditures of the
organization for the taxable year are expenditures for the
acquisition, construction, management, maintenance, and care of
association property and, in the case of a timeshare
association, for activities provided to or on behalf of members
of the association,
(D) no part of the net earnings of such organization inures
(other than by acquiring, constructing, or providing
management, maintenance, and care of association property, and
other than by a rebate of excess membership dues, fees, or
assessments) to the benefit of any private shareholder or
individual, and
(E) such organization elects (at such time and in such manner
as the Secretary by regulations prescribes) to have this
section apply for the taxable year.
(2) Condominium management association
The term "condominium management association" means any
organization meeting the requirement of subparagraph (A) of
paragraph (1) with respect to a condominium project substantially
all of the units of which are used by individuals for residences.
(3) Residential real estate management association
The term "residential real estate management association" means
any organization meeting the requirements of subparagraph (A) of
paragraph (1) with respect to a subdivision, development, or
similar area substantially all the lots or buildings of which may
only be used by individuals for residences.
(4) Timeshare association
The term "timeshare association" means any organization (other
than a condominium management association) meeting the
requirement of subparagraph (A) of paragraph (1) if any member
thereof holds a timeshare right to use, or a timeshare ownership
interest in, real property constituting association property.
(5) Association property
The term "association property" means -
(A) property held by the organization,
(B) property commonly held by the members of the
organization,
(C) property within the organization privately held by the
members of the organization, and
(D) property owned by a governmental unit and used for the
benefit of residents of such unit.
In the case of a timeshare association, such term includes
property in which the timeshare association, or members of the
association, have rights arising out of recorded easements,
covenants, or other recorded instruments to use property related
to the timeshare project.
(d) Homeowners association taxable income defined
(1) Taxable income defined
For purposes of this section, the homeowners association
taxable income of any organization for any taxable year is an
amount equal to the excess (if any) of -
(A) the gross income for the taxable year (excluding any
exempt function income), over
(B) the deductions allowed by this chapter which are directly
connected with the production of the gross income (excluding
exempt function income), computed with the modifications
provided in paragraph (2).
(2) Modifications
For purposes of this subsection -
(A) there shall be allowed a specific deduction of $100,
(B) no net operating loss deduction shall be allowed under
section 172, and
(C) no deduction shall be allowed under part VIII of
subchapter B (relating to special deductions for corporations).
(3) Exempt function income
For purposes of this subsection, the term "exempt function
income" means any amount received as membership dues, fees, or
assessments from -
(A) owners of condominium housing units in the case of a
condominium management association,
(B) owners of real property in the case of a residential real
estate management association, or
(C) owners of timeshare rights to use, or timeshare ownership
interests in, real property in the case of a timeshare
association.
-SOURCE-
(Added Pub. L. 94-455, title XXI, Sec. 2101(a), Oct. 4, 1976, 90
Stat. 1897; amended Pub. L. 95-600, title III, Sec. 301(b)(7),
title IV, Sec. 403(c)(2), title VII, Sec. 701(n)(1), Nov. 6, 1978,
92 Stat. 2821, 2868, 2907; Pub. L. 96-605, title I, Sec. 105(a),
Dec. 28, 1980, 94 Stat. 3523; Pub. L. 105-34, title IX, Sec.
966(a)-(d), Aug. 5, 1997, 111 Stat. 894, 895.)
-MISC1-
AMENDMENTS
1997 - Subsec. (b). Pub. L. 105-34, Sec. 966(d), which directed
amendment of subsec. (b) by inserting before the period "(32
percent of such income in the case of a timeshare association)",
was executed by making the insertion before the period at end to
reflect the probable intent of Congress.
Subsec. (c)(1). Pub. L. 105-34, Sec. 966(a)(1)(A), substituted ",
a residential real estate management association, or a timeshare
association" for "or a residential real estate management
association" in introductory provisions.
Subsec. (c)(1)(B)(iii). Pub. L. 105-34, Sec. 966(a)(1)(B), added
cl. (iii).
Subsec. (c)(1)(C). Pub. L. 105-34, Sec. 966(a)(1)(C), inserted
before comma at end "and, in the case of a timeshare association,
for activities provided to or on behalf of members of the
association".
Subsec. (c)(4). Pub. L. 105-34, Sec. 966(a)(2), added par. (4).
Former par. (4) redesignated (5).
Subsec. (c)(5). Pub. L. 105-34, Sec. 966(c), inserted concluding
provisions "In the case of a timeshare association, such term
includes property in which the timeshare association, or members of
the association, have rights arising out of recorded easements,
covenants, or other recorded instruments to use property related to
the timeshare project."
Pub. L. 105-34, Sec. 966(a)(2), redesignated par. (4) as (5).
Subsec. (d)(3)(C). Pub. L. 105-34, Sec. 966(b), added subpar.
(C).
1980 - Subsec. (b). Pub. L. 96-605 substituted provision that all
income of a homeowners association be taxed at a rate of 30 per
cent for provision that all income of a homeowners association be
taxed a sum computed by multiplying the homeowners association
taxable income by the highest rate of tax specified in section
11(b) of this title and struck out provision providing for
alternative tax in case of capital gains.
1978 - Subsec. (b)(1). Pub. L. 95-600, Sec. 301(b)(7),
substituted "Such tax shall be computed by multiplying the
homeowners association taxable income by the highest rate of tax
specified in section 11(b)" for "Such tax shall consist of a normal
tax and a surtax computed as provided in section 11 as though the
homeowners association were a corporation and as though the
homeowners association taxable income were the taxable income
referred to in section 11" and struck out provision that for
purposes of this subsection, the surtax exemption provided by
section 11(d) not be allowed.
Subsec. (b)(2)(B). Pub. L. 95-600, Sec. 403(c)(2), substituted
provision related to amount being determined according to section
1201(a) for provision requiring an amount of 30 percent.
Subsec. (c)(2). Pub. L. 95-600, Sec. 701(n)(1), substituted "by
individuals for residences" for "as residences".
EFFECTIVE DATE OF 1997 AMENDMENT
Section 966(e) of Pub. L. 105-34 provided that: "The amendments
made by this section [amending this section] shall apply to taxable
years beginning after December 31, 1996."
EFFECTIVE DATE OF 1980 AMENDMENT
Section 105(b) of Pub. L. 96-605 provided that: "The amendment
made by subsection (a) [amending this section] shall apply to
taxable years beginning after December 31, 1980."
EFFECTIVE DATE OF 1978 AMENDMENT
Amendment by section 301(b)(7) of Pub. L. 95-600 applicable to
taxable years beginning after Dec. 31, 1978, see section 301(c) of
Pub. L. 95-600, set out as a note under section 11 of this title.
Section 403(d)(3) of Pub. L. 95-600 provided that: "The
amendments made by paragraphs (2), (3), and (4) of subsection (c)
[amending this section and sections 857 and 904 of this title]
shall take effect on the date of the enactment of this Act [Nov. 6,
1978]."
Section 701(n)(2) of Pub. L. 95-600 provided that: "The amendment
made by paragraph (1) [amending this section] shall apply to
taxable years beginning after December 31, 1973."
EFFECTIVE DATE
Section 2101(e) of Pub. L. 94-455 provided that: "Except as
provided in subsection (f)(2) [set out as a note under section 216
of this title], the amendments made by this section [enacting this
section and amending sections 216 and 6012 of this title] shall
apply to taxable years beginning after December 31, 1973."
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in section 6012 of this title.
-End-
-CITE-
26 USC PART VIII - HIGHER EDUCATION SAVINGS ENTITIES 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter F - Exempt Organizations
PART VIII - HIGHER EDUCATION SAVINGS ENTITIES
-HEAD-
PART VIII - HIGHER EDUCATION SAVINGS ENTITIES
-MISC1-
Sec.
529. Qualified tuition programs.
530. Coverdell education savings accounts.
AMENDMENTS
2001 - Pub. L. 107-22, Sec. 1(a)(6), July 26, 2001, 115 Stat.
196, which directed amendment of the analysis for part VII of
subchapter F of chapter 1 of this title by substituting "Coverdell
education savings accounts" for "Education individual retirement
accounts" in item 530, was executed by making the substitution in
item 530 in the analysis for this part, to reflect the probable
intent of Congress.
Pub. L. 107-16, title IV, Sec. 402(a)(4)(E), June 7, 2001, 115
Stat. 61, struck out "State" before "tuition" in item 529.
1997 - Pub. L. 105-34, title II, Secs. 211(e)(1)(A), 213(e)(3),
Aug. 5, 1997, 111 Stat. 812, 817, substituted "HIGHER EDUCATION
SAVINGS ENTITIES" for "QUALIFIED STATE TUITION PROGRAMS" in heading
and added item 530.
-End-
-CITE-
26 USC Sec. 529 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter F - Exempt Organizations
PART VIII - HIGHER EDUCATION SAVINGS ENTITIES
-HEAD-
Sec. 529. Qualified tuition programs
-STATUTE-
(a) General rule
A qualified tuition program shall be exempt from taxation under
this subtitle. Notwithstanding the preceding sentence, such program
shall be subject to the taxes imposed by section 511 (relating to
imposition of tax on unrelated business income of charitable
organizations).
(b) Qualified tuition program
For purposes of this section -
(1) In general
The term "qualified tuition program" means a program
established and maintained by a State or agency or
instrumentality thereof or by 1 or more eligible educational
institutions -
(A) under which a person -
(i) may purchase tuition credits or certificates on behalf
of a designated beneficiary which entitle the beneficiary to
the waiver or payment of qualified higher education expenses
of the beneficiary, or
(ii) in the case of a program established and maintained by
a State or agency or instrumentality thereof, may make
contributions to an account which is established for the
purpose of meeting the qualified higher education expenses of
the designated beneficiary of the account, and
(B) which meets the other requirements of this subsection.
Except to the extent provided in regulations, a program
established and maintained by 1 or more eligible educational
institutions shall not be treated as a qualified tuition program
unless such program provides that amounts are held in a qualified
trust and such program has received a ruling or determination
that such program meets the applicable requirements for a
qualified tuition program. For purposes of the preceding
sentence, the term "qualified trust" means a trust which is
created or organized in the United States for the exclusive
benefit of designated beneficiaries and with respect to which the
requirements of paragraphs (2) and (5) of section 408(a) are met.
(2) Cash contributions
A program shall not be treated as a qualified tuition program
unless it provides that purchases or contributions may only be
made in cash.
(3) Separate accounting
A program shall not be treated as a qualified tuition program
unless it provides separate accounting for each designated
beneficiary.
(4) No investment direction
A program shall not be treated as a qualified tuition program
unless it provides that any contributor to, or designated
beneficiary under, such program may not directly or indirectly
direct the investment of any contributions to the program (or any
earnings thereon).
(5) No pledging of interest as security
A program shall not be treated as a qualified tuition program
if it allows any interest in the program or any portion thereof
to be used as security for a loan.
(6) Prohibition on excess contributions
A program shall not be treated as a qualified tuition program
unless it provides adequate safeguards to prevent contributions
on behalf of a designated beneficiary in excess of those
necessary to provide for the qualified higher education expenses
of the beneficiary.
(c) Tax treatment of designated beneficiaries and contributors
(1) In general
Except as otherwise provided in this subsection, no amount
shall be includible in gross income of -
(A) a designated beneficiary under a qualified tuition
program, or
(B) a contributor to such program on behalf of a designated
beneficiary,
with respect to any distribution or earnings under such program.
(2) Gift tax treatment of contributions
For purposes of chapters 12 and 13 -
(A) In general
Any contribution to a qualified tuition program on behalf of
any designated beneficiary -
(i) shall be treated as a completed gift to such
beneficiary which is not a future interest in property, and
(ii) shall not be treated as a qualified transfer under
section 2503(e).
(B) Treatment of excess contributions
If the aggregate amount of contributions described in
subparagraph (A) during the calendar year by a donor exceeds
the limitation for such year under section 2503(b), such
aggregate amount shall, at the election of the donor, be taken
into account for purposes of such section ratably over the
5-year period beginning with such calendar year.
(3) Distributions
(A) In general
Any distribution under a qualified tuition program shall be
includible in the gross income of the distributee in the manner
as provided under section 72 to the extent not excluded from
gross income under any other provision of this chapter.
(B) Distributions for qualified higher education expenses
For purposes of this paragraph -
(i) In-kind distributions
No amount shall be includible in gross income under
subparagraph (A) by reason of a distribution which consists
of providing a benefit to the distributee which, if paid for
by the distributee, would constitute payment of a qualified
higher education expense.
(ii) Cash distributions
In the case of distributions not described in clause (i),
if -
(I) such distributions do not exceed the qualified higher
education expenses (reduced by expenses described in clause
(i)), no amount shall be includible in gross income, and
(II) in any other case, the amount otherwise includible
in gross income shall be reduced by an amount which bears
the same ratio to such amount as such expenses bear to such
distributions.
(iii) Exception for institutional programs
In the case of any taxable year beginning before January 1,
2004, clauses (i) and (ii) shall not apply with respect to
any distribution during such taxable year under a qualified
tuition program established and maintained by 1 or more
eligible educational institutions.
(iv) Treatment as distributions
Any benefit furnished to a designated beneficiary under a
qualified tuition program shall be treated as a distribution
to the beneficiary for purposes of this paragraph.
(v) Coordination with Hope and Lifetime Learning credits
The total amount of qualified higher education expenses
with respect to an individual for the taxable year shall be
reduced -
(I) as provided in section 25A(g)(2), and
(II) by the amount of such expenses which were taken into
account in determining the credit allowed to the taxpayer
or any other person under section 25A.
(vi) Coordination with Coverdell education savings accounts
If, with respect to an individual for any taxable year -
(I) the aggregate distributions to which clauses (i) and
(ii) and section 530(d)(2)(A) apply, exceed
(II) the total amount of qualified higher education
expenses otherwise taken into account under clauses (i) and
(ii) (after the application of clause (v)) for such year,
the taxpayer shall allocate such expenses among such
distributions for purposes of determining the amount of the
exclusion under clauses (i) and (ii) and section
530(d)(2)(A).
(C) Change in beneficiaries or programs
(i) Rollovers
Subparagraph (A) shall not apply to that portion of any
distribution which, within 60 days of such distribution, is
transferred -
(I) to another qualified tuition program for the benefit
of the designated beneficiary, or
(II) to the credit of another designated beneficiary
under a qualified tuition program who is a member of the
family of the designated beneficiary with respect to which
the distribution was made.
(ii) Change in designated beneficiaries
Any change in the designated beneficiary of an interest in
a qualified tuition program shall not be treated as a
distribution for purposes of subparagraph (A) if the new
beneficiary is a member of the family of the old beneficiary.
(iii) Limitation on certain rollovers
Clause (i)(I) shall not apply to any transfer if such
transfer occurs within 12 months from the date of a previous
transfer to any qualified tuition program for the benefit of
the designated beneficiary.
(D) Operating rules
For purposes of applying section 72 -
(i) to the extent provided by the Secretary, all qualified
tuition programs of which an individual is a designated
beneficiary shall be treated as one program,
(ii) except to the extent provided by the Secretary, all
distributions during a taxable year shall be treated as one
distribution, and
(iii) except to the extent provided by the Secretary, the
value of the contract, income on the contract, and investment
in the contract shall be computed as of the close of the
calendar year in which the taxable year begins.
(4) Estate tax treatment
(A) In general
No amount shall be includible in the gross estate of any
individual for purposes of chapter 11 by reason of an interest
in a qualified tuition program.
(B) Amounts includible in estate of designated beneficiary in
certain cases
Subparagraph (A) shall not apply to amounts distributed on
account of the death of a beneficiary.
(C) Amounts includible in estate of donor making excess
contributions
In the case of a donor who makes the election described in
paragraph (2)(B) and who dies before the close of the 5-year
period referred to in such paragraph, notwithstanding
subparagraph (A), the gross estate of the donor shall include
the portion of such contributions properly allocable to periods
after the date of death of the donor.
(5) Other gift tax rules
For purposes of chapters 12 and 13 -
(A) Treatment of distributions
Except as provided in subparagraph (B), in no event shall a
distribution from a qualified tuition program be treated as a
taxable gift.
(B) Treatment of designation of new beneficiary
The taxes imposed by chapters 12 and 13 shall apply to a
transfer by reason of a change in the designated beneficiary
under the program (or a rollover to the account of a new
beneficiary) only if the new beneficiary is a generation below
the generation of the old beneficiary (determined in accordance
with section 2651).
(6) Additional tax
The tax imposed by section 530(d)(4) shall apply to any payment
or distribution from a qualified tuition program in the same
manner as such tax applies to a payment or distribution from an
education individual retirement account. This paragraph shall not
apply to any payment or distribution in any taxable year
beginning before January 1, 2004, which is includible in gross
income but used for qualified higher education expenses of the
designated beneficiary.
(d) Reports
Each officer or employee having control of the qualified tuition
program or their designee shall make such reports regarding such
program to the Secretary and to designated beneficiaries with
respect to contributions, distributions, and such other matters as
the Secretary may require. The reports required by this subsection
shall be filed at such time and in such manner and furnished to
such individuals at such time and in such manner as may be required
by the Secretary.
(e) Other definitions and special rules
For purposes of this section -
(1) Designated beneficiary
The term "designated beneficiary" means -
(A) the individual designated at the commencement of
participation in the qualified tuition program as the
beneficiary of amounts paid (or to be paid) to the program,
(B) in the case of a change in beneficiaries described in
subsection (c)(3)(C), the individual who is the new
beneficiary, and
(C) in the case of an interest in a qualified tuition program
purchased by a State or local government (or agency or
instrumentality thereof) or an organization described in
section 501(c)(3) and exempt from taxation under section 501(a)
as part of a scholarship program operated by such government or
organization, the individual receiving such interest as a
scholarship.
(2) Member of family
The term "member of the family" means, with respect to any
designated beneficiary -
(A) the spouse of such beneficiary;
(B) an individual who bears a relationship to such
beneficiary which is described in paragraphs (1) through (8) of
section 152(a);
(C) the spouse of any individual described in subparagraph
(B); and
(D) any first cousin of such beneficiary.
(3) Qualified higher education expenses
(A) In general
The term "qualified higher education expenses" means -
(i) tuition, fees, books, supplies, and equipment required
for the enrollment or attendance of a designated beneficiary
at an eligible educational institution; and
(ii) expenses for special needs services in the case of a
special needs beneficiary which are incurred in connection
with such enrollment or attendance.
(B) Room and board included for students who are at least
half-time
(i) In general
In the case of an individual who is an eligible student (as
defined in section 25A(b)(3)) for any academic period, such
term shall also include reasonable costs for such period (as
determined under the qualified tuition program) incurred by
the designated beneficiary for room and board while attending
such institution. For purposes of subsection (b)(6), a
designated beneficiary shall be treated as meeting the
requirements of this clause.
(ii) Limitation
The amount treated as qualified higher education expenses
by reason of clause (i) shall not exceed -
(I) the allowance (applicable to the student) for room
and board included in the cost of attendance (as defined in
section 472 of the Higher Education Act of 1965 (20 U.S.C.
1087ll), as in effect on the date of the enactment of the
Economic Growth and Tax Relief Reconciliation Act of 2001)
as determined by the eligible educational institution for
such period, or
(II) if greater, the actual invoice amount the student
residing in housing owned or operated by the eligible
educational institution is charged by such institution for
room and board costs for such period.
(4) Application of section 514
An interest in a qualified tuition program shall not be treated
as debt for purposes of section 514.
(5) Eligible educational institution
The term "eligible educational institution" means an
institution -
(A) which is described in section 481 of the Higher Education
Act of 1965 (20 U.S.C. 1088), as in effect on the date of the
enactment of this paragraph, and
(B) which is eligible to participate in a program under title
IV of such Act.
-SOURCE-
(Added Pub. L. 104-188, title I, Sec. 1806(a), Aug. 20, 1996, 110
Stat. 1895; amended Pub. L. 105-34, title II, Sec. 211(a), (b),
(d), (e)(2)(A), title XVI, Sec. 1601(h)(1)(A), (B), Aug. 5, 1997,
111 Stat. 810, 812, 1092; Pub. L. 105-206, title VI, Sec.
6004(c)(2), (3), July 22, 1998, 112 Stat. 793; Pub. L. 106-554,
Sec. 1(a)(7) [title III, Sec. 319(5)], Dec. 21, 2000, 114 Stat.
2763, 2763A-646; Pub. L. 107-16, title IV, Sec. 402(a)(1)-(3),
(4)(A), (C), (D), (b)(1), (c)-(g), June 7, 2001, 115 Stat. 60-63;
Pub. L. 107-22, Sec. 1(b)(3)(C), July 26, 2001, 115 Stat. 197; Pub.
L. 107-147, title IV, Sec. 417(11), Mar. 9, 2002, 116 Stat. 56.)
-STATAMEND-
AMENDMENT OF SECTION
For termination of amendment by section 901 of Pub. L. 107-16,
see Effective and Termination Dates of 2001 Amendment note below.
-REFTEXT-
REFERENCES IN TEXT
The date of the enactment of the Economic Growth and Tax Relief
Reconciliation Act of 2001, referred to in subsec.
(e)(3)(B)(ii)(I), is the date of enactment of Pub. L. 107-16, which
was approved June 7, 2001.
The date of the enactment of this paragraph, referred to in
subsec. (e)(5)(A), probably means the date of enactment of Pub. L.
105-34, which enacted subsec. (e)(5) and which was approved Aug. 5,
1997.
The Higher Education Act of 1965, referred to in subsec. (e)(5),
is Pub. L. 89-329, Nov. 8, 1965, 79 Stat. 1219, as amended. Title
IV of the Act is classified generally to subchapter IV (Sec. 1070
et seq.) of chapter 28 of Title 20, Education, and part C (Sec.
2751 et seq.) of subchapter I of chapter 34 of Title 42, The Public
Health and Welfare. For complete classification of this Act to the
Code, see Short Title note set out under section 1001 of Title 20
and Tables.
-MISC1-
AMENDMENTS
2002 - Subsec. (e)(3)(B)(i). Pub. L. 107-147 substituted
"subsection (b)(6)" for "subsection (b)(7)".
2001 - Pub. L. 107-16, Secs. 402(a)(4)(D), 901, temporarily
struck out "State" before "tuition" in section catchline. See
Effective and Termination Dates of 2001 Amendment note below.
Subsec. (a). Pub. L. 107-16, Secs. 402(a)(4)(A), 901, temporarily
substituted "qualified tuition" for "qualified State tuition". See
Effective and Termination Dates of 2001 Amendment note below.
Subsec. (b). Pub. L. 107-16, Secs. 402(a)(4)(C), 901, temporarily
substituted "Qualified tuition" for "Qualified State tuition" in
heading. See Effective and Termination Dates of 2001 Amendment note
below.
Subsec. (b)(1). Pub. L. 107-16, Secs. 402(a)(1), (4)(A), 901, in
introductory provisions, temporarily substituted "qualified
tuition" for "qualified State tuition" and inserted "or by 1 or
more eligible educational institutions" after "thereof", and
temporarily added concluding provisions. See Effective and
Termination Dates of 2001 Amendment note below.
Subsec. (b)(1)(A)(ii). Pub. L. 107-16, Secs. 402(a)(2), 901,
temporarily inserted "in the case of a program established and
maintained by a State or agency or instrumentality thereof," before
"may make". See Effective and Termination Dates of 2001 Amendment
note below.
Subsec. (b)(2). Pub. L. 107-16, Secs. 402(a)(4)(A), 901,
temporarily substituted "qualified tuition" for "qualified State
tuition". See Effective and Termination Dates of 2001 Amendment
note below.
Subsec. (b)(3) to (7). Pub. L. 107-16, Secs. 402(a)(3)(A),
(4)(A), 901, temporarily redesignated pars. (4) to (7) as (3) to
(6), respectively, substituted "qualified tuition" for "qualified
State tuition" wherever appearing, and struck out heading and text
of former par. (3). Text read as follows: "A program shall not be
treated as a qualified State tuition program unless it imposes a
more than de minimis penalty on any refund of earnings from the
account which are not -
"(A) used for qualified higher education expenses of the
designated beneficiary,
"(B) made on account of the death or disability of the
designated beneficiary, or
"(C) made on account of a scholarship (or allowance or payment
described in section 135(d)(1)(B) or (C)) received by the
designated beneficiary to the extent the amount of the refund
does not exceed the amount of the scholarship, allowance, or
payment."
See Effective and Termination Dates of 2001 Amendment note below.
Subsec. (c)(1)(A), (3)(A). Pub. L. 107-16, Secs. 402(a)(4)(A),
901, temporarily substituted "qualified tuition" for "qualified
State tuition". See Effective and Termination Dates of 2001
Amendment note below.
Subsec. (c)(3)(B). Pub. L. 107-16, Secs. 402(b)(1), 901,
temporarily amended heading and text of subpar. (B) generally.
Prior to amendment, text read as follows: "Any benefit furnished to
a designated beneficiary under a qualified tuition program shall be
treated as a distribution to the beneficiary." See Effective and
Termination Dates of 2001 Amendment note below.
Pub. L. 107-16, Secs. 402(a)(4)(A), 901, temporarily substituted
"qualified tuition" for "qualified State tuition". See Effective
and Termination Dates of 2001 Amendment note below.
Subsec. (c)(3)(B)(vi). Pub. L. 107-22 substituted "Coverdell
education savings" for "education individual retirement" in
heading.
Subsec. (c)(3)(C). Pub. L. 107-16, Secs. 402(c)(3), 901,
temporarily inserted "or programs" after "beneficiaries" in
heading. See Effective and Termination Dates of 2001 Amendment note
below.
Subsec. (c)(3)(C)(i). Pub. L. 107-16, Secs. 402(c)(1), 901,
temporarily substituted "transferred - " for "transferred", added
subcl. (I), and designated existing provisions "to the credit" as
subcl. (II). See Effective and Termination Dates of 2001 Amendment
note below.
Pub. L. 107-16, Secs. 402(a)(4)(A), 901, temporarily substituted
"qualified tuition" for "qualified State tuition". See Effective
and Termination Dates of 2001 Amendment note below.
Subsec. (c)(3)(C)(ii). Pub. L. 107-16, Secs. 402(a)(4)(A), 901,
temporarily substituted "qualified tuition" for "qualified State
tuition". See Effective and Termination Dates of 2001 Amendment
note below.
Subsec. (c)(3)(C)(iii). Pub. L. 107-16, Secs. 402(c)(2), 901,
temporarily added cl. (iii). See Effective and Termination Dates of
2001 Amendment note below.
Subsec. (c)(3)(D)(i). Pub. L. 107-16, Secs. 402(a)(4)(A), 901,
temporarily substituted "qualified tuition" for "qualified State
tuition". See Effective and Termination Dates of 2001 Amendment
note below.
Subsec. (c)(3)(D)(ii). Pub. L. 107-16, Secs. 402(g)(1), 901,
temporarily inserted "except to the extent provided by the
Secretary," before "all distributions". See Effective and
Termination Dates of 2001 Amendment note below.
Subsec. (c)(3)(D)(iii). Pub. L. 107-16, Secs. 402(g)(2), 901,
temporarily inserted "except to the extent provided by the
Secretary," before "the value". See Effective and Termination Dates
of 2001 Amendment note below.
Subsec. (c)(6). Pub. L. 107-16, Secs. 402(a)(3)(B), 901,
temporarily added par. (6). See Effective and Termination Dates of
2001 Amendment note below.
Subsecs. (d), (e)(1)(A), (C). Pub. L. 107-16, Secs. 402(a)(4)(A),
901, temporarily substituted "qualified tuition" for "qualified
State tuition". See Effective and Termination Dates of 2001
Amendment note below.
Subsec. (e)(2)(D). Pub. L. 107-16, Secs. 402(d), 901, temporarily
added subpar. (D). See Effective and Termination Dates of 2001
Amendment note below.
Subsec. (e)(3)(A). Pub. L. 107-16, Secs. 402(f), 901, temporarily
reenacted heading without change and amended text of subpar. (A)
generally. Prior to amendment, text read as follows: "The term
'qualified higher education expenses' means tuition, fees, books,
supplies, and equipment required for the enrollment or attendance
of a designated beneficiary at an eligible educational
institution." See Effective and Termination Dates of 2001 Amendment
note below.
Subsec. (e)(3)(B)(i). Pub. L. 107-16, Secs. 402(a)(4)(A), 901,
temporarily substituted "qualified tuition" for "qualified State
tuition". See Effective and Termination Dates of 2001 Amendment
note below.
Subsec. (e)(3)(B)(ii). Pub. L. 107-16, Secs. 402(e), 901,
temporarily reenacted heading without change and amended text of
cl. (ii) generally. Prior to amendment, text read as follows: "The
amount treated as qualified higher education expenses by reason of
the preceding sentence shall not exceed the minimum amount
(applicable to the student) included for room and board for such
period in the cost of attendance (as defined in section 472 of the
Higher Education Act of 1965, 20 U.S.C. 1087ll, as in effect on the
date of the enactment of this paragraph) for the eligible
educational institution for such period." See Effective and
Termination Dates of 2001 Amendment note below.
Subsec. (e)(4). Pub. L. 107-16, Secs. 402(a)(4)(A), 901,
temporarily substituted "qualified tuition" for "qualified State
tuition". See Effective and Termination Dates of 2001 Amendment
note below.
2000 - Subsec. (e)(3)(B). Pub. L. 106-554 struck out "under
guaranteed plans" after "students" in heading.
1998 - Subsec. (c)(3)(A). Pub. L. 105-206, Sec. 6004(c)(2),
substituted "section 72" for "section 72(b)".
Subsec. (e)(2). Pub. L. 105-206, Sec. 6004(c)(3), reenacted
heading without change and amended text of par. (2) generally.
Prior to amendment, text read as follows: "The term 'member of the
family' means -
"(A) an individual who bears a relationship to another
individual which is a relationship described in paragraphs (1)
through (8) of section 152(a), and
"(B) the spouse of any individual described in subparagraph
(A)."
1997 - Subsec. (b)(5). Pub. L. 105-34, Sec. 211(b)(4), inserted
"directly or indirectly" after "may not".
Subsec. (c)(2). Pub. L. 105-34, Sec. 211(b)(3)(A)(i), amended
heading and text of par. (2) generally. Prior to amendment, text
read as follows: "In no event shall a contribution to a qualified
State tuition program on behalf of a designated beneficiary be
treated as a taxable gift for purposes of chapter 12."
Subsec. (c)(3)(A). Pub. L. 105-34, Sec. 211(d), substituted
"section 72(b)" for "section 72".
Subsec. (c)(4). Pub. L. 105-34, Sec. 211(b)(3)(B), amended
heading and text of par. (4) generally. Prior to amendment, text
read as follows: "The value of any interest in any qualified State
tuition program which is attributable to contributions made by an
individual to such program on behalf of any designated beneficiary
shall be includible in the gross estate of the contributor for
purposes of chapter 11."
Subsec. (c)(5). Pub. L. 105-34, Sec. 211(b)(3)(A)(ii), amended
heading and text of par. (5) generally. Prior to amendment, text
read as follows: "For purposes of section 2503(e), the waiver (or
payment to an educational institution) of qualified higher
education expenses of a designated beneficiary under a qualified
State tuition program shall be treated as a qualified transfer."
Subsec. (d). Pub. L. 105-34, Sec. 211(e)(2)(A), amended subsec.
(d) generally. Prior to amendment, subsec. (d) read as follows:
"(d) Reporting Requirements. -
"(1) In general. - If there is a distribution to any individual
with respect to an interest in a qualified State tuition program
during any calendar year, each officer or employee having control
of the qualified State tuition program or their designee shall
make such reports as the Secretary may require regarding such
distribution to the Secretary and to the designated beneficiary
or the individual to whom the distribution was made. Any such
report shall include such information as the Secretary may
prescribe.
"(2) Timing of reports. - Any report required by this
subsection -
"(A) shall be filed at such time and in such matter as the
Secretary prescribes, and
"(B) shall be furnished to individuals not later than January
31 of the calendar year following the calendar year to which
such report relates."
Subsec. (e)(1)(B). Pub. L. 105-34, Sec. 1601(h)(1)(A),
substituted "subsection (c)(3)(C)" for "subsection (c)(2)(C)".
Subsec. (e)(1)(C). Pub. L. 105-34, Sec. 1601(h)(1)(B), inserted
"(or agency or instrumentality thereof)" after "local government".
Subsec. (e)(2). Pub. L. 105-34, Sec. 211(b)(1), amended heading
and text of par. (2) generally. Prior to amendment, text read as
follows: "The term 'member of the family' has the same meaning
given such term as section 2032A(e)(2)."
Subsec. (e)(3). Pub. L. 105-34, Sec. 211(a), amended heading and
text of par. (3) generally. Prior to amendment, text read as
follows: "The term 'qualified higher education expenses' means
tuition, fees, books, supplies, and equipment required for the
enrollment or attendance of a designated beneficiary at an eligible
educational institution (as defined in section 135(c)(3))."
Subsec. (e)(5). Pub. L. 105-34, Sec. 211(b)(2), added par. (5).
EFFECTIVE AND TERMINATION DATES OF 2001 AMENDMENTS
Amendment by Pub. L. 107-22 effective July 26, 2001, see section
1(c) of Pub. L. 107-22, set out as a note under section 26 of this
title.
Amendment by Pub. L. 107-16 applicable to taxable years beginning
after Dec. 31, 2001, see section 402(h) of Pub. L. 107-16, set out
as a note under section 72 of this title.
Amendment by Pub. L. 107-16 inapplicable to taxable, plan, or
limitation years beginning after Dec. 31, 2010, and the Internal
Revenue Code of 1986 to be applied and administered to such years
as if such amendment had never been enacted, see section 901 of
Pub. L. 107-16, set out as a note under section 1 of this title.
EFFECTIVE DATE OF 1998 AMENDMENT
Amendment by Pub. L. 105-206 effective, except as otherwise
provided, as if included in the provisions of the Taxpayer Relief
Act of 1997, Pub. L. 105-34, to which such amendment relates, see
section 6024 of Pub. L. 105-206, set out as a note under section 1
of this title.
EFFECTIVE DATE OF 1997 AMENDMENT
Section 211(f) of Pub. L. 105-34 provided that:
"(1) In general. - Except as otherwise provided in this
subsection, the amendments made by this section [amending this
section and sections 135 and 6693 of this title] shall take effect
on January 1, 1998.
"(2) Expenses to include room and board. - The amendment made by
subsection (a) shall take effect as if included in the amendments
made by section 1806 of the Small Business Job Protection Act of
1996 [Pub. L. 104-188].
"(3) Eligible educational institution. - The amendment made by
subsection (b)(2) [amending this section] shall apply to
distributions after December 31, 1997, with respect to expenses
paid after such date (in taxable years ending after such date), for
education furnished in academic periods beginning after such date.
"(4) Coordination with education savings bonds. - The amendment
made by subsection (c) [amending section 135 of this title] shall
apply to taxable years beginning after December 31, 1997.
"(5) Estate and gift tax changes. -
"(A) Gift tax changes. - Paragraphs (2) and (5) of section
529(c) of the Internal Revenue Code of 1986, as amended by this
section, shall apply to transfers (including designations of new
beneficiaries) made after the date of the enactment of this Act
[Aug. 5, 1997].
"(B) Estate tax changes. - Paragraph (4) of such section 529(c)
shall apply to estates of decedents dying after June 8, 1997.
"(6) Transition rule for pre-august 20, 1996 contracts. - In the
case of any contract issued prior to August 20, 1996, section
529(c)(3)(C) of the Internal Revenue Code of 1986 shall be applied
for taxable years ending after August 20, 1996, without regard to
the requirement that a distribution be transferred to a member of
the family or the requirement that a change in beneficiaries may be
made only to a member of the family."
Amendment by section 1601(h)(1)(A), (B) of Pub. L. 105-34
effective as if included in the provisions of the Small Business
Job Protection Act of 1996, Pub. L. 104-188, to which it relates,
see section 1601(j) of Pub. L. 105-34, set out as a note under
section 23 of this title.
EFFECTIVE DATE
Section 1806(c) of Pub. L. 104-188, as amended by Pub. L. 105-34,
title XVI, Sec. 1601(h)(1)(C), Aug. 5, 1997, 111 Stat. 1092,
provided that:
"(1) In general. - The amendments made by this section [enacting
this section and amending section 135 of this title] shall apply to
taxable years ending after the date of the enactment of this Act
[Aug. 20, 1996].
"(2) Transition rule. - If -
"(A) a State or agency or instrumentality thereof maintains, on
the date of the enactment of this Act, a program under which
persons may purchase tuition credits or certificates on behalf
of, or make contributions for education expenses of, a designated
beneficiary, and
"(B) such program meets the requirements of a qualified State
tuition program before the later of -
"(i) the date which is 1 year after such date of enactment,
or
"(ii) the first day of the first calendar quarter after the
close of the first regular session of the State legislature
that begins after such date of enactment,
then such program (as in effect on August 20, 1996) shall be
treated as a qualified State tuition program with respect to
contributions (and earnings allocable thereto) pursuant to
contracts entered into under such program before the first date
on which such program meets such requirements (determined without
regard to this paragraph) and the provisions of such program (as
so in effect) shall apply in lieu of section 529(b) of the
Internal Revenue Code of 1986 with respect to such contributions
and earnings.
For purposes of subparagraph (B)(ii), if a State has a 2-year
legislative session, each year of such session shall be deemed to
be a separate regular session of the State legislature."
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 62, 72, 135, 221, 222,
530, 6693 of this title.
-End-
-CITE-
26 USC Sec. 530 01/19/04
-EXPCITE-
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter F - Exempt Organizations
PART VIII - HIGHER EDUCATION SAVINGS ENTITIES
-HEAD-
Sec. 530. Coverdell education savings accounts
-STATUTE-
(a) General rule
A Coverdell education savings account shall be exempt from
taxation under this subtitle. Notwithstanding the preceding
sentence, the Coverdell education savings account shall be subject
to the taxes imposed by section 511 (relating to imposition of tax
on unrelated business income of charitable organizations).
(b) Definitions and special rules
For purposes of this section -
(1) Coverdell education savings account
The term "Coverdell education savings account" means a trust
created or organized in the United States exclusively for the
purpose of paying the qualified education expenses of an
individual who is the designated beneficiary of the trust (and
designated as a Coverdell education savings account at the time
created or organized), but only if the written governing
instrument creating the trust meets the following requirements:
(A) No contribution will be accepted -
(i) unless it is in cash,
(ii) after the date on which such beneficiary attains age
18, or
(iii) except in the case of rollover contributions, if such
contribution would result in aggregate contributions for the
taxable year exceeding $2,000.
(B) The trustee is a bank (as defined in section 408(n)) or
another person who demonstrates to the satisfaction of the
Secretary that the manner in which that person will administer
the trust will be consistent with the requirements of this
section or who has so demonstrated with respect to any
individual retirement plan.
(C) No part of the trust assets will be invested in life
insurance contracts.
(D) The assets of the trust shall not be commingled with
other property except in a common trust fund or common
investment fund.
(E) Except as provided in subsection (d)(7), any balance to
the credit of the designated beneficiary on the date on which
the beneficiary attains age 30 shall be distributed within 30
days after such date to the beneficiary or, if the beneficiary
dies before attaining age 30, shall be distributed within 30
days after the date of death of such beneficiary.
The age limitations in subparagraphs (A)(ii) and (E), and
paragraphs (5) and (6) of subsection (d), shall not apply to any
designated beneficiary with special needs (as determined under
regulations prescribed by the Secretary).
(2) Qualified education expenses
(A) In general
The term "qualified education expenses" means -
(i) qualified higher education expenses (as defined in
section 529(e)(3)), and
(ii) qualified elementary and secondary education expenses
(as defined in paragraph (4)).
(B) Qualified tuition programs
Such term shall include any contribution to a qualified
tuition program (as defined in section 529(b)) on behalf of the
designated beneficiary (as defined in section 529(e)(1)); but
there shall be no increase in the investment in the contract
for purposes of applying section 72 by reason of any portion of
such contribution which is not includible in gross income by
reason of subsection (d)(2).
(3) Eligible educational institution
The term "eligible educational institution" has the meaning
given such term by section 529(e)(5).
(4) Qualified elementary and secondary education expenses
(A) In general
The term "qualified elementary and secondary education
expenses" means -
(i) expenses for tuition, fees, academic tutoring, special
needs services in the case of a special needs beneficiary,
books, supplies, and other equipment which are incurred in
connection with the enrollment or attendance of the
designated beneficiary of the trust as an elementary or
secondary school student at a public, private, or religious
school,
(ii) expenses for room and board, uniforms, transportation,
and supplementary items and services (including extended day
programs) which are required or provided by a public,
private, or religious school in connection with such
enrollment or attendance, and
(iii) expenses for the purchase of any computer technology
or equipment (as defined in section 170(e)(6)(F)(i)) or
Internet access and related services, if such technology,
equipment, or services are to be used by the beneficiary and
the beneficiary's family during any of the years the
beneficiary is in school.
Clause (iii) shall not include expenses for computer software
designed for sports, games, or hobbies unless the software is
predominantly educational in nature.
(B) School
The term "school" means any school which provides elementary
education or secondary education (kindergarten through grade
12), as determined under State law.
(5) Time when contributions deemed made
An individual shall be deemed to have made a contribution to an
education individual retirement account on the last day of the
preceding taxable year if the contribution is made on account of
such taxable year and is made not later than the time prescribed
by law for filing the return for such taxable year (not including
extensions thereof).
(c) Reduction in permitted contributions based on adjusted gross
income
(1) In general
In the case of a contributor who is an individual, the maximum
amount the contributor could otherwise make to an account under
this section shall be reduced by an amount which bears the same
ratio to such maximum amount as -
(A) the excess of -
(i) the contributor's modified adjusted gross income for
such taxable year, over
(ii) $95,000 ($190,000 in the case of a joint return),
bears to
(B) $15,000 ($30,000 in the case of a joint return).
(2) Modified adjusted gross income
For purposes of paragraph (1), the term "modified adjusted
gross income" means the adjusted gross income of the taxpayer for
the taxable year increased by any amount excluded from gross
income under section 911, 931, or 933.
(d) Tax treatment of distributions
(1) In general
Any distribution shall be includible in the gross income of the
distributee in the manner as provided in section 72.
(2) Distributions for qualified education expenses
(A) In general
No amount shall be includible in gross income under paragraph
(1) if the qualified education expenses of the designated
beneficiary during the taxable year are not less than the
aggregate distributions during the taxable year.
(B) Distributions in excess of expenses
If such aggregate distributions exceed such expenses during
the taxable year, the amount otherwise includible in gross
income under paragraph (1) shall be reduced by the amount which
bears the same ratio to the amount which would be includible in
gross income under paragraph (1) (without regard to this
subparagraph) as the qualified education expenses bear to such
aggregate distributions.
(C) Coordination with Hope and Lifetime Learning credits and
qualified tuition programs
For purposes of subparagraph (A) -
(i) Credit coordination
The total amount of qualified higher education expenses
with respect to an individual for the taxable year shall be
reduced -
(I) as provided in section 25A(g)(2), and
(II) by the amount of such expenses which were taken into
account in determining the credit allowed to the taxpayer
or any other person under section 25A.
(ii) Coordination with qualified tuition programs
If, with respect to an individual for any taxable year -
(I) the aggregate distributions during such year to which
subparagraph (A) and section 529(c)(3)(B) apply, exceed
(II) the total amount of qualified education expenses
(after the application of clause (i)) for such year,
the taxpayer shall allocate such expenses among such
distributions for purposes of determining the amount of the
exclusion under subparagraph (A) and section 529(c)(3)(B).
(D) Disallowance of excluded amounts as deduction, credit, or
exclusion
No deduction, credit, or exclusion shall be allowed to the
taxpayer under any other section of this chapter for any
qualified education expenses to the extent taken into account
in determining the amount of the exclusion under this
paragraph.
(3) Special rules for applying estate and gift taxes with respect
to account
Rules similar to the rules of paragraphs (2), (4), and (5) of
section 529(c) shall apply for purposes of this section.
(4) Additional tax for distributions not used for educational
expenses
(A) In general
The tax imposed by this chapter for any taxable year on any
taxpayer who receives a payment or distribution from a
Coverdell education savings account which is includible in
gross income shall be increased by 10 percent of the amount
which is so includible.
(B) Exceptions
Subparagraph (A) shall not apply if the payment or
distribution is -
(i) made to a beneficiary (or to the estate of the
designated beneficiary) on or after the death of the
designated beneficiary,
(ii) attributable to the designated beneficiary's being
disabled (within the meaning of section 72(m)(7)),
(iii) made on account of a scholarship, allowance, or
payment described in section 25A(g)(2) received by the
account holder to the extent the amount of the payment or
distribution does not exceed the amount of the scholarship,
allowance, or payment,
(iv) made on account of the attendance of the designated
beneficiary at the United States Military Academy, the United
States Naval Academy, the United States Air Force Academy,
the United States Coast Guard Academy, or the United States
Merchant Marine Academy, to the extent that the amount of the
payment or distribution does not exceed the costs of advanced
education (as defined by section 2005(e)(3) of title 10,
United States Code, as in effect on the date of the enactment
of this section) attributable to such attendance, or
(v) an amount which is includible in gross income solely by
application of paragraph (2)(C)(i)(II) for the taxable year.
(C) Contributions returned before certain date
Subparagraph (A) shall not apply to the distribution of any
contribution made during a taxable year on behalf of the
designated beneficiary if -
(i) such distribution is made before the first day of the
sixth month of the taxable year following the taxable year,
and
(ii) such distribution is accompanied by the amount of net
income attributable to such excess contribution.
Any net income described in clause (ii) shall be included in
gross income for the taxable year in which such excess
contribution was made.
(5) Rollover contributions
Paragraph (1) shall not apply to any amount paid or distributed
from a Coverdell education savings account to the extent that the
amount received is paid, not later than the 60th day after the
date of such payment or distribution, into another Coverdell
education savings account for the benefit of the same beneficiary
or a member of the family (within the meaning of section
529(e)(2)) of such beneficiary who has not attained age 30 as of
such date. The preceding sentence shall not apply to any payment
or distribution if it applied to any prior payment or
distribution during the 12-month period ending on the date of the
payment or distribution.
(6) Change in beneficiary
Any change in the beneficiary of a Coverdell education savings
account shall not be treated as a distribution for purposes of
paragraph (1) if the new beneficiary is a member of the family
(as so defined) of the old beneficiary and has not attained age
30 as of the date of such change.
(7) Special rules for death and divorce
Rules similar to the rules of paragraphs (7) and (8) of section
220(f) shall apply. In applying the preceding sentence, members
of the family (as so defined) of the designated beneficiary shall
be treated in the same manner as the spouse under such paragraph
(8).
(8) Deemed distribution on required distribution date
In any case in which a distribution is required under
subsection (b)(1)(E), any balance to the credit of a designated
beneficiary as of the close of the 30-day period referred to in
such subsection for making such distribution shall be deemed
distributed at the close of such period.
(e) Tax treatment of accounts
Rules similar to the rules of paragraphs (2) and (4) of section
408(e) shall apply to any Coverdell education savings account.
(f) Community property laws
This section shall be applied without regard to any community
property laws.
(g) Custodial accounts
For purposes of this section, a custodial account shall be
treated as a trust if the assets of such account are held by a bank
(as defined in section 408(n)) or another person who demonstrates,
to the satisfaction of the Secretary, that the manner in which he
will administer the account will be consistent with the
requirements of this section, and if the custodial account would,
except for the fact that it is not a trust, constitute an account
described in subsection (b)(1). For purposes of this title, in the
case of a custodial account treated as a trust by reason of the
preceding sentence, the custodian of such account shall be treated
as the trustee thereof.
(h) Reports
The trustee of a Coverdell education savings account shall make
such reports regarding such account to the Secretary and to the
beneficiary of the account with respect to contributions,
distributions, and such other matters as the Secretary may require.
The reports required by this subsection shall be filed at such time
and in such manner and furnished to such individuals at such time
and in such manner as may be required.
-SOURCE-
(Added Pub. L. 105-34, title II, Sec. 213(a), Aug. 5, 1997, 111
Stat. 813; amended Pub. L. 105-206, title VI, Sec.
6004(d)(1)-(3)(A), (5)-(8), July 22, 1998, 112 Stat. 793, 794; Pub.
L. 106-554, Sec. 1(a)(7) [title III, Sec. 319(6)], Dec. 21, 2000,
114 Stat. 2763, 2763A-646; Pub. L. 107-16, title IV, Secs.
401(a)(1), (b)-(g)(1), (2)(C), 402(a)(4)(A), (C), June 7, 2001, 115
Stat. 57-61; Pub. L. 107-22, Sec. 1(a)(1)-(5), July 26, 2001, 115
Stat. 196; Pub. L. 107-147, title IV, Sec. 411(f), Mar. 9, 2002,
116 Stat. 46; Pub. L. 108-121, title I, Sec. 107(a), Nov. 11, 2003,
117 Stat. 1339.)
-STATAMEND-
AMENDMENT OF SECTION
For termination of amendment by section 901 of Pub. L. 107-16,
see Effective and Termination Dates of 2001 Amendment note below.
-REFTEXT-
REFERENCES IN TEXT
The date of the enactment of this section, referred to in subsec.
(d)(4)(B)(iv), is the date of enactment of Pub. L. 105-34, which
enacted this section and was approved Aug. 5, 1997.
-MISC1-
AMENDMENTS
2003 - Subsec. (d)(4)(B)(iv), (v). Pub. L. 108-121 added cl. (iv)
and redesignated former cl. (iv) as (v).
2002 - Subsec. (d)(4)(B)(iv). Pub. L. 107-147 substituted "by
application of paragraph (2)(C)(i)(II)" for "because the taxpayer
elected under paragraph (2)(C) to waive the application of
paragraph (2)".
2001 - Pub. L. 107-22, Sec. 1(a)(5), amended section catchline
generally, substituting "Coverdell education savings" for
"Education individual retirement".
Subsec. (a). Pub. L. 107-22, Sec. 1(a)(2), substituted "A
Coverdell education savings account" for "An education individual
retirement account" and "the Coverdell education savings account"
for "the education individual retirement account".
Subsec. (b)(1). Pub. L. 107-22, Sec. 1(a)(1), (3), in heading,
substituted "Coverdell education savings account" for "Education
individual retirement account" and, in introductory provisions,
substituted " 'Coverdell education savings account' " for "
'education individual retirement account' " and "designated as a
Coverdell education savings account" for "designated as an
education individual retirement account".
Pub. L. 107-16, Secs. 401(d), 901, temporarily inserted
concluding provisions. See Effective and Termination Dates of 2001
Amendment note below.
Pub. L. 107-16, Secs. 401(c)(3)(A), 901, temporarily struck out
"higher" before "education expenses" in introductory provisions.
See Effective and Termination Dates of 2001 Amendment note below.
Subsec. (b)(1)(A)(iii). Pub. L. 107-16, Secs. 401(a)(1), 901,
temporarily substituted "$2,000" for "$500". See Effective and
Termination Dates of 2001 Amendment note below.
Subsec. (b)(2). Pub. L. 107-16, Secs. 401(c)(1), 901, temporarily
amended heading and text of par. (2) generally, substituting
present provisions for provisions which defined "qualified higher
education expenses" as having the meaning given such term by
section 529(e)(3), reduced as provided in section 25A(g)(2), and
including amounts paid or incurred to purchase tuition credits or
certificates, or to make contributions to an account, under a
qualified State tuition program for the benefit of the beneficiary
of the account. See Effective and Termination Dates of 2001
Amendment note below.
Subsec. (b)(2)(B). Pub. L. 107-16, Secs. 402(a)(4)(A), (C), 901,
in heading, temporarily substituted "Qualified tuition" for
"Qualified State tuition" and in text, temporarily substituted
"qualified tuition" for "qualified State tuition". See Effective
and Termination Dates of 2001 Amendment note below.
Subsec. (b)(4). Pub. L. 107-16, Secs. 401(c)(2), 901, temporarily
added par. (4). See Effective and Termination Dates of 2001
Amendment note below.
Subsec. (b)(5). Pub. L. 107-16, Secs. 401(f)(1), 901, temporarily
added par. (5). See Effective and Termination Dates of 2001
Amendment note below.
Subsec. (c)(1). Pub. L. 107-16, Secs. 401(e), 901, temporarily
substituted "In the case of a contributor who is an individual, the
maximum amount the contributor" for "The maximum amount which a
contributor" in introductory provisions. See Effective and
Termination Dates of 2001 Amendment note below.
Subsec. (c)(1)(A)(ii). Pub. L. 107-16, Secs. 401(b)(1), 901,
temporarily substituted "$190,000" for "$150,000". See Effective
and Termination Dates of 2001 Amendment note below.
Subsec. (c)(1)(B). Pub. L. 107-16, Secs. 401(b)(2), 901,
temporarily substituted "$30,000" for "$10,000". See Effective and
Termination Dates of 2001 Amendment note below.
Subsec. (d)(2). Pub. L. 107-16, Secs. 401(c)(3)(B), 901,
temporarily struck out "higher" before "education" in heading. See
Effective and Termination Dates of 2001 Amendment note below.
Subsec. (d)(2)(A), (B). Pub. L. 107-16, Secs. 401(c)(3)(A), 901,
temporarily struck out "higher" before "education". See Effective
and Termination Dates of 2001 Amendment note below.
Subsec. (d)(2)(C). Pub. L. 107-16, Secs. 401(g)(1), 901,
temporarily amended heading and text of subpar. (C) generally.
Prior to amendment, text read as follows: "A taxpayer may elect to
waive the application of this paragraph for any taxable year." See
Effective and Termination Dates of 2001 Amendment note below.
Subsec. (d)(2)(D). Pub. L. 107-16, Secs. 401(g)(2)(C), 901, in
heading, temporarily substituted "deduction, credit, or exclusion"
for "credit or deduction" and in text, temporarily substituted ",
credit, or exclusion" for "or credit". See Effective and
Termination Dates of 2001 Amendment note below.
Subsec. (d)(4)(A). Pub. L. 107-22, Sec. 1(a)(1), substituted "a
Coverdell education savings account" for "an education individual
retirement account".
Subsec. (d)(4)(C). Pub. L. 107-16, Secs. 401(f)(2)(B), 901,
temporarily substituted "certain date" for "due date of return" in
heading. See Effective and Termination Dates of 2001 Amendment note
below.
Subsec. (d)(4)(C)(i). Pub. L. 107-16, Secs. 401(f)(2)(A), 901,
temporarily added cl. (i) and struck out former cl. (i) which read
as follows: "such distribution is made on or before the day
prescribed by law (including extensions of time) for filing the
beneficiary's return of tax for the taxable year or, if the
beneficiary is not required to file such a return, the 15th day of
the 4th month of the taxable year following the taxable year; and".
See Effective and Termination Dates of 2001 Amendment note below.
Subsec. (d)(5). Pub. L. 107-22, Sec. 1(a)(1), (4), substituted
"distributed from a Coverdell education savings account" for
"distributed from an education individual retirement account" and
"another Coverdell education savings account" for "another
education individual retirement account".
Subsec. (d)(6). Pub. L. 107-22, Sec. 1(a)(1), substituted "a
Coverdell education savings account" for "an education individual
retirement account".
Subsec. (e). Pub. L. 107-22, Sec. 1(a)(4), substituted "Coverdell
education savings account" for "education individual retirement
account".
Subsec. (h). Pub. L. 107-22, Sec. 1(a)(1), substituted "a
Coverdell education savings account" for "an education individual
retirement account".
2000 - Subsec. (d)(4)(B)(iii). Pub. L. 106-554 substituted a
comma for a semicolon before "or" at end.
1998 - Subsec. (b)(1). Pub. L. 105-206, Sec. 6004(d)(1), inserted
"an individual who is" before "the designated beneficiary" in
introductory provisions.
Subsec. (b)(1)(E). Pub. L. 105-206, Sec. 6004(d)(2)(A), amended
subpar. (E) generally. Prior to amendment, subpar. (E) read as
follows: "Upon the death of the designated beneficiary, any balance
to the credit of the beneficiary shall be distributed within 30
days after the date of death to the estate of such beneficiary."
Subsec. (d)(1). Pub. L. 105-206, Sec. 6004(d)(3)(A), substituted
"section 72" for "section 72(b)".
Subsec. (d)(2)(D). Pub. L. 105-206, Sec. 6004(d)(5), added
subpar. (D).
Subsec. (d)(4)(B)(iv). Pub. L. 105-206, Sec. 6004(d)(6), added
cl. (iv).
Subsec. (d)(4)(C). Pub. L. 105-206, Sec. 6004(d)(7), substituted
"Contributions" for "Excess contributions" in heading and amended
text of introductory provisions and cl. (i) generally. Prior to
amendment, text read as follows: "Subparagraph (A) shall not apply
to the distribution of any contribution made during a taxable year
on behalf of a designated beneficiary to the extent that such
contribution exceeds $500 if -
"(i) such distribution is received on or before the day
prescribed by law (including extensions of time) for filing such
contributor's return for such taxable year, and".
Subsec. (d)(5). Pub. L. 105-206, Sec. 6004(d)(8)(A), added first
sentence and struck out former first sentence which read as
follows: "Paragraph (1) shall not apply to any amount paid or
distributed from an education individual retirement account to the
extent that the amount received is paid into another education
individual retirement account for the benefit of the same
beneficiary or a member of the family (within the meaning of
section 529(e)(2)) of such beneficiary not later than the 60th day
after the date of such payment or distribution."
Subsec. (d)(6). Pub. L. 105-206, Sec. 6004(d)(8)(B), inserted
before period at end "and has not attained age 30 as of the date of
such change".
Subsec. (d)(7). Pub. L. 105-206, Sec. 6004(d)(2)(B), inserted at
end "In applying the preceding sentence, members of the family (as
so defined) of the designated beneficiary shall be treated in the
same manner as the spouse under such paragraph (8)."
Subsec. (d)(8). Pub. L. 105-206, Sec. 6004(d)(2)(C), added par.
(8).
EFFECTIVE DATE OF 2003 AMENDMENT
Pub. L. 108-121, title I, Sec. 107(b), Nov. 11, 2003, 117 Stat.
1339, provided that: "The amendments made by this section [amending
this section] shall apply to taxable years beginning after December
31, 2002."
EFFECTIVE DATE OF 2002 AMENDMENT
Amendment by Pub. L. 107-147 effective as if included in the
provisions of the Economic Growth and Tax Relief Reconciliation Act
of 2001, Pub. L. 107-16, to which such amendment relates, see
section 411(x) of Pub. L. 107-147, set out as a note under section
25B of this title.
EFFECTIVE AND TERMINATION DATES OF 2001 AMENDMENTS
Amendment by Pub. L. 107-22 effective July 26, 2001, see section
1(c) of Pub. L. 107-22, set out as a note under section 26 of this
title.
Amendment by section 401(a)(1), (b)-(g)(1), (2)(C) of Pub. L.
107-16 applicable to taxable years beginning after Dec. 31, 2001,
see section 401(h) of Pub. L. 107-16, set out as a note under
section 25A of this title.
Amendment by section 402(a)(4)(A), (C) of Pub. L. 107-16
applicable to taxable years beginning after Dec. 31, 2001, see
section 402(h) of Pub. L. 107-16, set out as a note under section
72 of this title.
Amendment by Pub. L. 107-16 inapplicable to taxable, plan, or
limitation years beginning after Dec. 31, 2010, and the Internal
Revenue Code of 1986 to be applied and administered to such years
as if such amendment had never been enacted, see section 901 of
Pub. L. 107-16, set out as a note under section 1 of this title.
EFFECTIVE DATE OF 1998 AMENDMENT
Amendment by Pub. L. 105-206 effective, except as otherwise
provided, as if included in the provisions of the Taxpayer Relief
Act of 1997, Pub. L. 105-34, to which such amendment relates, see
section 6024 of Pub. L. 105-206, set out as a note under section 1
of this title.
EFFECTIVE DATE
Section applicable to taxable years beginning after Dec. 31,
1997, see section 213(f) of Pub. L. 105-34, set out as an Effective
Date of 1997 Amendment note under section 26 of this title.
-SECREF-
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 26, 62, 72, 135, 221,
222, 529, 4973, 4975, 6693 of this title.
-End-
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