Private foundation defined
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—
an organization described in section 170(b)(1)(A) (other than in clauses (vii) and (viii));
an organization which—
normally receives more than one-third of its support in each taxable year from any combination of—
gifts, grants, contributions, or membership fees, and
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
normally receives not more than one-third of its support in each taxable year from the sum of—
gross investment income (as defined in subsection (e)) and
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;
an organization which—
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),
is—
operated, supervised, or controlled by one or more organizations described in paragraph (1) or (2),
supervised or controlled in connection with one or more such organizations, or
operated in connection with one or more such organizations, and
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
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).
Continuation of private foundation status
Status of organization after termination of private foundation status
Definition of support
For purposes of this part and chapter 42, the term “support” includes (but is not limited to)—
gifts, grants, contributions, or membership fees,
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),
net income from unrelated business activities, whether or not such activities are carried on regularly as a trade or business,
gross investment income (as defined in subsection (e)),
tax revenues levied for the benefit of an organization and either paid to or expended on behalf of such organization, and
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.
Definition of gross investment income
Requirements for supporting organizations
Type III supporting organizations
For purposes of subsection (a)(3)(B)(iii), an organization shall not be considered to be operated in connection with any organization described in paragraph (1) or (2) of subsection (a) unless such organization meets the following requirements:
Responsiveness
Foreign supported organizations
In general
Transition rule for existing organizations
Organizations controlled by donors
In general
For purposes of subsection (a)(3)(B), an organization shall not be considered to be—
operated, supervised, or controlled by any organization described in paragraph (1) or (2) of subsection (a), or
operated in connection with any organization described in paragraph (1) or (2) of subsection (a),
if such organization accepts any gift or contribution from any person described in subparagraph (B).
Person described
A person is described in this subparagraph if, with respect to a supported organization of an organization described in subparagraph (A), such person is—
a person (other than an organization described in paragraph (1), (2), or (4) of section 509(a)) who directly or indirectly controls, either alone or together with persons described in clauses (ii) and (iii), the governing body of such supported organization,
a member of the family (determined under section 4958(f)(4)) of an individual described in clause (i), or
a 35-percent controlled entity (as defined in section 4958(f)(3) by substituting “persons described in clause (i) or (ii) of section 509(f)(2)(B)” for “persons described in subparagraph (A) or (B) of paragraph (1)” in subparagraph (A)(i) thereof).
Supported organization
For purposes of this subsection, the term “supported organization” means, with respect to an organization described in subsection (a)(3), an organization described in paragraph (1) or (2) of subsection (a)—
for whose benefit the organization described in subsection (a)(3) is organized and operated, or
with respect to which the organization performs the functions of, or carries out the purposes of.
Source
(Added Pub. L. 91–172, title I, § 101(a),Notes
References in Text
Codification
Amendments
Effective Date of 2006 Amendment
In general.—
The amendments made by subsections (a) and (b) [amending this section] shall take effect on the date of the enactment of this Act [
Charitable trusts which are type iii supporting organizations.—
Subsection (c) [enacting provisions set out as a note below] shall take effect—
in the case of trusts operated in connection with an organization described in paragraph (1) or (2) of section 509(a) of the Internal Revenue Code of 1986 on the date of the enactment of this Act, on the date that is one year after the date of the enactment of this Act, and
in the case of any other trust, on the date of the enactment of this Act.”
Effective Date of 1978 Amendment
amounts received after
transfers of securities, under agreements described in section 1058 of such Code, occurring after such date.”
Effective Date of 1975 Amendment
Effective Date
Savings Provision
Charitable Trusts Which Are Type III Supporting Organizations
it is a charitable trust under State law,
the supported organization (as defined in section 509(f)(3) of such Code) is a beneficiary of such trust, and
the supported organization (as so defined) has the power to enforce the trust and compel an accounting.”
Payout Requirements for Type III Supporting Organizations
In general.—
The Secretary of the Treasury shall promulgate new regulations under section 509 of the Internal Revenue Code of 1986 on payments required by type III supporting organizations which are not functionally integrated type III supporting organizations. Such regulations shall require such organizations to make distributions of a percentage of either income or assets to supported organizations (as defined in section 509(f)(3) of such Code) in order to ensure that a significant amount is paid to such organizations.
Type iii supporting organization; functionally integrated type iii supporting organization.—
For purposes of paragraph (1), the terms ‘type III supporting organization’ and ‘functionally integrated type III supporting organization’ have the meanings given such terms under subparagraphs (A) and (B) section 4943(f)(5) of the Internal Revenue Code of 1986 (as added by this Act), respectively.”