26 U.S.C. § 511 — Imposition of tax on unrelated business in-

Page 1696 TITLE 26—INTERNAL REVENUE CODE § 511 assets to supported organizations (as defined in section 509(f)(3) of such Code) in order to ensure that a signifi- cant amount is paid to such organizations. ‘‘(2) TYPE III SUPPORTING ORGANIZATION; FUNCTIONALLY INTEGRATED TYPE III SUPPORTING ORGANIZATION.—For purposes of paragraph (1), the terms ‘type III sup- porting 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.’’ PART III—TAXATION OF BUSINESS INCOME OF CERTAIN EXEMPT ORGANIZATIONS Sec. 511. Imposition of tax on unrelated business in- come of charitable, etc., organizations. 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. Editorial Notes AMENDMENTS 2018—Pub. L. 115–141, div. U, title IV, § 401(a)(125), Mar. 23, 2018, 132 Stat. 1190, substituted ‘‘Imposition of tax on unrelated business income of charitable, etc., or- ganizations.’’ for ‘‘Imposition of tax on unrelated busi- ness income of charitable organizations, etc.’’ in item 511. 1969—Pub. L. 91–172, title I, §§ 101(a), 121(d)(3)(C), Dec. 30, 1969, 83 Stat. 492, 548, substituted ‘‘PART III’’ for ‘‘PART II’’ as part designation and substituted ‘‘Unre- lated debt-financed income’’ for ‘‘Business leases’’ in item 514. § 511. Imposition of tax on unrelated business in- come of charitable, etc., organizations (a) Charitable, etc., organizations taxable at cor- poration 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 organiza- tion described in paragraph (2) a tax computed as provided in section 11. In making such com- putation 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 founda- tions), 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 sub- divisions. 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 mak- ing such computation for purposes of this sec- tion, 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, ex- cept as provided in this part or part II (relat- ing 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, bene- ficiaries, 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 in- come), 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 or- ganized and operated for the same purposes as such organization, in addition to the purposes described in section 501(c)(2). (Aug. 16, 1954, ch. 736, 68A Stat. 169; Pub. L. 86–667, § 3, July 14, 1960, 74 Stat. 535; Pub. L. 89–352, § 2, Feb. 2, 1966, 80 Stat. 4; Pub. L. 91–172, title I, § 121(a)(1)–(3), title III, § 301(b)(8), title VIII, § 803(d)(2), Dec. 30, 1969, 83 Stat. 536, 585, 684; Pub. L. 95–30, title I, § 101(d)(6), May 23, 1977, 91 Stat. 133; Pub. L. 95–600, title III, § 301(b)(5), title IV, § 421(e)(3), Nov. 6, 1978, 92 Stat. 2821, 2876; Pub. L. 97–248, title II, § 201(d)(5), formerly § 201(c)(5), Sept. 3, 1982, 96 Stat. 419, renumbered § 201(d)(5), Pub. L. 97–448, title III, § 306(a)(1)(A)(i), Jan. 12, 1983, 96 Stat. 2400; Pub. L. 100–647, title I, § 1007(g)(6), Nov. 10, 1988, 102 Stat. 3435.) Editorial Notes 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 busi- ness taxable income pursuant to subsection (a), the tax imposed by section 56 shall apply to such organi- zations with respect to items of tax preference which enter into the computation of unrelated business tax- able income in the same manner as section 56 applies to corporations. ‘‘(2) ORGANIZATIONS TAXABLE AS TRUSTS.—If an orga- nization is subject to tax on unrelated business tax- able income pursuant to subsection (b), the taxes im- Page 1697 TITLE 26—INTERNAL REVENUE CODE § 512 posed 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 ‘‘sec- tion 55’’ for ‘‘section 55 and section 56 (as the case may be)’’. 1978—Subsec. (a)(1). Pub. L. 95–600, § 301(b)(5)(A), sub- stituted ‘‘a tax’’ for ‘‘a normal tax and a surtax’’. Subsec. (a)(2). Pub. L. 95–600, § 301(b)(5)(B), substituted ‘‘tax’’ for ‘‘taxes’’ wherever appearing. Subsec. (d). Pub. L. 95–600, § 421(e)(3), substituted pro- visions 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 busi- ness 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, § 121(a)(1), re- moved 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, conven- tions, or associations of churches, from the imposition of tax on their unrelated business income, made cor- porations 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, § 803(d)(2), substituted section 1(d) for section 1 in reference to section under which the computation of the tax dealing with the im- position of tax on the unrelated business taxable in- come of trusts, is computed. Subsec. (b)(2). Pub. L. 91–172, § 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 de- termining trusts exempt from taxation, substituted ref- erence to section 501(a) for reference to ‘‘section 501(c)(3) or (17) or section 401(a)’’. Subsec. (c). Pub. L. 91–172, § 121(a)(3), added subsec. (c). Former subsec. (c), covering the effective date, was struck out. Subsec. (d). Pub. L. 91–172, § 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, § 3(a), included or- ganizations described in section 501(c)(17) within sub- par. (A). Subsec. (b). Pub. L. 86–667, § 3(b), inserted a reference to section 501(c)(17). Statutory Notes and Related Subsidiaries 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 ap- plicable 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 Pub. L. 91–172, title I, § 121(g), Dec. 30, 1969, 83 Stat. 549, as amended by Pub. L. 99–514, § 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 tax- able years beginning after December 31, 1969. The amendments made by subsection (b)(3) [enacting sec- tion 277 of this title] shall apply to taxable years begin- ning 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 De- cember 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 organi- zation 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 per- cent 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 ap- plicable 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 ap- plicable 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 Pub. L. 89–352, § 3, Feb. 2, 1966, 80 Stat. 4, provided in part that: ‘‘The amendment made by section 2 [amend- ing 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. § 512. Unrelated business taxable income (a) Definition For purposes of this title— (1) General rule Except as otherwise provided in this sub- section, 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 pro- vided 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—