26 U.S.C. § 4946 — Definitions and special rules

Page 3036 TITLE 26—INTERNAL REVENUE CODE § 4946 2006—Subsec. (a)(1). Pub. L. 109–280, § 1212(e)(1)(A), substituted ‘‘20 percent’’ for ‘‘10 percent’’. See Codifica- tion note above. Subsec. (a)(2). Pub. L. 109–280, § 1212(e)(1)(B), sub- stituted ‘‘5 percent’’ for ‘‘21⁄2 percent’’. See Codification note above. Subsec. (c)(2). Pub. L. 109–280, § 1212(e)(2), substituted ‘‘$10,000,’’ for ‘‘$5,000,’’ and ‘‘$20,000.’’ for ‘‘$10,000.’’ See Codification note above. Subsec. (d)(4)(A). Pub. L. 109–280, § 1244(b), amended subpar. (A) generally. Prior to amendment, subpar. (A) read as follows: ‘‘such organization is described in para- graph (1), (2), or (3) of section 509(a) or is an exempt op- erating foundation (as defined in section 4940(d)(2)), or’’. See Codification note above. 1988—Subsec. (g)(1). Pub. L. 100–647 amended par. (1) generally. Prior to amendment, par. (1) read as follows: ‘‘the grant constitutes a scholarship or fellowship grant which is subject to the provisions of section 117(a) and is to be used for study at an educational or- ganization described in section 170(b)(1)(A)(ii),’’. 1986—Subsec. (g)(2). Pub. L. 99–514 inserted ‘‘(without regard to paragraph (3) thereof)’’ after ‘‘section 74(b)’’. 1984—Subsec. (d)(4). Pub. L. 98–369, in amending par. (4) generally, divided existing provisions into subpars. (A) and (B) and inserted reference in subpar. (A) to ex- empt foundations (as defined in section 4940(d)(2)). 1980—Subsec. (b)(1). Pub. L. 96–596, § 2(a)(1)(F), sub- stituted ‘‘taxable period’’ for ‘‘correction period’’. Subsec. (i)(2). Pub. L. 96–596, § 2(a)(2)(E), substituted provision defining taxable period as the period begin- ning with the date on which the taxable expenditure occurs and ending on the earlier of the date of mailing a notice of deficiency with respect to the tax imposed by subsec. (a)(1) of this section under section 6212 of this title or the date on which the tax imposed by sub- sec. (a)(1) of this section is assessed for provision defin- ing correction period as the period beginning with the date on which the taxable expenditure occurs and end- ing 90 days after the date of mailing of a notice of defi- ciency with respect to the tax imposed by subsec. (b)(1) of this section under section 6212 of this title, extended by any period in which the deficiency cannot be as- sessed under section 6213(a) of this title and any other period which the Secretary determines to be reasonable and necessary, except that such determination not be made with respect to any taxable expenditure within the meaning of pars. (1), (2), (3), or (4) of subsec. (d) of this section because of any action by an appropriate State officer. 1976—Subsec. (g). Pub. L. 94–455, §§ 1901(b)(8)(H), 1906(b)(13)(A), struck out in provisions preceding par. (1) ‘‘or his delegate’’ after ‘‘Secretary’’ and substituted in par. (1) ‘‘educational organization described in sec- tion 170(b)(1)(A)(ii)’’ for ‘‘educational institution de- scribed in section 151(e)(4)’’. Subsecs. (h), (i). Pub. L. 94–455, § 1906(b)(13)(A), struck out ‘‘or his delegate’’ after ‘‘Secretary’’ wherever ap- pearing. Statutory Notes and Related Subsidiaries EFFECTIVE DATE OF 2014 AMENDMENT Amendment by Pub. L. 113–295 effective Dec. 19, 2014, subject to a savings provision, see section 221(b) of Pub. L. 113–295, set out as a note under section 1 of this title. EFFECTIVE DATE OF 2006 AMENDMENT Amendment by section 1212(e) of Pub. L. 109–280 appli- cable to taxable years beginning after Aug. 17, 2006, see section 1212(f) of Pub. L. 109–280, set out as a note under section 4941 of this title. Amendment by section 1244(b) of Pub. L. 109–280 ap- plicable to distributions and expenditures after Aug. 17, 2006, see section 1244(c) of Pub. L. 109–280, set out as a note under section 4942 of this title. 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 prizes and awards granted after Dec. 31, 1986, see section 151(c) of Pub. L. 99–514, set out as a note under section 1 of this title. EFFECTIVE DATE OF 1984 AMENDMENT Pub. L. 98–369, div. A, title III, § 302(c)(2), July 18, 1984, 98 Stat. 781, provided that: ‘‘The amendment made by subsection (b) [amending this section] shall apply to grants made after December 31, 1984, in taxable years ending after such date.’’ EFFECTIVE DATE OF 1980 AMENDMENT For effective date of amendment by Pub. L. 96–596 with respect to any first tier tax and to any second tier tax, see section 2(d) of Pub. L. 96–596, set out as an Ef- fective Date note under section 4961 of this title. SAVINGS PROVISION Applicability of subsecs. (d)(4) and (h) of this section to grants to private foundations described in section 101(l)(C)(3) of Pub. L. 91–172, see section 101(l)(5) of Pub. L. 91–172, set out as a note under section 4940 of this title. § 4946. Definitions and special rules (a) Disqualified person (1) In general For purposes of this subchapter, the term ‘‘disqualified person’’ means, with respect to a private foundation, a person who is— (A) a substantial contributor to the foun- dation, (B) a foundation manager (within the meaning of subsection (b)(1)), (C) an owner of more than 20 percent of— (i) the total combined voting power of a corporation, (ii) the profits interest of a partnership, or (iii) the beneficial interest of a trust or unincorporated enterprise, which is a substantial contributor to the foundation, (D) a member of the family (as defined in subsection (d)) of any individual described in subparagraph (A), (B), or (C), (E) a corporation of which persons de- scribed in subparagraph (A), (B), (C), or (D) own more than 35 percent of the total com- bined voting power, (F) a partnership in which persons de- scribed in subparagraph (A), (B), (C), or (D) own more than 35 percent of the profits in- terest, (G) a trust or estate in which persons de- scribed in subparagraph (A), (B), (C), or (D) hold more than 35 percent of the beneficial interest, (H) only for purposes of section 4943, a pri- vate foundation— (i) which is effectively controlled (di- rectly or indirectly) by the same person or persons who control the private foundation in question, or (ii) substantially all of the contributions to which were made (directly or indirectly) Page 3037 TITLE 26—INTERNAL REVENUE CODE § 4946 by the same person or persons described in subparagraph (A), (B), or (C), or members of their families (within the meaning of subsection (d)), who made (directly or indi- rectly) substantially all of the contribu- tions to the private foundation in ques- tion, and (I) only for purposes of section 4941, a gov- ernment official (as defined in subsection (c)). (2) Substantial contributors For purposes of paragraph (1), the term ‘‘substantial contributor’’ means a person who is described in section 507(d)(2). (3) Stockholdings For purposes of paragraphs (1)(C)(i) and (1)(E), there shall be taken into account indi- rect stockholdings which would be taken into account under section 267(c), except that, for purposes of this paragraph, section 267(c)(4) shall be treated as providing that the members of the family of an individual are the members within the meaning of subsection (d). (4) Partnerships; trusts For purposes of paragraphs (1)(C)(ii) and (iii), (1)(F), and (1)(G), the ownership of profits or beneficial interests shall be determined in accordance with the rules for constructive ownership of stock provided in section 267(c) (other than paragraph (3) thereof), except that section 267(c)(4) shall be treated as providing that the members of the family of an indi- vidual are the members within the meaning of subsection (d). (b) Foundation manager For purposes of this subchapter, the term ‘‘foundation manager’’ means, with respect to any private foundation— (1) an officer, director, or trustee of a foun- dation (or an individual having powers or re- sponsibilities similar to those of officers, di- rectors, or trustees of the foundation), and (2) with respect to any act (or failure to act), the employees of the foundation having au- thority or responsibility with respect to such act (or failure to act). (c) Government official For purposes of subsection (a)(1)(I) and section 4941, the term ‘‘government official’’ means, with respect to an act of self-dealing described in section 4941, an individual who, at the time of such act, holds any of the following offices or positions (other than as a ‘‘special Government employee’’, as defined in section 202(a) of title 18, United States Code): (1) an elective public office in the executive or legislative branch of the Government of the United States, (2) an office in the executive or judicial branch of the Government of the United States, appointment to which was made by the President, (3) a position in the executive, legislative, or judicial branch of the Government of the United States— (A) which is listed in schedule C of rule VI of the Civil Service Rules, or (B) the compensation for which is equal to or greater than the lowest rate of basic pay for the Senior Executive Service under sec- tion 5382 of title 5, United States Code, (4) a position under the House of Representa- tives or the Senate of the United States held by an individual receiving gross compensation at an annual rate of $15,000 or more, (5) an elective or appointive public office in the executive, legislative, or judicial branch of the government of a State, possession of the United States, or political subdivision or other area of any of the foregoing, or of the District of Columbia, held by an individual receiving gross compensation at an annual rate of $20,000 or more, (6) a position as personal or executive assist- ant or secretary to any of the foregoing, or (7) a member of the Internal Revenue Serv- ice Oversight Board. (d) Members of family For purposes of subsection (a)(1), the family of any individual shall include only his spouse, an- cestors, children, grandchildren, great grand- children, and the spouses of children, grand- children, and great grandchildren. (Added Pub. L. 91–172, title I, § 101(b), Dec. 30, 1969, 83 Stat. 515; amended Pub. L. 95–227, § 4(c)(2)(B), Feb. 10, 1978, 92 Stat. 22; Pub. L. 98–369, div. A, title III, § 306(a), July 18, 1984, 98 Stat. 784; Pub. L. 99–514, title XVI, § 1606(a), Oct. 22, 1986, 100 Stat. 2771; Pub. L. 105–206, title I, § 1101(c)(1), July 22, 1998, 112 Stat. 696; Pub. L. 106–554, § 1(a)(7) [title III, § 319(16)], Dec. 21, 2000, 114 Stat. 2763, 2763A–647.) Editorial Notes AMENDMENTS 2000—Subsec. (c)(3)(B). Pub. L. 106–554 substituted ‘‘the lowest rate of basic pay for the Senior Executive Service under section 5382’’ for ‘‘the lowest rate of com- pensation prescribed for GS–16 of the General Schedule under section 5332’’. 1998—Subsec. (c)(7). Pub. L. 105–206 added par. (7). 1986—Subsec. (c)(5). Pub. L. 99–514 substituted ‘‘$20,000’’ for ‘‘$15,000’’. 1984—Subsec. (d). Pub. L. 98–369 amended subsec. (d) generally, substituting references to children, grand- children, and great grandchildren for references to lin- eal descendants in two places. 1978—Subsecs. (a)(1), (b). Pub. L. 95–227 substituted ‘‘subchapter’’ for ‘‘chapter’’. Statutory Notes and Related Subsidiaries EFFECTIVE DATE OF 1986 AMENDMENT Pub. L. 99–514, title XVI, § 1606(b), Oct. 22, 1986, 100 Stat. 2771, provided that: ‘‘The amendment made by this section [amending this section] shall apply to com- pensation received after December 31, 1985.’’ EFFECTIVE DATE OF 1984 AMENDMENT Pub. L. 98–369, div. A, title III, § 306(c), July 18, 1984, 98 Stat. 784, provided that: ‘‘The amendments made by this subsection [probably should be ‘‘section’’, amend- ing this section and section 6104 of this title] shall take effect on January 1, 1985.’’ EFFECTIVE DATE OF 1978 AMENDMENT Amendment by Pub. L. 95–227 applicable with respect to contributions, acts, and expenditures made after Page 3038 TITLE 26—INTERNAL REVENUE CODE § 4947 Dec. 31, 1977, in and for taxable years beginning after such date, see section 4(f) of Pub. L. 95–227, set out as an Effective Date note under section 192 of this title. § 4947. Application of taxes to certain nonexempt trusts (a) Application of tax (1) Charitable trusts For purposes of part II of subchapter F of chapter 1 (other than section 508(a), (b), and (c)) and for purposes of this chapter, a trust which is not exempt from taxation under sec- tion 501(a), all of the unexpired interests in which are devoted to one or more of the pur- poses described in section 170(c)(2)(B), and for which a deduction was allowed under section 170, 545(b)(2), 642(c), 2055, 2106(a)(2), or 2522 (or the corresponding provisions of prior law), shall be treated as an organization described in section 501(c)(3). For purposes of section 509(a)(3)(A), such a trust shall be treated as if organized on the day on which it first becomes subject to this paragraph. (2) Split-interest trusts In the case of a trust which is not exempt from tax under section 501(a), not all of the unexpired interests in which are devoted to one or more of the purposes described in sec- tion 170(c)(2)(B), and which has amounts in trust for which a deduction was allowed under section 170, 545(b)(2), 642(c), 2055, 2106(a)(2), or 2522, section 507 (relating to termination of private foundation status), section 508(e) (re- lating to governing instruments) to the extent applicable to a trust described in this para- graph, section 4941 (relating to taxes on self- dealing), section 4943 (relating to taxes on ex- cess business holdings) except as provided in subsection (b)(3), section 4944 (relating to in- vestments which jeopardize charitable pur- pose) except as provided in subsection (b)(3), and section 4945 (relating to taxes on taxable expenditures) shall apply as if such trust were a private foundation. This paragraph shall not apply with respect to— (A) any amounts payable under the terms of such trust to income beneficiaries, unless a deduction was allowed under section 170(f)(2)(B), 2055(e)(2)(B), or 2522(c)(2)(B), (B) any amounts in trust other than amounts for which a deduction was allowed under section 170, 545(b)(2), 642(c), 2055, 2106(a)(2), or 2522, if such other amounts are segregated from amounts for which no de- duction was allowable, or (C) any amounts transferred in trust be- fore May 27, 1969. (3) Segregated amounts For purposes of paragraph (2)(B), a trust with respect to which amounts are segregated shall separately account for the various in- come, deduction, and other items properly at- tributable to each of such segregated amounts. (b) Special rules (1) Regulations The Secretary shall prescribe such regula- tions as may be necessary to carry out the purposes of this section. (2) Limit to segregated amounts If any amounts in the trust are segregated within the meaning of subsection (a)(2)(B) of this section, the value of the net assets for purposes of subsections (c)(2) and (g) of section 507 shall be limited to such segregated amounts. (3) Sections 4943 and 4944 Sections 4943 and 4944 shall not apply to a trust which is described in subsection (a)(2) if— (A) all the income interest (and none of the remainder interest) of such trust is de- voted solely to one or more of the purposes described in section 170(c)(2)(B), and all amounts in such trust for which a deduction was allowed under section 170, 545(b)(2), 642(c), 2055, 2106(a)(2), or 2522 have an aggre- gate value not more than 60 percent of the aggregate fair market value of all amounts in such trusts, or (B) a deduction was allowed under section 170, 545(b)(2), 642(c), 2055, 2106(a)(2), or 2522 for amounts payable under the terms of such trust to every remainder beneficiary but not to any income beneficiary. (4) Section 507 The provisions of section 507(a) shall not apply to a trust which is described in sub- section (a)(2) by reason of a distribution of qualified employer securities (as defined in section 664(g)(4)) to an employee stock owner- ship plan (as defined in section 4975(e)(7)) in a qualified gratuitous transfer (as defined by section 664(g)). (Added Pub. L. 91–172, title I, § 101(b), Dec. 30, 1969, 83 Stat. 517; amended Pub. L. 94–455, title XIX, § 1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1834; Pub. L. 105–34, title XV, § 1530(c)(9), Aug. 5, 1997, 111 Stat. 1079; Pub. L. 107–16, title V, § 542(e)(4), June 7, 2001, 115 Stat. 85; Pub. L. 108–357, title IV, § 413(c)(30), Oct. 22, 2004, 118 Stat. 1509; Pub. L. 111–312, title III, § 301(a), Dec. 17, 2010, 124 Stat. 3300.) Editorial Notes AMENDMENTS 2010—Subsec. (a)(2)(A). Pub. L. 111–312 amended sub- sec. (a)(2)(A) to read as if amendment by Pub. L. 107–16, § 542(e)(4), had never been enacted. See 2001 Amendment note below. 2004—Subsecs. (a)(1), (2), (b)(3). Pub. L. 108–357 struck out ‘‘556(b)(2),’’ after ‘‘545(b)(2),’’ wherever appearing. 2001—Subsec. (a)(2)(A). Pub. L. 107–16, § 542(e)(4), in- serted ‘‘642(c),’’ after ‘‘170(f)(2)(B),’’. 1997—Subsec. (b)(4). Pub. L. 105–34 added par. (4). 1976—Subsec. (b)(1). Pub. L. 94–455 struck out ‘‘or his delegate’’ after ‘‘Secretary’’. Statutory Notes and Related Subsidiaries EFFECTIVE DATE OF 2010 AMENDMENT Amendment by Pub. L. 111–312 applicable to estates of decedents dying, and transfers made after Dec. 31, 2009, except as otherwise provided, see section 301(e) of Pub. L. 111–312, set out as an Effective and Termination Dates of 2010 Amendment note under section 121 of this title. EFFECTIVE DATE OF 2004 AMENDMENT Amendment by Pub. L. 108–357 applicable to taxable years of foreign corporations beginning after Dec. 31,