26 U.S.C. § 4966 — Taxes on taxable distributions

Page 3052 TITLE 26—INTERNAL REVENUE CODE § 4966 (8) a program described in section 529A. (d) Entity manager For purposes of this section, the term ‘‘entity manager’’ means— (1) in the case of an entity described in para- graph (1), (2), or (3) of subsection (c)— (A) the person with authority or responsi- bility similar to that exercised by an officer, director, or trustee of an organization, and (B) with respect to any act, the person having authority or responsibility with re- spect to such act, and (2) in the case of an entity described in para- graph (4), (5), (6), or (7) of subsection (c), the person who approves or otherwise causes the entity to be a party to the prohibited tax shel- ter transaction. (e) Prohibited tax shelter transaction; subse- quently listed transaction For purposes of this section— (1) Prohibited tax shelter transaction (A) In general The term ‘‘prohibited tax shelter trans- action’’ means— (i) any listed transaction, and (ii) any prohibited reportable trans- action. (B) Listed transaction The term ‘‘listed transaction’’ has the meaning given such term by section 6707A(c)(2). (C) Prohibited reportable transaction The term ‘‘prohibited reportable trans- action’’ means any confidential transaction or any transaction with contractual protec- tion (as defined under regulations prescribed by the Secretary) which is a reportable transaction (as defined in section 6707A(c)(1)). (2) Subsequently listed transaction The term ‘‘subsequently listed transaction’’ means any transaction to which a tax-exempt entity is a party and which is determined by the Secretary to be a listed transaction at any time after the entity has become a party to the transaction. Such term shall not include a transaction which is a prohibited reportable transaction at the time the entity became a party to the transaction. (f) Regulatory authority The Secretary is authorized to promulgate regulations which provide guidance regarding the determination of the allocation of net in- come or proceeds of a tax-exempt entity attrib- utable to a transaction to various periods, in- cluding before and after the listing of the trans- action or the date which is 90 days after the date of the enactment of this section. (g) Coordination with other taxes and penalties The tax imposed by this section is in addition to any other tax, addition to tax, or penalty im- posed under this title. (Added Pub. L. 109–222, title V, § 516(a)(1), May 17, 2006, 120 Stat. 368; amended Pub. L. 110–172, § 11(a)(30), Dec. 29, 2007, 121 Stat. 2487; Pub. L. 113–295, div. B, title I, § 102(e)(3), Dec. 19, 2014, 128 Stat. 4062.) Editorial Notes REFERENCES IN TEXT The date of the enactment of this section, referred to in subsecs. (b)(1)(B) and (f), is the date of enactment of Pub. L. 109–222, which was approved May 17, 2006. AMENDMENTS 2014—Subsec. (c)(8). Pub. L. 113–295 added par. (8). 2007—Subsec. (c)(6). Pub. L. 110–172 substituted ‘‘sec- tion 457(e)(1)(A)’’ for ‘‘section 4457(e)(1)(A)’’. Statutory Notes and Related Subsidiaries EFFECTIVE DATE OF 2014 AMENDMENT Amendment by Pub. L. 113–295 applicable to taxable years beginning after Dec. 31, 2014, see section 102(f)(1) of Pub. L. 113–295, set out as a note under section 552a of Title 5, Government Organization and Employees. EFFECTIVE DATE Pub. L. 109–222, title V, § 516(d), May 17, 2006, 120 Stat. 372, provided that: ‘‘(1) IN GENERAL.—Except as provided in paragraph (2), the amendments made by this section [enacting this section and amending sections 6011, 6033, and 6652 of this title] shall apply to taxable years ending after the date of the enactment of this Act [May 17, 2006], with respect to transactions before, on, or after such date, except that no tax under section 4965(a) of the Internal Revenue Code of 1986 (as added by this section) shall apply with respect to income or proceeds that are prop- erly allocable to any period ending on or before the date which is 90 days after such date of enactment. ‘‘(2) DISCLOSURE.—The amendments made by sub- sections (b) and (c) [amending sections 6011, 6033, and 6652 of this title] shall apply to disclosures the due date for which are after the date of the enactment of this Act.’’ Subchapter G—Donor Advised Funds Sec. 4966. Taxes on taxable distributions. 4967. Taxes on prohibited benefits. Editorial Notes CODIFICATION Pub. L. 109–280, title XII, § 1231(a), Aug. 17, 2006, 120 Stat. 1094, which directed the addition of subchapter G at the end of chapter 42, without specifying the act to be amended, was executed by adding subchapter G at the end of chapter 42 of this title, which consists of the Internal Revenue Code of 1986, to reflect the probable intent of Congress. § 4966. Taxes on taxable distributions (a) Imposition of taxes (1) On the sponsoring organization There is hereby imposed on each taxable dis- tribution a tax equal to 20 percent of the amount thereof. The tax imposed by this para- graph shall be paid by the sponsoring organi- zation with respect to the donor advised fund. (2) On the fund management There is hereby imposed on the agreement of any fund manager to the making of a distribu- tion, knowing that it is a taxable distribution, a tax equal to 5 percent of the amount thereof. Page 3053 TITLE 26—INTERNAL REVENUE CODE § 4966 The tax imposed by this paragraph shall be paid by any fund manager who agreed to the making of the distribution. (b) Special rules For purposes of subsection (a)— (1) Joint and several liability If more than one person is liable under sub- section (a)(2) with respect to the making of a taxable distribution, all such persons shall be jointly and severally liable under such para- graph with respect to such distribution. (2) Limit for management With respect to any one taxable distribu- tion, the maximum amount of the tax imposed by subsection (a)(2) shall not exceed $10,000. (c) Taxable distribution For purposes of this section— (1) In general The term ‘‘taxable distribution’’ means any distribution from a donor advised fund— (A) to any natural person, or (B) to any other person if— (i) such distribution is for any purpose other than one specified in section 170(c)(2)(B), or (ii) the sponsoring organization does not exercise expenditure responsibility with respect to such distribution in accordance with section 4945(h). (2) Exceptions Such term shall not include any distribution from a donor advised fund— (A) to any organization described in sec- tion 170(b)(1)(A) (other than a disqualified supporting organization), (B) to the sponsoring organization of such donor advised fund, or (C) to any other donor advised fund. (d) Definitions For purposes of this subchapter— (1) Sponsoring organization The term ‘‘sponsoring organization’’ means any organization which— (A) is described in section 170(c) (other than in paragraph (1) thereof, and without regard to paragraph (2)(A) thereof), (B) is not a private foundation (as defined in section 509(a)), and (C) maintains 1 or more donor advised funds. (2) Donor advised fund (A) In general Except as provided in subparagraph (B) or (C), the term ‘‘donor advised fund’’ means a fund or account— (i) which is separately identified by ref- erence to contributions of a donor or do- nors, (ii) which is owned and controlled by a sponsoring organization, and (iii) with respect to which a donor (or any person appointed or designated by such donor) has, or reasonably expects to have, advisory privileges with respect to the distribution or investment of amounts held in such fund or account by reason of the donor’s status as a donor. (B) Exceptions The term ‘‘donor advised fund’’ shall not include any fund or account— (i) which makes distributions only to a single identified organization or govern- mental entity, or (ii) with respect to which a person de- scribed in subparagraph (A)(iii) advises as to which individuals receive grants for travel, study, or other similar purposes, if— (I) such person’s advisory privileges are performed exclusively by such person in the person’s capacity as a member of a committee all of the members of which are appointed by the sponsoring organi- zation, (II) no combination of persons de- scribed in subparagraph (A)(iii) (or per- sons related to such persons) control, di- rectly or indirectly, such committee, and (III) all grants from such fund or ac- count are awarded on an objective and nondiscriminatory basis pursuant to a procedure approved in advance by the board of directors of the sponsoring orga- nization, and such procedure is designed to ensure that all such grants meet the requirements of paragraph (1), (2), or (3) of section 4945(g). (C) Secretarial authority The Secretary may exempt a fund or ac- count not described in subparagraph (B) from treatment as a donor advised fund— (i) if such fund or account is advised by a committee not directly or indirectly controlled by the donor or any person ap- pointed or designated by the donor for the purpose of advising with respect to dis- tributions from such fund (and any related parties), or (ii) if such fund benefits a single identi- fied charitable purpose. (3) Fund manager The term ‘‘fund manager’’ means, with re- spect to any sponsoring organization— (A) an officer, director, or trustee of such sponsoring organization (or an individual having powers or responsibilities similar to those of officers, directors, or trustees of the sponsoring organization), and (B) with respect to any act (or failure to act), the employees of the sponsoring organi- zation having authority or responsibility with respect to such act (or failure to act). (4) Disqualified supporting organization (A) In general The term ‘‘disqualified supporting organi- zation’’ means, with respect to any distribu- tion— (i) any type III supporting organization (as defined in section 4943(f)(5)(A)) which is not a functionally integrated type III sup- porting organization (as defined in section 4943(f)(5)(B)), and Page 3054 TITLE 26—INTERNAL REVENUE CODE § 4967 (ii) any organization which is described in subparagraph (B) or (C) if— (I) the donor or any person designated by the donor for the purpose of advising with respect to distributions from a donor advised fund (and any related par- ties) directly or indirectly controls a supported organization (as defined in section 509(f)(3)) of such organization, or (II) the Secretary determines by regu- lations that a distribution to such orga- nization otherwise is inappropriate. (B) Type I and type II supporting organiza- tions An organization is described in this sub- paragraph if the organization meets the re- quirements of subparagraphs (A) and (C) of section 509(a)(3) and is— (i) operated, supervised, or controlled by one or more organizations described in paragraph (1) or (2) of section 509(a), or (ii) supervised or controlled in connec- tion with one or more such organizations. (C) Functionally integrated type III sup- porting organizations An organization is described in this sub- paragraph if the organization is a function- ally integrated type III supporting organiza- tion (as defined under section 4943(f)(5)(B)). (Added Pub. L. 109–280, title XII, § 1231(a), Aug. 17, 2006, 120 Stat. 1095.) Statutory Notes and Related Subsidiaries EFFECTIVE DATE Section applicable to taxable years beginning after Aug. 17, 2006, see section 1231(c) of Pub. L. 109–280, set out as an Effective Date of 2006 Amendment note under section 4963 of this title. § 4967. Taxes on prohibited benefits (a) Imposition of taxes (1) On the donor, donor advisor, or related per- son There is hereby imposed on the advice of any person described in subsection (d) to have a sponsoring organization make a distribution from a donor advised fund which results in such person or any other person described in subsection (d) receiving, directly or indirectly, a more than incidental benefit as a result of such distribution, a tax equal to 125 percent of such benefit. The tax imposed by this para- graph shall be paid by any person described in subsection (d) who advises as to the distribu- tion or who receives such a benefit as a result of the distribution. (2) On the fund management There is hereby imposed on the agreement of any fund manager to the making of a distribu- tion, knowing that such distribution would confer a benefit described in paragraph (1), a tax equal to 10 percent of the amount of such benefit. The tax imposed by this paragraph shall be paid by any fund manager who agreed to the making of the distribution. (b) Exception No tax shall be imposed under this section with respect to any distribution if a tax has been imposed with respect to such distribution under section 4958. (c) Special rules For purposes of subsection (a)— (1) Joint and several liability If more than one person is liable under para- graph (1) or (2) of subsection (a) with respect to a distribution described in subsection (a), all such persons shall be jointly and severally liable under such paragraph with respect to such distribution. (2) Limit for management With respect to any one distribution de- scribed in subsection (a), the maximum amount of the tax imposed by subsection (a)(2) shall not exceed $10,000. (d) Person described A person is described in this subsection if such person is described in section 4958(f)(7) with re- spect to a donor advised fund. (Added Pub. L. 109–280, title XII, § 1231(a), Aug. 17, 2006, 120 Stat. 1097.) Statutory Notes and Related Subsidiaries EFFECTIVE DATE Section applicable to taxable years beginning after Aug. 17, 2006, see section 1231(c) of Pub. L. 109–280, set out as an Effective Date of 2006 Amendment note under section 4963 of this title. Subchapter H—Excise Tax Based on Invest- ment Income of Private Colleges and Univer- sities Sec. 4968. Excise tax based on investment income of pri- vate colleges and universities. § 4968. Excise tax based on investment income of private colleges and universities (a) Tax imposed There is hereby imposed on each applicable educational institution for the taxable year a tax equal to 1.4 percent of the net investment income of such institution for the taxable year. (b) Applicable educational institution For purposes of this subchapter— (1) In general The term ‘‘applicable educational institu- tion’’ means an eligible educational institu- tion (as defined in section 25A(f)(2))— (A) which had at least 500 tuition-paying students during the preceding taxable year, (B) more than 50 percent of the tuition- paying students of which are located in the United States, (C) which is not described in the first sen- tence of section 511(a)(2)(B) (relating to State colleges and universities), and (D) the aggregate fair market value of the assets of which at the end of the preceding taxable year (other than those assets which are used directly in carrying out the institu- tion’s exempt purpose) is at least $500,000 per student of the institution. (2) Students For purposes of paragraph (1), the number of students of an institution (including for pur-