26 U.S.C. § 504 — Status after organization ceases to qualify

Page 1686 TITLE 26—INTERNAL REVENUE CODE § 504 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 Pub. L. 85–866, title I, § 30(c), Sept. 2, 1958, 72 Stat. 1631, as amended by Pub. L. 99–514, § 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 end- ing after March 15, 1956. The amendment made by sub- section (b) [amending this section] shall apply with re- spect to taxable years ending after the date of the en- actment of this Act [Sept. 2, 1958], but only with re- spect to periods after such date. ‘‘(2) EXCEPTIONS.—Nothing in subsection (a) [amend- ing this section] shall be construed to make any trans- action a prohibited transaction which, under announce- ments of the Internal Revenue Service made with re- spect to section 503(c)(1) of the Internal Revenue Code of 1986 [formerly I.R.C. 1954] before the date of the en- actment of this Act [Sept. 2, 1958], would not constitute a prohibited transaction. In the case of any bond, de- benture, note, or certificate or other evidence of in- debtedness 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, para- graphs (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 liabil- ity for tax for periods ending after Nov. 5, 1990, see sec- tion 11821(b) of Pub. L. 101–508, set out as a note under section 45K of this title. § 504. Status after organization ceases to qualify for exemption under section 501(c)(3) be- cause of substantial lobbying or because of political activities (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 organiza- tion described in section 501(c)(3), and (2) is not an organization described in sec- tion 501(c)(3)— (A) by reason of carrying on propaganda, or otherwise attempting, to influence legis- lation, or (B) by reason of participating in, or inter- vening 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 regu- lations relating to a direct or indirect transfer of all or part of the assets of an organization to an organization controlled (directly or indi- rectly) by the same person or persons who con- trol the transferor organization. (c) Churches, etc. Subsection (a) shall not apply to any organiza- tion 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 sub- section (a). (Added Pub. L. 94–455, title XIII, § 1307(a)(2), Oct. 4, 1976, 90 Stat. 1721; amended Pub. L. 100–203, title X, § 10711(b)(1), (2)(A), Dec. 22, 1987, 101 Stat. 1330–464.) Editorial Notes PRIOR PROVISIONS A prior section 504, acts Aug. 16, 1954, ch. 736, 68A Stat. 168; Oct. 22, 1968, Pub. L. 90–630, § 6(a), 82 Stat. 1330, related to denial of exemption, prior to repeal by Pub. L. 91–172, title I, § 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, § 10711(b)(2)(A), substituted ‘‘substantial lobbying or because of political activi- ties’’ for ‘‘substantial lobbying’’ in section catchline. Subsec. (a)(2). Pub. L. 100–203, § 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 other- wise attempting, to influence legislation,’’. Statutory Notes and Related Subsidiaries EFFECTIVE DATE OF 1987 AMENDMENT Amendment by Pub. L. 100–203 applicable with re- spect to activities after Dec. 22, 1987, see section 10711(c) of Pub. L. 100–203, set out as a note under sec- tion 170 of this title. CONSTRUCTION OF AMENDMENT Pub. L. 94–455, title XIII, § 1307(a)(3), Oct. 4, 1976, 90 Stat. 1722, 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 re- garded 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.’’ § 505. Additional requirements for organizations described in paragraph (9) or (17) of section 501(c) (a) Certain requirements must be met in the case of organizations described in section 501(c)(9) (1) Voluntary employees’ beneficiary associa- tions, etc. An organization described in section 501(c)(9) 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 agree- ments Paragraph (1) shall not apply to any organi- zation which is part of a plan maintained pur- suant to an agreement between employee rep- resentatives and 1 or more employers if the