26 U.S.C. § 501 : US Code - Section 501: Exemption from tax on corporations, certain trusts, etc.

    (a) Exemption from taxation
      An organization described in subsection (c) or (d) or section
    401(a) shall be exempt from taxation under this subtitle unless
    such exemption is denied under section 502 or 503.
    (b) Tax on unrelated business income and certain other activities
      An organization exempt from taxation under subsection (a) shall
    be subject to tax to the extent provided in parts II, III, and VI
    of this subchapter, but (notwithstanding parts II, III, and VI of
    this subchapter) shall be considered an organization exempt from
    income taxes for the purpose of any law which refers to
    organizations exempt from income taxes.
    (c) List of exempt organizations
      The following organizations are referred to in subsection (a):
        (1) Any corporation organized under Act of Congress which is an
      instrumentality of the United States but only if such corporation
      - 
          (A) is exempt from Federal income taxes - 
            (i) under such Act as amended and supplemented before July
          18, 1984, or
            (ii) under this title without regard to any provision of
          law which is not contained in this title and which is not
          contained in a revenue Act, or

          (B) is described in subsection (l).

        (2) Corporations organized for the exclusive purpose of holding
      title to property, collecting income therefrom, and turning over
      the entire amount thereof, less expenses, to an organization
      which itself is exempt under this section. Rules similar to the
      rules of subparagraph (G) of paragraph (25) shall apply for
      purposes of this paragraph.
        (3) Corporations, and any community chest, fund, or foundation,
      organized and operated exclusively for religious, charitable,
      scientific, testing for public safety, literary, or educational
      purposes, or to foster national or international amateur sports
      competition (but only if no part of its activities involve the
      provision of athletic facilities or equipment), or for the
      prevention of cruelty to children or animals, no part of the net
      earnings of which inures to the benefit of any private
      shareholder or individual, no substantial part of the activities
      of which is carrying on propaganda, or otherwise attempting, to
      influence legislation (except as otherwise provided in subsection
      (h)), and which does not participate in, or intervene in
      (including the publishing or distributing of statements), any
      political campaign on behalf of (or in opposition to) any
      candidate for public office.
        (4)(A) Civic leagues or organizations not organized for profit
      but operated exclusively for the promotion of social welfare, or
      local associations of employees, the membership of which is
      limited to the employees of a designated person or persons in a
      particular municipality, and the net earnings of which are
      devoted exclusively to charitable, educational, or recreational
      purposes.
        (B) Subparagraph (A) shall not apply to an entity unless no
      part of the net earnings of such entity inures to the benefit of
      any private shareholder or individual.
        (5) Labor, agricultural, or horticultural organizations.
        (6) Business leagues, chambers of commerce, real-estate boards,
      boards of trade, or professional football leagues (whether or not
      administering a pension fund for football players), not organized
      for profit and no part of the net earnings of which inures to the
      benefit of any private shareholder or individual.
        (7) Clubs organized for pleasure, recreation, and other
      nonprofitable purposes, substantially all of the activities of
      which are for such purposes and no part of the net earnings of
      which inures to the benefit of any private shareholder.
        (8) Fraternal beneficiary societies, orders, or associations - 
          (A) operating under the lodge system or for the exclusive
        benefit of the members of a fraternity itself operating under
        the lodge system, and
          (B) providing for the payment of life, sick, accident, or
        other benefits to the members of such society, order, or
        association or their dependents.

        (9) Voluntary employees' beneficiary associations providing for
      the payment of life, sick, accident, or other benefits to the
      members of such association or their dependents or designated
      beneficiaries, if no part of the net earnings of such association
      inures (other than through such payments) to the benefit of any
      private shareholder or individual. For purposes of providing for
      the payment of sick and accident benefits to members of such an
      association and their dependents, the term "dependent" shall
      include any individual who is a child (as defined in section
      152(f)(1)) of a member who as of the end of the calendar year has
      not attained age 27.
        (10) Domestic fraternal societies, orders, or associations,
      operating under the lodge system - 
          (A) the net earnings of which are devoted exclusively to
        religious, charitable, scientific, literary, educational, and
        fraternal purposes, and
          (B) which do not provide for the payment of life, sick,
        accident, or other benefits.

        (11) Teachers' retirement fund associations of a purely local
      character, if - 
          (A) no part of their net earnings inures (other than through
        payment of retirement benefits) to the benefit of any private
        shareholder or individual, and
          (B) the income consists solely of amounts received from
        public taxation, amounts received from assessments on the
        teaching salaries of members, and income in respect of
        investments.

        (12)(A) Benevolent life insurance associations of a purely
      local character, mutual ditch or irrigation companies, mutual or
      cooperative telephone companies, or like organizations; but only
      if 85 percent or more of the income consists of amounts collected
      from members for the sole purpose of meeting losses and expenses.
        (B) In the case of a mutual or cooperative telephone company,
      subparagraph (A) shall be applied without taking into account any
      income received or accrued - 
          (i) from a nonmember telephone company for the performance of
        communication services which involve members of the mutual or
        cooperative telephone company,
          (ii) from qualified pole rentals,
          (iii) from the sale of display listings in a directory
        furnished to the members of the mutual or cooperative telephone
        company, or
          (iv) from the prepayment of a loan under section 306A, 306B,
        or 311 (!1) of the Rural Electrification Act of 1936 (as in
        effect on January 1, 1987).


        (C) In the case of a mutual or cooperative electric company,
      subparagraph (A) shall be applied without taking into account any
      income received or accrued - 
          (i) from qualified pole rentals, or
          (ii) from any provision or sale of electric energy
        transmission services or ancillary services if such services
        are provided on a nondiscriminatory open access basis under an
        open access transmission tariff approved or accepted by FERC or
        under an independent transmission provider agreement approved
        or accepted by FERC (other than income received or accrued
        directly or indirectly from a member),
          (iii) from the provision or sale of electric energy
        distribution services or ancillary services if such services
        are provided on a nondiscriminatory open access basis to
        distribute electric energy not owned by the mutual or electric
        cooperative company - 
            (I) to end-users who are served by distribution facilities
          not owned by such company or any of its members (other than
          income received or accrued directly or indirectly from a
          member), or
            (II) generated by a generation facility not owned or leased
          by such company or any of its members and which is directly
          connected to distribution facilities owned by such company or
          any of its members (other than income received or accrued
          directly or indirectly from a member),

          (iv) from any nuclear decommissioning transaction, or
          (v) from any asset exchange or conversion transaction.

        (D) For purposes of this paragraph, the term "qualified pole
      rental" means any rental of a pole (or other structure used to
      support wires) if such pole (or other structure) - 
          (i) is used by the telephone or electric company to support
        one or more wires which are used by such company in providing
        telephone or electric services to its members, and
          (ii) is used pursuant to the rental to support one or more
        wires (in addition to the wires described in clause (i)) for
        use in connection with the transmission by wire of electricity
        or of telephone or other communications.

      For purposes of the preceding sentence, the term "rental"
      includes any sale of the right to use the pole (or other
      structure).
        (E) For purposes of subparagraph (C)(ii), the term "FERC" means
      the Federal Energy Regulatory Commission and references to such
      term shall be treated as including the Public Utility Commission
      of Texas with respect to any ERCOT utility (as defined in section
      212(k)(2)(B) of the Federal Power Act (16 U.S.C. 824k(k)(2)(B))).
        (F) For purposes of subparagraph (C)(iv), the term "nuclear
      decommissioning transaction" means - 
          (i) any transfer into a trust, fund, or instrument
        established to pay any nuclear decommissioning costs if the
        transfer is in connection with the transfer of the mutual or
        cooperative electric company's interest in a nuclear power
        plant or nuclear power plant unit,
          (ii) any distribution from any trust, fund, or instrument
        established to pay any nuclear decommissioning costs, or
          (iii) any earnings from any trust, fund, or instrument
        established to pay any nuclear decommissioning costs.

        (G) For purposes of subparagraph (C)(v), the term "asset
      exchange or conversion transaction" means any voluntary exchange
      or involuntary conversion of any property related to generating,
      transmitting, distributing, or selling electric energy by a
      mutual or cooperative electric company, the gain from which
      qualifies for deferred recognition under section 1031 or 1033,
      but only if the replacement property acquired by such company
      pursuant to such section constitutes property which is used, or
      to be used, for - 
          (i) generating, transmitting, distributing, or selling
        electric energy, or
          (ii) producing, transmitting, distributing, or selling
        natural gas.

        (H)(i) In the case of a mutual or cooperative electric company
      described in this paragraph or an organization described in
      section 1381(a)(2)(C), income received or accrued from a load
      loss transaction shall be treated as an amount collected from
      members for the sole purpose of meeting losses and expenses.
        (ii) For purposes of clause (i), the term "load loss
      transaction" means any wholesale or retail sale of electric
      energy (other than to members) to the extent that the aggregate
      sales during the recovery period do not exceed the load loss
      mitigation sales limit for such period.
        (iii) For purposes of clause (ii), the load loss mitigation
      sales limit for the recovery period is the sum of the annual load
      losses for each year of such period.
        (iv) For purposes of clause (iii), a mutual or cooperative
      electric company's annual load loss for each year of the recovery
      period is the amount (if any) by which - 
          (I) the megawatt hours of electric energy sold during such
        year to members of such electric company are less than
          (II) the megawatt hours of electric energy sold during the
        base year to such members.

        (v) For purposes of clause (iv)(II), the term "base year" means
      - 
          (I) the calendar year preceding the start-up year, or
          (II) at the election of the mutual or cooperative electric
        company, the second or third calendar years preceding the start-
        up year.

        (vi) For purposes of this subparagraph, the recovery period is
      the 7-year period beginning with the start-up year.
        (vii) For purposes of this subparagraph, the start-up year is
      the first year that the mutual or cooperative electric company
      offers nondiscriminatory open access or the calendar year which
      includes the date of the enactment of this subparagraph, if
      later, at the election of such company.
        (viii) A company shall not fail to be treated as a mutual or
      cooperative electric company for purposes of this paragraph or as
      a corporation operating on a cooperative basis for purposes of
      section 1381(a)(2)(C) by reason of the treatment under clause
      (i).
        (ix) For purposes of subparagraph (A), in the case of a mutual
      or cooperative electric company, income received, or accrued,
      indirectly from a member shall be treated as an amount collected
      from members for the sole purpose of meeting losses and expenses.
        (13) Cemetery companies owned and operated exclusively for the
      benefit of their members or which are not operated for profit;
      and any corporation chartered solely for the purpose of the
      disposal of bodies by burial or cremation which is not permitted
      by its charter to engage in any business not necessarily incident
      to that purpose and no part of the net earnings of which inures
      to the benefit of any private shareholder or individual.
        (14)(A) Credit unions without capital stock organized and
      operated for mutual purposes and without profit.
        (B) Corporations or associations without capital stock
      organized before September 1, 1957, and operated for mutual
      purposes and without profit for the purpose of providing reserve
      funds for, and insurance of shares or deposits in - 
          (i) domestic building and loan associations,
          (ii) cooperative banks without capital stock organized and
        operated for mutual purposes and without profit,
          (iii) mutual savings banks not having capital stock
        represented by shares, or
          (iv) mutual savings banks described in section 591(b) (!2)


        (C) Corporations or associations organized before September 1,
      1957, and operated for mutual purposes and without profit for the
      purpose of providing reserve funds for associations or banks
      described in clause (i), (ii), or (iii) of subparagraph (B); but
      only if 85 percent or more of the income is attributable to
      providing such reserve funds and to investments. This
      subparagraph shall not apply to any corporation or association
      entitled to exemption under subparagraph (B).
        (15)(A) Insurance companies (as defined in section 816(a))
      other than life (including interinsurers and reciprocal
      underwriters) if - 
          (i)(I) the gross receipts for the taxable year do not exceed
        $600,000, and
          (II) more than 50 percent of such gross receipts consist of
        premiums, or
          (ii) in the case of a mutual insurance company - 
            (I) the gross receipts of which for the taxable year do not
          exceed $150,000, and
            (II) more than 35 percent of such gross receipts consist of
          premiums.

      Clause (ii) shall not apply to a company if any employee of the
      company, or a member of the employee's family (as defined in
      section 2032A(e)(2)), is an employee of another company exempt
      from taxation by reason of this paragraph (or would be so exempt
      but for this sentence).
        (B) For purposes of subparagraph (A), in determining whether
      any company or association is described in subparagraph (A), such
      company or association shall be treated as receiving during the
      taxable year amounts described in subparagraph (A) which are
      received during such year by all other companies or associations
      which are members of the same controlled group as the insurance
      company or association for which the determination is being made.
        (C) For purposes of subparagraph (B), the term "controlled
      group" has the meaning given such term by section
      831(b)(2)(B)(ii), except that in applying section
      831(b)(2)(B)(ii) for purposes of this subparagraph, subparagraphs
      (B) and (C) of section 1563(b)(2) shall be disregarded.
        (16) Corporations organized by an association subject to part
      IV of this subchapter or members thereof, for the purpose of
      financing the ordinary crop operations of such members or other
      producers, and operated in conjunction with such association.
      Exemption shall not be denied any such corporation because it has
      capital stock, if the dividend rate of such stock is fixed at not
      to exceed the legal rate of interest in the State of
      incorporation or 8 percent per annum, whichever is greater, on
      the value of the consideration for which the stock was issued,
      and if substantially all such stock (other than nonvoting
      preferred stock, the owners of which are not entitled or
      permitted to participate, directly or indirectly, in the profits
      of the corporation, on dissolution or otherwise, beyond the fixed
      dividends) is owned by such association, or members thereof; nor
      shall exemption be denied any such corporation because there is
      accumulated and maintained by it a reserve required by State law
      or a reasonable reserve for any necessary purpose.
        (17)(A) A trust or trusts forming part of a plan providing for
      the payment of supplemental unemployment compensation benefits,
      if - 
          (i) under the plan, it is impossible, at any time prior to
        the satisfaction of all liabilities, with respect to employees
        under the plan, for any part of the corpus or income to be
        (within the taxable year or thereafter) used for, or diverted
        to, any purpose other than the providing of supplemental
        unemployment compensation benefits,
          (ii) such benefits are payable to employees under a
        classification which is set forth in the plan and which is
        found by the Secretary not to be discriminatory in favor of
        employees who are highly compensated employees (within the
        meaning of section 414(q)), and
          (iii) such benefits do not discriminate in favor of employees
        who are highly compensated employees (within the meaning of
        section 414(q)). A plan shall not be considered discriminatory
        within the meaning of this clause merely because the benefits
        received under the plan bear a uniform relationship to the
        total compensation, or the basic or regular rate of
        compensation, of the employees covered by the plan.

        (B) In determining whether a plan meets the requirements of
      subparagraph (A), any benefits provided under any other plan
      shall not be taken into consideration, except that a plan shall
      not be considered discriminatory - 
          (i) merely because the benefits under the plan which are
        first determined in a nondiscriminatory manner within the
        meaning of subparagraph (A) are then reduced by any sick,
        accident, or unemployment compensation benefits received under
        State or Federal law (or reduced by a portion of such benefits
        if determined in a nondiscriminatory manner), or
          (ii) merely because the plan provides only for employees who
        are not eligible to receive sick, accident, or unemployment
        compensation benefits under State or Federal law the same
        benefits (or a portion of such benefits if determined in a
        nondiscriminatory manner) which such employees would receive
        under such laws if such employees were eligible for such
        benefits, or
          (iii) merely because the plan provides only for employees who
        are not eligible under another plan (which meets the
        requirements of subparagraph (A)) of supplemental unemployment
        compensation benefits provided wholly by the employer the same
        benefits (or a portion of such benefits if determined in a
        nondiscriminatory manner) which such employees would receive
        under such other plan if such employees were eligible under
        such other plan, but only if the employees eligible under both
        plans would make a classification which would be
        nondiscriminatory within the meaning of subparagraph (A).

        (C) A plan shall be considered to meet the requirements of
      subparagraph (A) during the whole of any year of the plan if on
      one day in each quarter it satisfies such requirements.
        (D) The term "supplemental unemployment compensation benefits"
      means only - 
          (i) benefits which are paid to an employee because of his
        involuntary separation from the employment of the employer
        (whether or not such separation is temporary) resulting
        directly from a reduction in force, the discontinuance of a
        plant or operation, or other similar conditions, and
          (ii) sick and accident benefits subordinate to the benefits
        described in clause (i).

        (E) Exemption shall not be denied under subsection (a) to any
      organization entitled to such exemption as an association
      described in paragraph (9) of this subsection merely because such
      organization provides for the payment of supplemental
      unemployment benefits (as defined in subparagraph (D)(i)).
        (18) A trust or trusts created before June 25, 1959, forming
      part of a plan providing for the payment of benefits under a
      pension plan funded only by contributions of employees, if - 
          (A) under the plan, it is impossible, at any time prior to
        the satisfaction of all liabilities with respect to employees
        under the plan, for any part of the corpus or income to be
        (within the taxable year or thereafter) used for, or diverted
        to, any purpose other than the providing of benefits under the
        plan,
          (B) such benefits are payable to employees under a
        classification which is set forth in the plan and which is
        found by the Secretary not to be discriminatory in favor of
        employees who are highly compensated employees (within the
        meaning of section 414(q)),
          (C) such benefits do not discriminate in favor of employees
        who are highly compensated employees (within the meaning of
        section 414(q)). A plan shall not be considered discriminatory
        within the meaning of this subparagraph merely because the
        benefits received under the plan bear a uniform relationship to
        the total compensation, or the basic or regular rate of
        compensation, of the employees covered by the plan, and
          (D) in the case of a plan under which an employee may
        designate certain contributions as deductible - 
            (i) such contributions do not exceed the amount with
          respect to which a deduction is allowable under section
          219(b)(3),
            (ii) requirements similar to the requirements of section
          401(k)(3)(A)(ii) are met with respect to such elective
          contributions,
            (iii) such contributions are treated as elective deferrals
          for purposes of section 402(g), and
            (iv) the requirements of section 401(a)(30) are met.

      For purposes of subparagraph (D)(ii), rules similar to the rules
      of section 401(k)(8) shall apply. For purposes of section 4979,
      any excess contribution under clause (ii) shall be treated as an
      excess contribution under a cash or deferred arrangement.
        (19) A post or organization of past or present members of the
      Armed Forces of the United States, or an auxiliary unit or
      society of, or a trust or foundation for, any such post or
      organization - 
          (A) organized in the United States or any of its possessions,
          (B) at least 75 percent of the members of which are past or
        present members of the Armed Forces of the United States and
        substantially all of the other members of which are individuals
        who are cadets or are spouses, widows,,(!3) widowers,
        ancestors, or lineal descendants of past or present members of
        the Armed Forces of the United States or of cadets, and

          (C) no part of the net earnings of which inures to the
        benefit of any private shareholder or individual.

        (20) an (!4) organization or trust created or organized in the
      United States, the exclusive function of which is to form part of
      a qualified group legal services plan or plans, within the
      meaning of section 120. An organization or trust which receives
      contributions because of section 120(c)(5)(C) shall not be
      prevented from qualifying as an organization described in this
      paragraph merely because it provides legal services or
      indemnification against the cost of legal services unassociated
      with a qualified group legal services plan.

        (21)(A) A trust or trusts established in writing, created or
      organized in the United States, and contributed to by any person
      (except an insurance company) if - 
          (i) the purpose of such trust or trusts is exclusively - 
            (I) to satisfy, in whole or in part, the liability of such
          person for, or with respect to, claims for compensation for
          disability or death due to pneumoconiosis under Black Lung
          Acts,
            (II) to pay premiums for insurance exclusively covering
          such liability,
            (III) to pay administrative and other incidental expenses
          of such trust in connection with the operation of the trust
          and the processing of claims against such person under Black
          Lung Acts, and
            (IV) to pay accident or health benefits for retired miners
          and their spouses and dependents (including administrative
          and other incidental expenses of such trust in connection
          therewith) or premiums for insurance exclusively covering
          such benefits; and

          (ii) no part of the assets of the trust may be used for, or
        diverted to, any purpose other than - 
            (I) the purposes described in clause (i),
            (II) investment (but only to the extent that the trustee
          determines that a portion of the assets is not currently
          needed for the purposes described in clause (i)) in qualified
          investments, or
            (III) payment into the Black Lung Disability Trust Fund
          established under section 9501, or into the general fund of
          the United States Treasury (other than in satisfaction of any
          tax or other civil or criminal liability of the person who
          established or contributed to the trust).

        (B) No deduction shall be allowed under this chapter for any
      payment described in subparagraph (A)(i)(IV) from such trust.
        (C) Payments described in subparagraph (A)(i)(IV) may be made
      from such trust during a taxable year only to the extent that the
      aggregate amount of such payments during such taxable year does
      not exceed the excess (if any), as of the close of the preceding
      taxable year, of - 
          (i) the fair market value of the assets of the trust, over
          (ii) 110 percent of the present value of the liability
        described in subparagraph (A)(i)(I) of such person.

      The determinations under the preceding sentence shall be made by
      an independent actuary using actuarial methods and assumptions
      (not inconsistent with the regulations prescribed under section
      192(c)(1)(A)) each of which is reasonable and which are
      reasonable in the aggregate.
        (D) For purposes of this paragraph:
          (i) The term "Black Lung Acts" means part C of title IV of
        the Federal Mine Safety and Health Act of 1977, and any State
        law providing compensation for disability or death due to that
        pneumoconiosis.
          (ii) The term "qualified investments" means - 
            (I) public debt securities of the United States,
            (II) obligations of a State or local government which are
          not in default as to principal or interest, and
            (III) time or demand deposits in a bank (as defined in
          section 581) or an insured credit union (within the meaning
          of section 101(7) of the Federal Credit Union Act, 12 U.S.C.
          1752(7)) located in the United States.

          (iii) The term "miner" has the same meaning as such term has
        when used in section 402(d) of the Black Lung Benefits Act (30
        U.S.C. 902(d)).
          (iv) The term "incidental expenses" includes legal,
        accounting, actuarial, and trustee expenses.

        (22) A trust created or organized in the United States and
      established in writing by the plan sponsors of multiemployer
      plans if - 
          (A) the purpose of such trust is exclusively - 
            (i) to pay any amount described in section 4223(c) or (h)
          of the Employee Retirement Income Security Act of 1974, and
            (ii) to pay reasonable and necessary administrative
          expenses in connection with the establishment and operation
          of the trust and the processing of claims against the trust,

          (B) no part of the assets of the trust may be used for, or
        diverted to, any purpose other than - 
            (i) the purposes described in subparagraph (A), or
            (ii) the investment in securities, obligations, or time or
          demand deposits described in clause (ii) of paragraph
          (21)(D),

          (C) such trust meets the requirements of paragraphs (2), (3),
        and (4) of section 4223(b), 4223(h), or, if applicable, section
        4223(c) of the Employee Retirement Income Security Act of 1974,
        and
          (D) the trust instrument provides that, on dissolution of the
        trust, assets of the trust may not be paid other than to plans
        which have participated in the plan or, in the case of a trust
        established under section 4223(h) of such Act, to plans with
        respect to which employers have participated in the fund.

        (23) Any association organized before 1880 more than 75 percent
      of the members of which are present or past members of the Armed
      Forces and a principal purpose of which is to provide insurance
      and other benefits to veterans or their dependents.
        (24) A trust described in section 4049 of the Employee
      Retirement Income Security Act of 1974 (as in effect on the date
      of the enactment of the Single-Employer Pension Plan Amendments
      Act of 1986).
        (25)(A) Any corporation or trust which - 
          (i) has no more than 35 shareholders or beneficiaries,
          (ii) has only 1 class of stock or beneficial interest, and
          (iii) is organized for the exclusive purposes of - 
            (I) acquiring real property and holding title to, and
          collecting income from, such property, and
            (II) remitting the entire amount of income from such
          property (less expenses) to 1 or more organizations described
          in subparagraph (C) which are shareholders of such
          corporation or beneficiaries of such trust.

      For purposes of clause (iii), the term "real property" shall not
      include any interest as a tenant in common (or similar interest)
      and shall not include any indirect interest.
        (B) A corporation or trust shall be described in subparagraph
      (A) without regard to whether the corporation or trust is
      organized by 1 or more organizations described in subparagraph
      (C).
        (C) An organization is described in this subparagraph if such
      organization is - 
          (i) a qualified pension, profit sharing, or stock bonus plan
        that meets the requirements of section 401(a),
          (ii) a governmental plan (within the meaning of section
        414(d)),
          (iii) the United States, any State or political subdivision
        thereof, or any agency or instrumentality of any of the
        foregoing, or
          (iv) any organization described in paragraph (3).

        (D) A corporation or trust shall in no event be treated as
      described in subparagraph (A) unless such corporation or trust
      permits its shareholders or beneficiaries - 
          (i) to dismiss the corporation's or trust's investment
        adviser, following reasonable notice, upon a vote of the
        shareholders or beneficiaries holding a majority of interest in
        the corporation or trust, and
          (ii) to terminate their interest in the corporation or trust
        by either, or both, of the following alternatives, as
        determined by the corporation or trust:
            (I) by selling or exchanging their stock in the corporation
          or interest in the trust (subject to any Federal or State
          securities law) to any organization described in subparagraph
          (C) so long as the sale or exchange does not increase the
          number of shareholders or beneficiaries in such corporation
          or trust above 35, or
            (II) by having their stock or interest redeemed by the
          corporation or trust after the shareholder or beneficiary has
          provided 90 days notice to such corporation or trust.

        (E)(i) For purposes of this title - 
          (I) a corporation which is a qualified subsidiary shall not
        be treated as a separate corporation, and
          (II) all assets, liabilities, and items of income, deduction,
        and credit of a qualified subsidiary shall be treated as
        assets, liabilities, and such items (as the case may be) of the
        corporation or trust described in subparagraph (A).

        (ii) For purposes of this subparagraph, the term "qualified
      subsidiary" means any corporation if, at all times during the
      period such corporation was in existence, 100 percent of the
      stock of such corporation is held by the corporation or trust
      described in subparagraph (A).
        (iii) For purposes of this subtitle, if any corporation which
      was a qualified subsidiary ceases to meet the requirements of
      clause (ii), such corporation shall be treated as a new
      corporation acquiring all of its assets (and assuming all of its
      liabilities) immediately before such cessation from the
      corporation or trust described in subparagraph (A) in exchange
      for its stock.
        (F) For purposes of subparagraph (A), the term "real property"
      includes any personal property which is leased under, or in
      connection with, a lease of real property, but only if the rent
      attributable to such personal property (determined under the
      rules of section 856(d)(1)) for the taxable year does not exceed
      15 percent of the total rent for the taxable year attributable to
      both the real and personal property leased under, or in
      connection with, such lease.
        (G)(i) An organization shall not be treated as failing to be
      described in this paragraph merely by reason of the receipt of
      any otherwise disqualifying income which is incidentally derived
      from the holding of real property.
        (ii) Clause (i) shall not apply if the amount of gross income
      described in such clause exceeds 10 percent of the organization's
      gross income for the taxable year unless the organization
      establishes to the satisfaction of the Secretary that the receipt
      of gross income described in clause (i) in excess of such
      limitation was inadvertent and reasonable steps are being taken
      to correct the circumstances giving rise to such income.
        (26) Any membership organization if - 
          (A) such organization is established by a State exclusively
        to provide coverage for medical care (as defined in section
        213(d)) on a not-for-profit basis to individuals described in
        subparagraph (B) through - 
            (i) insurance issued by the organization, or
            (ii) a health maintenance organization under an arrangement
          with the organization,

          (B) the only individuals receiving such coverage through the
        organization are individuals - 
            (i) who are residents of such State, and
            (ii) who, by reason of the existence or history of a
          medical condition - 
              (I) are unable to acquire medical care coverage for such
            condition through insurance or from a health maintenance
            organization, or
              (II) are able to acquire such coverage only at a rate
            which is substantially in excess of the rate for such
            coverage through the membership organization,

          (C) the composition of the membership in such organization is
        specified by such State, and
          (D) no part of the net earnings of the organization inures to
        the benefit of any private shareholder or individual.

      A spouse and any qualifying child (as defined in section 24(c))
      of an individual described in subparagraph (B) (without regard to
      this sentence) shall be treated as described in subparagraph (B).
        (27)(A) Any membership organization if - 
          (i) such organization is established before June 1, 1996, by
        a State exclusively to reimburse its members for losses arising
        under workmen's compensation acts,
          (ii) such State requires that the membership of such
        organization consist of - 
            (I) all persons who issue insurance covering workmen's
          compensation losses in such State, and
            (II) all persons and governmental entities who self-insure
          against such losses, and

          (iii) such organization operates as a non-profit organization
        by - 
            (I) returning surplus income to its members or workmen's
          compensation policyholders on a periodic basis, and
            (II) reducing initial premiums in anticipation of
          investment income.

        (B) Any organization (including a mutual insurance company) if -
       
          (i) such organization is created by State law and is
        organized and operated under State law exclusively to - 
            (I) provide workmen's compensation insurance which is
          required by State law or with respect to which State law
          provides significant disincentives if such insurance is not
          purchased by an employer, and
            (II) provide related coverage which is incidental to
          workmen's compensation insurance,

          (ii) such organization must provide workmen's compensation
        insurance to any employer in the State (for employees in the
        State or temporarily assigned out-of-State) which seeks such
        insurance and meets other reasonable requirements relating
        thereto,
          (iii)(I) the State makes a financial commitment with respect
        to such organization either by extending the full faith and
        credit of the State to the initial debt of such organization or
        by providing the initial operating capital of such
        organization, and (II) in the case of periods after the date of
        enactment of this subparagraph, the assets of such organization
        revert to the State upon dissolution or State law does not
        permit the dissolution of such organization, and
          (iv) the majority of the board of directors or oversight body
        of such organization are appointed by the chief executive
        officer or other executive branch official of the State, by the
        State legislature, or by both.

        (28) The National Railroad Retirement Investment Trust
      established under section 15(j) of the Railroad Retirement Act of
      1974.
        (29) CO-OP health insurance issuers. - 
          (A) In general. - A qualified nonprofit health insurance
        issuer (within the meaning of section 1322 of the Patient
        Protection and Affordable Care Act) which has received a loan
        or grant under the CO-OP program under such section, but only
        with respect to periods for which the issuer is in compliance
        with the requirements of such section and any agreement with
        respect to the loan or grant.
          (B) Conditions for exemption. - Subparagraph (A) shall apply
        to an organization only if - 
            (i) the organization has given notice to the Secretary, in
          such manner as the Secretary may by regulations prescribe,
          that it is applying for recognition of its status under this
          paragraph,
            (ii) except as provided in section 1322(c)(4) of the
          Patient Protection and Affordable Care Act, no part of the
          net earnings of which inures to the benefit of any private
          shareholder or individual,
            (iii) no substantial part of the activities of which is
          carrying on propaganda, or otherwise attempting, to influence
          legislation, and
            (iv) the organization does not participate in, or intervene
          in (including the publishing or distributing of statements),
          any political campaign on behalf of (or in opposition to) any
          candidate for public office.
    (d) Religious and apostolic organizations
      The following organizations are referred to in subsection (a):
    Religious or apostolic associations or corporations, if such
    associations or corporations have a common treasury or community
    treasury, even if such associations or corporations engage in
    business for the common benefit of the members, but only if the
    members thereof include (at the time of filing their returns) in
    their gross income their entire pro rata shares, whether
    distributed or not, of the taxable income of the association or
    corporation for such year. Any amount so included in the gross
    income of a member shall be treated as a dividend received.
    (e) Cooperative hospital service organizations
      For purposes of this title, an organization shall be treated as
    an organization organized and operated exclusively for charitable
    purposes, if - 
        (1) such organization is organized and operated solely - 
          (A) to perform, on a centralized basis, one or more of the
        following services which, if performed on its own behalf by a
        hospital which is an organization described in subsection
        (c)(3) and exempt from taxation under subsection (a), would
        constitute activities in exercising or performing the purpose
        or function constituting the basis for its exemption: data
        processing, purchasing (including the purchasing of insurance
        on a group basis), warehousing, billing and collection
        (including the purchase of patron accounts receivable on a
        recourse basis), food, clinical, industrial engineering,
        laboratory, printing, communications, record center, and
        personnel (including selection, testing, training, and
        education of personnel) services; and
          (B) to perform such services solely for two or more hospitals
        each of which is - 
            (i) an organization described in subsection (c)(3) which is
          exempt from taxation under subsection (a),
            (ii) a constituent part of an organization described in
          subsection (c)(3) which is exempt from taxation under
          subsection (a) and which, if organized and operated as a
          separate entity, would constitute an organization described
          in subsection (c)(3), or
            (iii) owned and operated by the United States, a State, the
          District of Columbia, or a possession of the United States,
          or a political subdivision or an agency or instrumentality of
          any of the foregoing;

        (2) such organization is organized and operated on a
      cooperative basis and allocates or pays, within 8 1/2  months
      after the close of its taxable year, all net earnings to patrons
      on the basis of services performed for them; and
        (3) if such organization has capital stock, all of such stock
      outstanding is owned by its patrons.

    For purposes of this title, any organization which, by reason of
    the preceding sentence, is an organization described in subsection
    (c)(3) and exempt from taxation under subsection (a), shall be
    treated as a hospital and as an organization referred to in section
    170(b)(1)(A)(iii).
    (f) Cooperative service organizations of operating educational
      organizations
      For purposes of this title, if an organization is - 
        (1) organized and operated solely to hold, commingle, and
      collectively invest and reinvest (including arranging for and
      supervising the performance by independent contractors of
      investment services related thereto) in stocks and securities,
      the moneys contributed thereto by each of the members of such
      organization, and to collect income therefrom and turn over the
      entire amount thereof, less expenses, to such members,
        (2) organized and controlled by one or more such members, and
        (3) comprised solely of members that are organizations
      described in clause (ii) or (iv) of section 170(b)(1)(A) - 
          (A) which are exempt from taxation under subsection (a), or
          (B) the income of which is excluded from taxation under
        section 115(a),

      then such organization shall be treated as an organization
      organized and operated exclusively for charitable purposes.
    (g) Definition of agricultural
      For purposes of subsection (c)(5), the term "agricultural"
    includes the art or science of cultivating land, harvesting crops
    or aquatic resources, or raising livestock.
    (h) Expenditures by public charities to influence legislation
      (1) General rule
        In the case of an organization to which this subsection
      applies, exemption from taxation under subsection (a) shall be
      denied because a substantial part of the activities of such
      organization consists of carrying on propaganda, or otherwise
      attempting, to influence legislation, but only if such
      organization normally - 
          (A) makes lobbying expenditures in excess of the lobbying
        ceiling amount for such organization for each taxable year, or
          (B) makes grass roots expenditures in excess of the grass
        roots ceiling amount for such organization for each taxable
        year.
      (2) Definitions
        For purposes of this subsection - 
        (A) Lobbying expenditures
          The term "lobbying expenditures" means expenditures for the
        purpose of influencing legislation (as defined in section
        4911(d)).
        (B) Lobbying ceiling amount
          The lobbying ceiling amount for any organization for any
        taxable year is 150 percent of the lobbying nontaxable amount
        for such organization for such taxable year, determined under
        section 4911.
        (C) Grass roots expenditures
          The term "grass roots expenditures" means expenditures for
        the purpose of influencing legislation (as defined in section
        4911(d) without regard to paragraph (1)(B) thereof).
        (D) Grass roots ceiling amount
          The grass roots ceiling amount for any organization for any
        taxable year is 150 percent of the grass roots nontaxable
        amount for such organization for such taxable year, determined
        under section 4911.
      (3) Organizations to which this subsection applies
        This subsection shall apply to any organization which has
      elected (in such manner and at such time as the Secretary may
      prescribe) to have the provisions of this subsection apply to
      such organization and which, for the taxable year which includes
      the date the election is made, is described in subsection (c)(3)
      and - 
          (A) is described in paragraph (4), and
          (B) is not a disqualified organization under paragraph (5).
      (4) Organizations permitted to elect to have this subsection
        apply
        An organization is described in this paragraph if it is
      described in - 
          (A) section 170(b)(1)(A)(ii) (relating to educational
        institutions),
          (B) section 170(b)(1)(A)(iii) (relating to hospitals and
        medical research organizations),
          (C) section 170(b)(1)(A)(iv) (relating to organizations
        supporting government schools),
          (D) section 170(b)(1)(A)(vi) (relating to organizations
        publicly supported by charitable contributions),
          (E) section 509(a)(2) (relating to organizations publicly
        supported by admissions, sales, etc.), or
          (F) section 509(a)(3) (relating to organizations supporting
        certain types of public charities) except that for purposes of
        this subparagraph, section 509(a)(3) shall be applied without
        regard to the last sentence of section 509(a).
      (5) Disqualified organizations
        For purposes of paragraph (3) an organization is a disqualified
      organization if it is - 
          (A) described in section 170(b)(1)(A)(i) (relating to
        churches),
          (B) an integrated auxiliary of a church or of a convention or
        association of churches, or
          (C) a member of an affiliated group of organizations (within
        the meaning of section 4911(f)(2)) if one or more members of
        such group is described in subparagraph (A) or (B).
      (6) Years for which election is effective
        An election by an organization under this subsection shall be
      effective for all taxable years of such organization which - 
          (A) end after the date the election is made, and
          (B) begin before the date the election is revoked by such
        organization (under regulations prescribed by the Secretary).
      (7) No effect on certain organizations
        With respect to any organization for a taxable year for which -
      
          (A) such organization is a disqualified organization (within
        the meaning of paragraph (5)), or
          (B) an election under this subsection is not in effect for
        such organization,

      nothing in this subsection or in section 4911 shall be construed
      to affect the interpretation of the phrase, "no substantial part
      of the activities of which is carrying on propaganda, or
      otherwise attempting, to influence legislation," under subsection
      (c)(3).
      (8) Affiliated organizations
          For rules regarding affiliated organizations, see section
        4911(f).
    (i) Prohibition of discrimination by certain social clubs
      Notwithstanding subsection (a), an organization which is
    described in subsection (c)(7) shall not be exempt from taxation
    under subsection (a) for any taxable year if, at any time during
    such taxable year, the charter, bylaws, or other governing
    instrument, of such organization or any written policy statement of
    such organization contains a provision which provides for
    discrimination against any person on the basis of race, color, or
    religion. The preceding sentence to the extent it relates to
    discrimination on the basis of religion shall not apply to - 
        (1) an auxiliary of a fraternal beneficiary society if such
      society - 
          (A) is described in subsection (c)(8) and exempt from tax
        under subsection (a), and
          (B) limits its membership to the members of a particular
        religion, or

        (2) a club which in good faith limits its membership to the
      members of a particular religion in order to further the
      teachings or principles of that religion, and not to exclude
      individuals of a particular race or color.
    (j) Special rules for certain amateur sports organizations
      (1) In general
        In the case of a qualified amateur sports organization - 
          (A) the requirement of subsection (c)(3) that no part of its
        activities involve the provision of athletic facilities or
        equipment shall not apply, and
          (B) such organization shall not fail to meet the requirements
        of subsection (c)(3) merely because its membership is local or
        regional in nature.
      (2) Qualified amateur sports organization defined
        For purposes of this subsection, the term "qualified amateur
      sports organization" means any organization organized and
      operated exclusively to foster national or international amateur
      sports competition if such organization is also organized and
      operated primarily to conduct national or international
      competition in sports or to support and develop amateur athletes
      for national or international competition in sports.
    (k) Treatment of certain organizations providing child care
      For purposes of subsection (c)(3) of this section and sections
    170(c)(2), 2055(a)(2), and 2522(a)(2), the term "educational
    purposes" includes the providing of care of children away from
    their homes if - 
        (1) substantially all of the care provided by the organization
      is for purposes of enabling individuals to be gainfully employed,
      and
        (2) the services provided by the organization are available to
      the general public.
    (l) Government corporations exempt under subsection (c)(1)
      For purposes of subsection (c)(1), the following organizations
    are described in this subsection:
        (1) The Central Liquidity Facility established under title III
      of the Federal Credit Union Act (12 U.S.C. 1795 et seq.).
        (2) The Resolution Trust Corporation established under section
      21A (!1) of the Federal Home Loan Bank Act.
        (3) The Resolution Funding Corporation established under
      section 21B of the Federal Home Loan Bank Act.
        (4) The Patient-Centered Outcomes Research Institute
      established under section 1181(b) of the Social Security Act.
    (m) Certain organizations providing commercial-type insurance not
      exempt from tax
      (1) Denial of tax exemption where providing commercial-type
        insurance is substantial part of activities
        An organization described in paragraph (3) or (4) of subsection
      (c) shall be exempt from tax under subsection (a) only if no
      substantial part of its activities consists of providing
      commercial-type insurance.
      (2) Other organizations taxed as insurance companies on insurance
        business
        In the case of an organization described in paragraph (3) or
      (4) of subsection (c) which is exempt from tax under subsection
      (a) after the application of paragraph (1) of this subsection - 
          (A) the activity of providing commercial-type insurance shall
        be treated as an unrelated trade or business (as defined in
        section 513), and
          (B) in lieu of the tax imposed by section 511 with respect to
        such activity, such organization shall be treated as an
        insurance company for purposes of applying subchapter L with
        respect to such activity.
      (3) Commercial-type insurance
        For purposes of this subsection, the term "commercial-type
      insurance" shall not include - 
          (A) insurance provided at substantially below cost to a class
        of charitable recipients,
          (B) incidental health insurance provided by a health
        maintenance organization of a kind customarily provided by such
        organizations,
          (C) property or casualty insurance provided (directly or
        through an organization described in section 414(e)(3)(B)(ii))
        by a church or convention or association of churches for such
        church or convention or association of churches,
          (D) providing retirement or welfare benefits (or both) by a
        church or a convention or association of churches (directly or
        through an organization described in section 414(e)(3)(A) or
        414(e)(3)(B)(ii)) for the employees (including employees
        described in section 414(e)(3)(B)) of such church or convention
        or association of churches or the beneficiaries of such
        employees, and
          (E) charitable gift annuities.
      (4) Insurance includes annuities
        For purposes of this subsection, the issuance of annuity
      contracts shall be treated as providing insurance.
      (5) Charitable gift annuity
        For purposes of paragraph (3)(E), the term "charitable gift
      annuity" means an annuity if - 
          (A) a portion of the amount paid in connection with the
        issuance of the annuity is allowable as a deduction under
        section 170 or 2055, and
          (B) the annuity is described in section 514(c)(5) (determined
        as if any amount paid in cash in connection with such issuance
        were property).
    (n) Charitable risk pools
      (1) In general
        For purposes of this title - 
          (A) a qualified charitable risk pool shall be treated as an
        organization organized and operated exclusively for charitable
        purposes, and
          (B) subsection (m) shall not apply to a qualified charitable
        risk pool.
      (2) Qualified charitable risk pool
        For purposes of this subsection, the term "qualified charitable
      risk pool" means any organization - 
          (A) which is organized and operated solely to pool insurable
        risks of its members (other than risks related to medical
        malpractice) and to provide information to its members with
        respect to loss control and risk management,
          (B) which is comprised solely of members that are
        organizations described in subsection (c)(3) and exempt from
        tax under subsection (a), and
          (C) which meets the organizational requirements of paragraph
        (3).
      (3) Organizational requirements
        An organization (hereinafter in this subsection referred to as
      the "risk pool") meets the organizational requirements of this
      paragraph if - 
          (A) such risk pool is organized as a nonprofit organization
        under State law provisions authorizing risk pooling
        arrangements for charitable organizations,
          (B) such risk pool is exempt from any income tax imposed by
        the State (or will be so exempt after such pool qualifies as an
        organization exempt from tax under this title),
          (C) such risk pool has obtained at least $1,000,000 in
        startup capital from nonmember charitable organizations,
          (D) such risk pool is controlled by a board of directors
        elected by its members, and
          (E) the organizational documents of such risk pool require
        that - 
            (i) each member of such pool shall at all times be an
          organization described in subsection (c)(3) and exempt from
          tax under subsection (a),
            (ii) any member which receives a final determination that
          it no longer qualifies as an organization described in
          subsection (c)(3) shall immediately notify the pool of such
          determination and the effective date of such determination,
          and
            (iii) each policy of insurance issued by the risk pool
          shall provide that such policy will not cover the insured
          with respect to events occurring after the date such final
          determination was issued to the insured.

      An organization shall not cease to qualify as a qualified
      charitable risk pool solely by reason of the failure of any of
      its members to continue to be an organization described in
      subsection (c)(3) if, within a reasonable period of time after
      such pool is notified as required under subparagraph (E)(ii),
      such pool takes such action as may be reasonably necessary to
      remove such member from such pool.
      (4) Other definitions
        For purposes of this subsection - 
        (A) Startup capital
          The term "startup capital" means any capital contributed to,
        and any program-related investments (within the meaning of
        section 4944(c)) made in, the risk pool before such pool
        commences operations.
        (B) Nonmember charitable organization
          The term "nonmember charitable organization" means any
        organization which is described in subsection (c)(3) and exempt
        from tax under subsection (a) and which is not a member of the
        risk pool and does not benefit (directly or indirectly) from
        the insurance coverage provided by the pool to its members.
    (o) Treatment of hospitals participating in provider-sponsored
      organizations
      An organization shall not fail to be treated as organized and
    operated exclusively for a charitable purpose for purposes of
    subsection (c)(3) solely because a hospital which is owned and
    operated by such organization participates in a provider-sponsored
    organization (as defined in section 1855(d) of the Social Security
    Act), whether or not the provider-sponsored organization is exempt
    from tax. For purposes of subsection (c)(3), any person with a
    material financial interest in such a provider-sponsored
    organization shall be treated as a private shareholder or
    individual with respect to the hospital.
    (p) Suspension of tax-exempt status of terrorist organizations
      (1) In general
        The exemption from tax under subsection (a) with respect to any
      organization described in paragraph (2), and the eligibility of
      any organization described in paragraph (2) to apply for
      recognition of exemption under subsection (a), shall be suspended
      during the period described in paragraph (3).
      (2) Terrorist organizations
        An organization is described in this paragraph if such
      organization is designated or otherwise individually identified -
      
          (A) under section 212(a)(3)(B)(vi)(II) or 219 of the
        Immigration and Nationality Act as a terrorist organization or
        foreign terrorist organization,
          (B) in or pursuant to an Executive order which is related to
        terrorism and issued under the authority of the International
        Emergency Economic Powers Act or section 5 of the United
        Nations Participation Act of 1945 for the purpose of imposing
        on such organization an economic or other sanction, or
          (C) in or pursuant to an Executive order issued under the
        authority of any Federal law if - 
            (i) the organization is designated or otherwise
          individually identified in or pursuant to such Executive
          order as supporting or engaging in terrorist activity (as
          defined in section 212(a)(3)(B) of the Immigration and
          Nationality Act) or supporting terrorism (as defined in
          section 140(d)(2) of the Foreign Relations Authorization Act,
          Fiscal Years 1988 and 1989); and
            (ii) such Executive order refers to this subsection.
      (3) Period of suspension
        With respect to any organization described in paragraph (2),
      the period of suspension - 
          (A) begins on the later of - 
            (i) the date of the first publication of a designation or
          identification described in paragraph (2) with respect to
          such organization, or
            (ii) the date of the enactment of this subsection, and

          (B) ends on the first date that all designations and
        identifications described in paragraph (2) with respect to such
        organization are rescinded pursuant to the law or Executive
        order under which such designation or identification was made.
      (4) Denial of deduction
        No deduction shall be allowed under any provision of this
      title, including sections 170, 545(b)(2), 556(b)(2),(!5) 642(c),
      2055, 2106(a)(2), and 2522, with respect to any contribution to
      an organization described in paragraph (2) during the period
      described in paragraph (3).

      (5) Denial of administrative or judicial challenge of suspension
        or denial of deduction
        Notwithstanding section 7428 or any other provision of law, no
      organization or other person may challenge a suspension under
      paragraph (1), a designation or identification described in
      paragraph (2), the period of suspension described in paragraph
      (3), or a denial of a deduction under paragraph (4) in any
      administrative or judicial proceeding relating to the Federal tax
      liability of such organization or other person.
      (6) Erroneous designation
        (A) In general
          If - 
            (i) the tax exemption of any organization described in
          paragraph (2) is suspended under paragraph (1),
            (ii) each designation and identification described in
          paragraph (2) which has been made with respect to such
          organization is determined to be erroneous pursuant to the
          law or Executive order under which such designation or
          identification was made, and
            (iii) the erroneous designations and identifications result
          in an overpayment of income tax for any taxable year by such
          organization,

        credit or refund (with interest) with respect to such
        overpayment shall be made.
        (B) Waiver of limitations
          If the credit or refund of any overpayment of tax described
        in subparagraph (A)(iii) is prevented at any time by the
        operation of any law or rule of law (including res judicata),
        such credit or refund may nevertheless be allowed or made if
        the claim therefor is filed before the close of the 1-year
        period beginning on the date of the last determination
        described in subparagraph (A)(ii).
      (7) Notice of suspensions
        If the tax exemption of any organization is suspended under
      this subsection, the Internal Revenue Service shall update the
      listings of tax-exempt organizations and shall publish
      appropriate notice to taxpayers of such suspension and of the
      fact that contributions to such organization are not deductible
      during the period of such suspension.
    (q) Special rules for credit counseling organizations
      (1) In general
        An organization with respect to which the provision of credit
      counseling services is a substantial purpose shall not be exempt
      from tax under subsection (a) unless such organization is
      described in paragraph (3) or (4) of subsection (c) and such
      organization is organized and operated in accordance with the
      following requirements:
          (A) The organization - 
            (i) provides credit counseling services tailored to the
          specific needs and circumstances of consumers,
            (ii) makes no loans to debtors (other than loans with no
          fees or interest) and does not negotiate the making of loans
          on behalf of debtors,
            (iii) provides services for the purpose of improving a
          consumer's credit record, credit history, or credit rating
          only to the extent that such services are incidental to
          providing credit counseling services, and
            (iv) does not charge any separately stated fee for services
          for the purpose of improving any consumer's credit record,
          credit history, or credit rating.

          (B) The organization does not refuse to provide credit
        counseling services to a consumer due to the inability of the
        consumer to pay, the ineligibility of the consumer for debt
        management plan enrollment, or the unwillingness of the
        consumer to enroll in a debt management plan.
          (C) The organization establishes and implements a fee policy
        which - 
            (i) requires that any fees charged to a consumer for
          services are reasonable,
            (ii) allows for the waiver of fees if the consumer is
          unable to pay, and
            (iii) except to the extent allowed by State law, prohibits
          charging any fee based in whole or in part on a percentage of
          the consumer's debt, the consumer's payments to be made
          pursuant to a debt management plan, or the projected or
          actual savings to the consumer resulting from enrolling in a
          debt management plan.

          (D) At all times the organization has a board of directors or
        other governing body - 
            (i) which is controlled by persons who represent the broad
          interests of the public, such as public officials acting in
          their capacities as such, persons having special knowledge or
          expertise in credit or financial education, and community
          leaders,
            (ii) not more than 20 percent of the voting power of which
          is vested in persons who are employed by the organization or
          who will benefit financially, directly or indirectly, from
          the organization's activities (other than through the receipt
          of reasonable directors' fees or the repayment of consumer
          debt to creditors other than the credit counseling
          organization or its affiliates), and
            (iii) not more than 49 percent of the voting power of which
          is vested in persons who are employed by the organization or
          who will benefit financially, directly or indirectly, from
          the organization's activities (other than through the receipt
          of reasonable directors' fees).

          (E) The organization does not own more than 35 percent of - 
            (i) the total combined voting power of any corporation
          (other than a corporation which is an organization described
          in subsection (c)(3) and exempt from tax under subsection
          (a)) which is in the trade or business of lending money,
          repairing credit, or providing debt management plan services,
          payment processing, or similar services,
            (ii) the profits interest of any partnership (other than a
          partnership which is an organization described in subsection
          (c)(3) and exempt from tax under subsection (a)) which is in
          the trade or business of lending money, repairing credit, or
          providing debt management plan services, payment processing,
          or similar services, and
            (iii) the beneficial interest of any trust or estate (other
          than a trust which is an organization described in subsection
          (c)(3) and exempt from tax under subsection (a)) which is in
          the trade or business of lending money, repairing credit, or
          providing debt management plan services, payment processing,
          or similar services.

          (F) The organization receives no amount for providing
        referrals to others for debt management plan services, and pays
        no amount to others for obtaining referrals of consumers.
      (2) Additional requirements for organizations described in
        subsection (c)(3)
        (A) In general
          In addition to the requirements under paragraph (1), an
        organization with respect to which the provision of credit
        counseling services is a substantial purpose and which is
        described in paragraph (3) of subsection (c) shall not be
        exempt from tax under subsection (a) unless such organization
        is organized and operated in accordance with the following
        requirements:
            (i) The organization does not solicit contributions from
          consumers during the initial counseling process or while the
          consumer is receiving services from the organization.
            (ii) The aggregate revenues of the organization which are
          from payments of creditors of consumers of the organization
          and which are attributable to debt management plan services
          do not exceed the applicable percentage of the total revenues
          of the organization.
        (B) Applicable percentage
          (i) In general
            For purposes of subparagraph (A)(ii), the applicable
          percentage is 50 percent.
          (ii) Transition rule
            Notwithstanding clause (i), in the case of an organization
          with respect to which the provision of credit counseling
          services is a substantial purpose and which is described in
          paragraph (3) of subsection (c) and exempt from tax under
          subsection (a) on the date of the enactment of this
          subsection, the applicable percentage is - 
              (I) 80 percent for the first taxable year of such
            organization beginning after the date which is 1 year after
            the date of the enactment of this subsection, and
              (II) 70 percent for the second such taxable year
            beginning after such date, and
              (III) 60 percent for the third such taxable year
            beginning after such date.
      (3) Additional requirement for organizations described in
        subsection (c)(4)
        In addition to the requirements under paragraph (1), an
      organization with respect to which the provision of credit
      counseling services is a substantial purpose and which is
      described in paragraph (4) of subsection (c) shall not be exempt
      from tax under subsection (a) unless such organization notifies
      the Secretary, in such manner as the Secretary may by regulations
      prescribe, that it is applying for recognition as a credit
      counseling organization.
      (4) Credit counseling services; debt management plan services
        For purposes of this subsection - 
        (A) Credit counseling services
          The term "credit counseling services" means - 
            (i) the providing of educational information to the general
          public on budgeting, personal finance, financial literacy,
          saving and spending practices, and the sound use of consumer
          credit,
            (ii) the assisting of individuals and families with
          financial problems by providing them with counseling, or
            (iii) a combination of the activities described in clauses
          (i) and (ii).
        (B) Debt management plan services
          The term "debt management plan services" means services
        related to the repayment, consolidation, or restructuring of a
        consumer's debt, and includes the negotiation with creditors of
        lower interest rates, the waiver or reduction of fees, and the
        marketing and processing of debt management plans.
    (r) Additional requirements for certain hospitals
      (1) In general
        A hospital organization to which this subsection applies shall
      not be treated as described in subsection (c)(3) unless the
      organization - 
          (A) meets the community health needs assessment requirements
        described in paragraph (3),
          (B) meets the financial assistance policy requirements
        described in paragraph (4),
          (C) meets the requirements on charges described in paragraph
        (5), and
          (D) meets the billing and collection requirement described in
        paragraph (6).
      (2) Hospital organizations to which subsection applies
        (A) In general
          This subsection shall apply to - 
            (i) an organization which operates a facility which is
          required by a State to be licensed, registered, or similarly
          recognized as a hospital, and
            (ii) any other organization which the Secretary determines
          has the provision of hospital care as its principal function
          or purpose constituting the basis for its exemption under
          subsection (c)(3) (determined without regard to this
          subsection).
        (B) Organizations with more than 1 hospital facility
          If a hospital organization operates more than 1 hospital
        facility - 
            (i) the organization shall meet the requirements of this
          subsection separately with respect to each such facility, and
            (ii) the organization shall not be treated as described in
          subsection (c)(3) with respect to any such facility for which
          such requirements are not separately met.
      (3) Community health needs assessments
        (A) In general
          An organization meets the requirements of this paragraph with
        respect to any taxable year only if the organization - 
            (i) has conducted a community health needs assessment which
          meets the requirements of subparagraph (B) in such taxable
          year or in either of the 2 taxable years immediately
          preceding such taxable year, and
            (ii) has adopted an implementation strategy to meet the
          community health needs identified through such assessment.
        (B) Community health needs assessment
          A community health needs assessment meets the requirements of
        this paragraph if such community health needs assessment - 
            (i) takes into account input from persons who represent the
          broad interests of the community served by the hospital
          facility, including those with special knowledge of or
          expertise in public health, and
            (ii) is made widely available to the public.
      (4) Financial assistance policy
        An organization meets the requirements of this paragraph if the
      organization establishes the following policies:
        (A) Financial assistance policy
          A written financial assistance policy which includes - 
            (i) eligibility criteria for financial assistance, and
          whether such assistance includes free or discounted care,
            (ii) the basis for calculating amounts charged to patients,
            (iii) the method for applying for financial assistance,
            (iv) in the case of an organization which does not have a
          separate billing and collections policy, the actions the
          organization may take in the event of non-payment, including
          collections action and reporting to credit agencies, and
            (v) measures to widely publicize the policy within the
          community to be served by the organization.
        (B) Policy relating to emergency medical care
          A written policy requiring the organization to provide,
        without discrimination, care for emergency medical conditions
        (within the meaning of section 1867 of the Social Security Act
        (42 U.S.C. 1395dd)) to individuals regardless of their
        eligibility under the financial assistance policy described in
        subparagraph (A).
      (5) Limitation on charges
        An organization meets the requirements of this paragraph if the
      organization - 
          (A) limits amounts charged for emergency or other medically
        necessary care provided to individuals eligible for assistance
        under the financial assistance policy described in paragraph
        (4)(A) to not more than the amounts generally billed to
        individuals who have insurance covering such care, and
          (B) prohibits the use of gross charges.
      (6) Billing and collection requirements
        An organization meets the requirement of this paragraph only if
      the organization does not engage in extraordinary collection
      actions before the organization has made reasonable efforts to
      determine whether the individual is eligible for assistance under
      the financial assistance policy described in paragraph (4)(A).
      (7) Regulatory authority
        The Secretary shall issue such regulations and guidance as may
      be necessary to carry out the provisions of this subsection,
      including guidance relating to what constitutes reasonable
      efforts to determine the eligibility of a patient under a
      financial assistance policy for purposes of paragraph (6).
    (s) Cross reference
          For nonexemption of Communist-controlled organizations, see
        section 11(b) of the Internal Security Act of 1950 (64 Stat.
        997; 50 U.S.C. 790(b)).