26 U.S.C. § 508 : US Code - Section 508: Special rules with respect to section 501(c)(3) organizations

Search 26 U.S.C. § 508 : US Code - Section 508: Special rules with respect to section 501(c)(3) organizations

(a) New organizations must notify Secretary that they are applying
for recognition of section 501(c)(3) status
Except as provided in subsection (c), an organization organized
after October 9, 1969, shall not be treated as an organization
described in section 501(c)(3) -
(1) unless it has given notice to the Secretary in such manner
as the Secretary may by regulations prescribe, that it is
applying for recognition of such status, or
(2) for any period before the giving of such notice, if such
notice is given after the time prescribed by the Secretary by
regulations for giving notice under this subsection.
(b) Presumption that organizations are private foundations
Except as provided in subsection (c), any organization (including
an organization in existence on October 9, 1969) which is described
in section 501(c)(3) and which does not notify the Secretary, at
such time and in such manner as the Secretary may by regulations
prescribe, that it is not a private foundation shall be presumed to
be a private foundation.
(c) Exceptions
(1) Mandatory exceptions
Subsections (a) and (b) shall not apply to -
(A) churches, their integrated auxiliaries, and conventions
or associations of churches, or
(B) any organization which is not a private foundation (as
defined in section 509(a)) and the gross receipts of which in
each taxable year are normally not more than $5,000.
(2) Exceptions by regulations
The Secretary may by regulations exempt (to the extent and
subject to such conditions as may be prescribed in such
regulations) from the provisions of subsection (a) or (b) or both
-
(A) educational organizations described in section
170(b)(1)(A)(ii), and
(B) any other class of organizations with respect to which
the Secretary determines that full compliance with the
provisions of subsections (a) and (b) is not necessary to the
efficient administration of the provisions of this title
relating to private foundations.
(d) Disallowance of certain charitable, etc., deductions
(1) Gift or bequest to organizations subject to section 507(c)
tax
No gift or bequest made to an organization upon which the tax
provided by section 507(c) has been imposed shall be allowed as a
deduction under section 170, 545(b)(2), 642(c), 2055, 2106(a)(2),
or 2522, if such gift or bequest is made -
(A) by any person after notification is made under section
507(a), or
(B) by a substantial contributor (as defined in section
507(d)(2)) in his taxable year which includes the first day on
which action is taken by such organization which culminates in
the imposition of tax under section 507(c) and any subsequent
taxable year.
(2) Gift or bequest to taxable private foundation, section 4947
trust, etc.
No gift or bequest made to an organization shall be allowed as
a deduction under section 170, 545(b)(2), 642(c), 2055,
2106(a)(2), or 2522, if such gift or bequest is made -
(A) to a private foundation or a trust described in section
4947 in a taxable year for which it fails to meet the
requirements of subsection (e) (determined without regard to
subsection (e)(2)), or
(B) to any organization in a period for which it is not
treated as an organization described in section 501(c)(3) by
reason of subsection (a).
(3) Exception
Paragraph (1) shall not apply if the entire amount of the
unpaid portion of the tax imposed by section 507(c) is abated by
the Secretary under section 507(g).
(e) Governing instruments
(1) General rule
A private foundation shall not be exempt from taxation under
section 501(a) unless its governing instrument includes
provisions the effects of which are -
(A) to require its income for each taxable year to be
distributed at such time and in such manner as not to subject
the foundation to tax under section 4942, and
(B) to prohibit the foundation from engaging in any act of
self-dealing (as defined in section 4941(d)), from retaining
any excess business holdings (as defined in section 4943(c)),
from making any investments in such manner as to subject the
foundation to tax under section 4944, and from making any
taxable expenditures (as defined in section 4945(d)).
(2) Special rules for existing private foundations
In the case of any organization organized before January 1,
1970, paragraph (1) shall not apply -
(A) to any period after December 31, 1971, during the
pendency of any judicial proceeding begun before January 1,
1972, by the private foundation which is necessary to reform,
or to excuse such foundation from compliance with, its
governing instrument or any other instrument in order to meet
the requirements of paragraph (1), and
(B) to any period after the termination of any judicial
proceeding described in subparagraph (A) during which its
governing instrument or any other instrument does not permit it
to meet the requirements of paragraph (1).