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Tax Exempt 508
On this page look for highlighted areas and you will learn what most certified public accountants and attorneys are unaware of.
Sec. 508. Special rules with respect to section
501(c)(3) organizations Sec. 508.
Special rules with respect to section 501(c)(3) organizations
TITLE 26, Subtitle A, CHAPTER 1, Subchapter F, PART II, Sec. 508
STATUTE
(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 See:
Publication 557 - Churches
(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), 556(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), 556(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).
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 170, 663, 681, 2055, 2522, 4947, 4948,
6104 of this title.
SOURCE
AMENDMENTS
EFFECTIVE DATE OF 1976 AMENDMENT
EFFECTIVE DATE
SAVINGS PROVISION
