
From the U.S. Code Online via GPO Access
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[Laws in effect as of January 2, 2001]
[Document not affected by Public Laws enacted between
  January 2, 2001 and January 28, 2002]
[CITE: 26USC4941]

 
                     TITLE 26--INTERNAL REVENUE CODE
 
                 Subtitle D--Miscellaneous Excise Taxes
 
     CHAPTER 42--PRIVATE FOUNDATIONS; AND CERTAIN OTHER TAX-EXEMPT 
                              ORGANIZATIONS
 
                    Subchapter A--Private Foundations
 
Sec. 4941. Taxes on self-dealing


(a) Initial taxes

                         (1) On self-dealer

        There is hereby imposed a tax on each act of self-dealing 
    between a disqualified person and a private foundation. The rate of 
    tax shall be equal to 5 percent of the amount involved with respect 
    to the act of self-dealing for each year (or part thereof) in the 
    taxable period. The tax imposed by this paragraph shall be paid by 
    any disqualified person (other than a foundation manager acting only 
    as such) who participates in the act of self-dealing. In the case of 
    a government official (as defined in section 4946(c)), a tax shall 
    be imposed by this paragraph only if such disqualified person 
    participates in the act of self-dealing knowing that it is such an 
    act.

                      (2) On foundation manager

        In any case in which a tax is imposed by paragraph (1), there is 
    hereby imposed on the participation of any foundation manager in an 
    act of self-dealing between a disqualified person and a private 
    foundation, knowing that it is such an act, a tax equal to 2\1/2\ 
    percent of the amount involved with respect to the act of self-
    dealing for each year (or part thereof) in the taxable period, 
    unless such participation is not willful and is due to reasonable 
    cause. The tax imposed by this paragraph shall be paid by any 
    foundation manager who participated in the act of self-dealing.

(b) Additional taxes

                         (1) On self-dealer

        In any case in which an initial tax is imposed by subsection 
    (a)(1) on an act of self-dealing by a disqualified person with a 
    private foundation and the act is not corrected within the taxable 
    period, there is hereby imposed a tax equal to 200 percent of the 
    amount involved. The tax imposed by this paragraph shall be paid by 
    any disqualified person (other than a foundation manager acting only 
    as such) who participated in the act of self-dealing.

                      (2) On foundation manager

        In any case in which an additional tax is imposed by paragraph 
    (1), if a foundation manager refused to agree to part or all of the 
    correction, there is hereby imposed a tax equal to 50 percent of the 
    amount involved. The tax imposed by this paragraph shall be paid by 
    any foundation manager who refused to agree to part or all of the 
    correction.

(c) Special rules

    For purposes of subsections (a) and (b)--

                   (1) Joint and several liability

        If more than one person is liable under any paragraph of 
    subsection (a) or (b) with respect to any one act of self-dealing, 
    all such persons shall be jointly and severally liable under such 
    paragraph with respect to such act.

                  (2) $10,000 limit for management

        With respect to any one act of self-dealing, the maximum amount 
    of the tax imposed by subsection (a)(2) shall not exceed $10,000, 
    and the maximum amount of the tax imposed by subsection (b)(2) shall 
    not exceed $10,000.

(d) Self-dealing

                           (1) In general

        For purposes of this section, the term ``self-dealing'' means 
    any direct or indirect--
            (A) sale or exchange, or leasing, of property between a 
        private foundation and a disqualified person;
            (B) lending of money or other extension of credit between a 
        private foundation and a disqualified person;
            (C) furnishing of goods, services, or facilities between a 
        private foundation and a disqualified person;
            (D) payment of compensation (or payment or reimbursement of 
        expenses) by a private foundation to a disqualified person;
            (E) transfer to, or use by or for the benefit of, a 
        disqualified person of the income or assets of a private 
        foundation; and
            (F) agreement by a private foundation to make any payment of 
        money or other property to a government official (as defined in 
        section 4946(c)), other than an agreement to employ such 
        individual for any period after the termination of his 
        government service if such individual is terminating his 
        government service within a 90-day period.

                          (2) Special rules

        For purposes of paragraph (1)--
            (A) the transfer of real or personal property by a 
        disqualified person to a private foundation shall be treated as 
        a sale or exchange if the property is subject to a mortgage or 
        similar lien which the foundation assumes or if it is subject to 
        a mortgage or similar lien which a disqualified person placed on 
        the property within the 10-year period ending on the date of the 
        transfer;
            (B) the lending of money by a disqualified person to a 
        private foundation shall not be an act of self-dealing if the 
        loan is without interest or other charge (determined without 
        regard to section 7872) and if the proceeds of the loan are used 
        exclusively for purposes specified in section 501(c)(3);
            (C) the furnishing of goods, services, or facilities by a 
        disqualified person to a private foundation shall not be an act 
        of self-dealing if the furnishing is without charge and if the 
        goods, services, or facilities so furnished are used exclusively 
        for purposes specified in section 501(c)(3);
            (D) the furnishing of goods, services, or facilities by a 
        private foundation to a disqualified person shall not be an act 
        of self-dealing if such furnishing is made on a basis no more 
        favorable than that on which such goods, services, or facilities 
        are made available to the general public;
            (E) except in the case of a government official (as defined 
        in section 4946(c)), the payment of compensation (and the 
        payment or reimbursement of expenses) by a private foundation to 
        a disqualified person for personal services which are reasonable 
        and necessary to carrying out the exempt purpose of the private 
        foundation shall not be an act of self-dealing if the 
        compensation (or payment or reimbursement) is not excessive;
            (F) any transaction between a private foundation and a 
        corporation which is a disqualified person (as defined in 
        section 4946(a)), pursuant to any liquidation, merger, 
        redemption, recapitalization, or other corporate adjustment, 
        organization, or reorganization, shall not be an act of self-
        dealing if all of the securities of the same class as that held 
        by the foundation are subject to the same terms and such terms 
        provide for receipt by the foundation of no less than fair 
        market value;
            (G) in the case of a government official (as defined in 
        section 4946(c)), paragraph (1) shall in addition not apply to--
                (i) prizes and awards which are subject to the 
            provisions of section 74(b) (without regard to paragraph (3) 
            thereof), if the recipients of such prizes and awards are 
            selected from the general public,
                (ii) scholarships and fellowship grants which would be 
            subject to the provisions of section 117(a) (as in effect on 
            the day before the date of the enactment of the Tax Reform 
            Act of 1986) and are to be used for study at an educational 
            organization described in section 170(b)(1)(A)(ii),
                (iii) any annuity or other payment (forming part of a 
            stock-bonus, pension, or profit-sharing plan) by a trust 
            which is a qualified trust under section 401,
                (iv) any annuity or other payment under a plan which 
            meets the requirements of section 404(a)(2),
                (v) any contribution or gift (other than a contribution 
            or gift of money) to, or services or facilities made 
            available to, any such individual, if the aggregate value of 
            such contributions, gifts, services, and facilities to, or 
            made available to, such individual during any calendar year 
            does not exceed $25,
                (vi) any payment made under chapter 41 of title 5, 
            United States Code, or
                (vii) any payment or reimbursement of traveling expenses 
            for travel solely from one point in the United States to 
            another point in the United States, but only if such payment 
            or reimbursement does not exceed the actual cost of the 
            transportation involved plus an amount for all other 
            traveling expenses not in excess of 125 percent of the 
            maximum amount payable under section 5702 of title 5, United 
            States Code, for like travel by employees of the United 
            States; and

            (H) the leasing by a disqualified person to a private 
        foundation of office space for use by the foundation in a 
        building with other tenants who are not disqualified persons 
        shall not be treated as an act of self-dealing if--
                (i) such leasing of office space is pursuant to a 
            binding lease which was in effect on October 9, 1969, or 
            pursuant to renewals of such a lease;
                (ii) the execution of such lease was not a prohibited 
            transaction (within the meaning of section 503(b) or any 
            corresponding provision of prior law) at the time of such 
            execution; and
                (iii) the terms of the lease (or any renewal) reflect an 
            arm's-length transaction.

(e) Other definitions

    For purposes of this section--

                         (1) Taxable period

        The term ``taxable period'' means, with respect to any act of 
    self-dealing, the period beginning with the date on which the act of 
    self-dealing occurs and ending on the earliest of--
            (A) the date of mailing a notice of deficiency with respect 
        to the tax imposed by subsection (a)(1) under section 6212,
            (B) the date on which the tax imposed by subsection (a)(1) 
        is assessed, or
            (C) the date on which correction of the act of self-dealing 
        is completed.

                         (2) Amount involved

        The term ``amount involved'' means, with respect to any act of 
    self-dealing, the greater of the amount of money and the fair market 
    value of the other property given or the amount of money and the 
    fair market value of the other property received; except that, in 
    the case of services described in subsection (d)(2)(E), the amount 
    involved shall be only the excess compensation. For purposes of the 
    preceding sentence, the fair market value--
            (A) in the case of the taxes imposed by subsection (a), 
        shall be determined as of the date on which the act of self-
        dealing occurs; and
            (B) in the case of the taxes imposed by subsection (b), 
        shall be the highest fair market value during the taxable 
        period.

                           (3) Correction

        The terms ``correction'' and ``correct'' mean, with respect to 
    any act of self-dealing, undoing the transaction to the extent 
    possible, but in any case placing the private foundation in a 
    financial position not worse than that in which it would be if the 
    disqualified person were dealing under the highest fiduciary 
    standards.

(Added Pub. L. 91-172, title I, Sec. 101(b), Dec. 30, 1969, 83 Stat. 
499; amended Pub. L. 94-455, title XIX, Secs. 1901(b)(8)(H), 
1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1795, 1834; Pub. L. 96-596, 
Sec. 2(a)(1)(A), (B), (2)(A), (3)(A), Dec. 24, 1980, 94 Stat. 3469, 
3471; Pub. L. 96-608, Sec. 5, Dec. 28, 1980, 94 Stat. 3553; Pub. L. 99-
234, title I, Sec. 107(c), Jan. 2, 1986, 99 Stat. 1759; Pub. L. 99-514, 
title I, Sec. 122(a)(2)(A), title XVIII, Sec. 1812(b)(1), Oct. 22, 1986, 
100 Stat. 2110, 2833; Pub. L. 100-647, title I, Sec. 1001(d)(1)(A), Nov. 
10, 1988, 102 Stat. 3350.)

                       References in Text

    The date of the enactment of the Tax Reform Act of 1986, referred to 
in subsec. (d)(2)(G)(ii), is the date of enactment of Pub. L. 99-514, 
which was approved Oct. 22, 1986.


                               Amendments

    1988--Subsec. (d)(2)(G)(ii). Pub. L. 100-647 amended cl. (ii) 
generally. Prior to amendment, cl. (ii) read as follows: ``scholarships 
and fellowship grants which are subject to the provisions of section 
117(a) and are to be used for study at an educational organization 
described in section 170(b)(1)(A)(ii),''.
    1986--Subsec. (d)(2)(B). Pub. L. 99-514, Sec. 1812(b)(1), inserted 
``(determined without regard to section 7872)'' after ``without interest 
or other charge''.
    Subsec. (d)(2)(G)(i). Pub. L. 99-514, Sec. 122(a)(2)(A), inserted 
``(without regard to paragraph (3) thereof)'' after ``section 74(b)''.
    Subsec. (d)(2)(G)(vii). Pub. L. 99-234 substituted ``5702'' for 
``5702(a)''.
    1980--Subsec. (b)(1). Pub. L. 96-596, Sec. 2(a)(1)(A), substituted 
``taxable period'' for ``correction period''.
    Subsec. (d)(2)(H). Pub. L. 96-608 added subpar. (H).
    Subsec. (e)(1)(B), (C). Pub. L. 96-596, Sec. 2(a)(2)(A), added 
subpar. (B) and redesignated former subpar. (B) as (C).
    Subsec. (e)(2)(B). Pub. L. 96-596, Sec. 2(a)(1)(B), substituted 
``taxable period'' for ``correction period''.
    Subsec. (e)(4). Pub. L. 96-596, Sec. 2(a)(3)(A), struck out par. (4) 
which defined correction period, with respect to any act of self-
dealing, as the period beginning with the date on which the act of self-
dealing occurs and ending 90 days after the date of mailing of a notice 
of deficiency with respect to the tax imposed by subsec. (b)(1) of this 
section under section 6212 of this title, extended by any period in 
which the deficiency cannot be assessed under section 6213(a) of this 
title and any other period which the Secretary determines is reasonable 
and necessary to bring about correction of the act of self-dealing.
    1976--Subsec. (d)(2)(G)(ii). Pub. L. 94-455, Sec. 1901(b)(8)(H), 
substituted ``educational organization described in section 
170(b)(1)(A)(ii)'' for ``educational institution described in section 
151(e)(4)'' after ``study at an''.
    Subsec. (e)(4). Pub. L. 94-455, Sec. 1906(b)(13)(A), struck out ``or 
his delegate'' after ``Secretary''.


                    Effective Date of 1988 Amendment

    Amendment by Pub. L. 100-647 effective, except as otherwise 
provided, as if included in the provision of the Tax Reform Act of 1986, 
Pub. L. 99-514, to which such amendment relates, see section 1019(a) of 
Pub. L. 100-647, set out as a note under section 1 of this title.


                    Effective Date of 1986 Amendments

    Amendment by section 122(a)(2)(A) of Pub. L. 99-514 applicable to 
prizes and awards granted after Dec. 31, 1986, see section 151(c) of 
Pub. L. 99-514, set out as a note under section 1 of this title.
    Amendment by section 1812(b)(1) of Pub. L. 99-514 effective, except 
as otherwise provided, as if included in the provisions of the Tax 
Reform Act of 1984, Pub. L. 98-369, div. A, to which such amendment 
relates, see section 1881 of Pub. L. 99-514, set out as a note under 
section 48 of this title.
    Amendment by Pub. L. 99-234 effective (1) on effective date of 
regulations to be promulgated not later than 150 days after Jan. 2, 
1986, or (2) 180 days after Jan. 2, 1986, whichever occurs first, see 
section 301(a) of Pub. L. 99-234, set out as a note under section 5701 
of Title 5, Government Organization and Employees.


                    Effective Date of 1980 Amendment

    For effective date of amendment by Pub. L. 96-596 with respect to 
any first tier tax and to any second tier tax, see section 2(d) of Pub. 
L. 96-596, set out as an Effective Date note under section 4961 of this 
title.


                            Savings Provision

    Exceptions to applicability of section, see section 101(l)(2) of 
Pub. L. 91-172, set out as a note under section 4940 of this title.


           Plan Amendments Not Required Until January 1, 1989

    For provisions directing that if any amendments made by subtitle A 
or subtitle C of title XI [Secs. 1101-1147 and 1171-1177] or title XVIII 
[Secs. 1800-1899A] of Pub. L. 99-514 require an amendment to any plan, 
such plan amendment shall not be required to be made before the first 
plan year beginning on or after Jan. 1, 1989, see section 1140 of Pub. 
L. 99-514, as amended, set out as a note under section 401 of this 
title.


       Tax on Self-Dealing Not To Apply to Certain Stock Purchases

    Pub. L. 98-369, div. A, title III, Sec. 312, July 18, 1984, 98 Stat. 
786, as amended by Pub. L. 99-514, Sec. 2, Oct. 22, 1986, 100 Stat. 
2095, provided that:
    ``(a) General Rule.--Section 4941 of the Internal Revenue Code of 
1986 [formerly I.R.C. 1954] (relating to taxes on self-dealing) shall 
not apply to the purchase during 1978 of stock from a private foundation 
(and to any note issued in connection with such purchase) if--
        ``(1) consideration for such purchase equaled or exceeded the 
    fair market value of such stock,
        ``(2) the purchaser of such stock did not make any contribution 
    to such foundation at any time during the 5-year period ending on 
    the date of such purchase,
        ``(3) the aggregate contributions to such foundation by the 
    purchaser before such date were less than $10,000 and less than 2 
    percent of the total contributions received by the foundation as of 
    such date, and
        ``(4) such purchase was pursuant to the settlement of litigation 
    involving the purchaser.
    ``(b) Statute of Limitations.--If credit or refund of any 
overpayment of tax resulting from subsection (a) is prevented at any 
time before the close of the 1-year period beginning on the date of the 
enactment of this Act [July 18, 1984] by the operation of any law or 
rule of law, refund or credit of such overpayment may, nevertheless, be 
made or allowed if claim therefor is filed before the close of such 1-
year period.''


Applicability to Determination of Status as Substantial Contributor for 
Purposes of Taxes on Self-Dealing of Contributions Made Prior to October 
                                 9, 1969

    Determination of status as substantial contributor within section 
507(d)(2) of this title for purposes of applying this section, see 
section 3 of Pub. L. 95-170, set out as a note under section 507 of this 
title.

                  Section Referred to in Other Sections

    This section is referred to in sections 508, 4946, 4947, 4962, 4963, 
6213, 7422, 7454 of this title.
