
From the U.S. Code Online via GPO Access
[wais.access.gpo.gov]
[Laws in effect as of January 2, 2001]
[Document not affected by Public Laws enacted between
  January 2, 2001 and January 28, 2002]
[CITE: 26USC4944]

 
                     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. 4944. Taxes on investments which jeopardize charitable 
        purpose
        

(a) Initial taxes

                    (1) On the private foundation

        If a private foundation invests any amount in such a manner as 
    to jeopardize the carrying out of any of its exempt purposes, there 
    is hereby imposed on the making of such investment a tax equal to 5 
    percent of the amount so invested for each year (or part thereof) in 
    the taxable period. The tax imposed by this paragraph shall be paid 
    by the private foundation.

                        (2) On the management

        In any case in which a tax is imposed by paragraph (1), there is 
    hereby imposed on the participation of any foundation manager in the 
    making of the investment, knowing that it is jeopardizing the 
    carrying out of any of the foundation's exempt purposes, a tax equal 
    to 5 percent of the amount so invested 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 making of the investment.

(b) Additional taxes

                        (1) On the foundation

        In any case in which an initial tax is imposed by subsection 
    (a)(1) on the making of an investment and such investment is not 
    removed from jeopardy within the taxable period, there is hereby 
    imposed a tax equal to 25 percent of the amount of the investment. 
    The tax imposed by this paragraph shall be paid by the private 
    foundation.

                        (2) On the management

        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 
    removal from jeopardy, there is hereby imposed a tax equal to 5 
    percent of the amount of the investment. The tax imposed by this 
    paragraph shall be paid by any foundation manager who refused to 
    agree to part or all of the removal from jeopardy.

(c) Exception for program-related investments

    For purposes of this section, investments, the primary purpose of 
which is to accomplish one or more of the purposes described in section 
170(c)(2)(B), and no significant purpose of which is the production of 
income or the appreciation of property, shall not be considered as 
investments which jeopardize the carrying out of exempt purposes.

(d) Special rules

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

                   (1) Joint and several liability

        If more than one person is liable under subsection (a)(2) or 
    (b)(2) with respect to any one investment, all such persons shall be 
    jointly and severally liable under such paragraph with respect to 
    such investment.

                      (2) Limit for management

        With respect to any one investment, the maximum amount of the 
    tax imposed by subsection (a)(2) shall not exceed $5,000, and the 
    maximum amount of the tax imposed by subsection (b)(2) shall not 
    exceed $10,000.

(e) Definitions

    For purposes of this section--

                         (1) Taxable period

        The term ``taxable period'' means, with respect to any 
    investment which jeopardizes the carrying out of exempt purposes, 
    the period beginning with the date on which the amount is so 
    invested and ending on the earliest of--
            (A) the date of mailing of 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 the amount so invested is removed from 
        jeopardy.

                      (2) Removal from jeopardy

        An investment which jeopardizes the carrying out of exempt 
    purposes shall be considered to be removed from jeopardy when such 
    investment is sold or otherwise disposed of, and the proceeds of 
    such sale or other disposition are not investments which jeopardize 
    the carrying out of exempt purposes.

(Added Pub. L. 91-172, title I, Sec. 101(b), Dec. 30, 1969, 83 Stat. 
511; amended Pub. L. 94-455, title XIX, Sec. 1906(b)(13)(A), Oct. 4, 
1976, 90 Stat. 1834; Pub. L. 96-596, Sec. 2(a)(1)(E), (2)(D), (3)(D), 
Dec. 24, 1980, 94 Stat. 3469-3471.)


                               Amendments

    1980--Subsec. (b)(1). Pub. L. 96-596, Sec. 2(a)(1)(E), substituted 
``taxable period'' for ``correction period''.
    Subsec. (e)(1)(B), (C). Pub. L. 96-596, Sec. 2(a)(2)(D), added 
subpar. (B) and redesignated former subpar. (B) as (C).
    Subsec. (e)(3). Pub. L. 96-596, Sec. 2(a)(3)(D), struck out par. 
(3), which defined correction period, with respect to any investment 
which jeopardizes the carrying out of exempt purposes, as the period 
beginning with the date on which such investment is entered into 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 a 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 removal from jeopardy.
    1976--Subsec. (e)(3)(B). Pub. L. 94-455 struck out ``or his 
delegate'' after ``Secretary''.


                    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.

                  Section Referred to in Other Sections

    This section is referred to in sections 501, 508, 4947, 4963, 6213, 
7422, 7454 of this title.
