
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: 26USC508]

 
                     TITLE 26--INTERNAL REVENUE CODE
 
                        Subtitle A--Income Taxes
 
                  CHAPTER 1--NORMAL TAXES AND SURTAXES
 
                   Subchapter F--Exempt Organizations
 
                      PART II--PRIVATE FOUNDATIONS
 
Sec. 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), 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).

(Added Pub. L. 91-172, title I, Sec. 101(a), Dec. 30, 1969, 83 Stat. 
494; amended Pub. L. 94-455, title XIX, Secs. 1901(a)(71), (b)(8)(E), 
1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1776, 1794, 1834.)


                               Amendments

    1976--Subsec. (a). Pub. L. 94-455, Sec. 1901(a)(71)(A), struck out 
last sentence providing that for purposes of paragraph (2), the time 
prescribed for giving notice under this subsection shall not expire 
before the 90th day after the day on which regulations first prescribed 
under this subsection become final.
    Subsec. (a)(1), (2). Pub. L. 94-455, Sec. 1906(b)(13)(A), struck out 
``or his delegate'' in three places after ``Secretary''.
    Subsec. (b). Pub. L. 94-455, Secs. 1901(a)(71)(A), 1906(b)(13)(A), 
struck out ``or his delegate'' in two places after ``Secretary'' and 
``The time prescribed for giving notice under this subsection shall not 
expire before the 90th day after the day on which regulations first 
prescribed under this subsection become final'' after ``a private 
foundation''.
    Subsec. (c)(2). Pub. L. 94-455, Sec. 1906(b)(13)(A), struck out ``or 
his delegate'' after ``Secretary''.
    Subsec. (c)(2)(A). Pub. L. 94-455, Sec. 1901(b)(8)(E), substituted 
``(A) educational organizations described in section 170(b)(1)(A)(ii), 
and'' for ``(A) educational organizations which normally maintain a 
regular faculty and curriculum and normally have a regularly enrolled 
body of pupils or students in attendance at the place where their 
educational activities are regularly carried on; and'' after ``(b) or 
both--''.
    Subsec. (c)(2)(B). Pub. L. 94-455, Sec. 1906(b)(13)(A), struck out 
``or his delegate'' after ``Secretary''.
    Subsec. (d)(2)(A). Pub. L. 94-455, Sec. 1901(a)(71)(C), substituted 
``(e)(2)'' for ``(e)(2)(B) and (C)'' after ``regard to subsection''.
    Subsec. (d)(3). Pub. L. 94-455, Sec. 1906(b)(13)(A), struck out ``or 
his delegate'' after ``Secretary''.
    Subsec. (e)(2)(A). Pub. L. 94-455, Sec. 1901(a)(71)(B), struck out 
subpar. (A) relating to taxable years beginning before 1972, and 
redesignated subpars. (B) and (C) as (A) and (B), respectively.
    Subsec. (e)(2)(B). Pub. L. 94-455, Sec. 1901(a)(71)(B), redesignated 
subpar. (C) as (B) and substituted ``(A)'' for ``(B)'' after ``described 
in subparagraph''.
    Subsec. (e)(2)(C). Pub. L. 94-455, Sec. 1901(a)(71)(B), redesignated 
subpar. (C) as (B).


                    Effective Date of 1976 Amendment

    Amendment by section 1901(a)(71)(A)-(C), (b)(8)(E) of Pub. L. 94-455 
applicable with respect to taxable years beginning after Dec. 31, 1976, 
see section 1901(d) of Pub. L. 94-455, set out as a note under section 2 
of this title.


                             Effective Date

    Section effective Jan. 1, 1970, except that subsecs. (a), (b), and 
(c) effective Oct. 9, 1969, see section 101(k)(1), (3) of Pub. L. 91-
172, set out as a note under section 4940 of this title.


                            Savings Provision

    Limits on inclusion of provisions inconsistent with subsec. (e) of 
this section in governing instruments, see section 101(l)(6) of Pub. L. 
91-172, set out as a note under section 4940 of this title.

                  Section Referred to in Other Sections

    This section is referred to in sections 170, 663, 681, 2055, 2522, 
4947, 4948, 6104 of this title.
