
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: 26USC509]

 
                     TITLE 26--INTERNAL REVENUE CODE
 
                        Subtitle A--Income Taxes
 
                  CHAPTER 1--NORMAL TAXES AND SURTAXES
 
                   Subchapter F--Exempt Organizations
 
                      PART II--PRIVATE FOUNDATIONS
 
Sec. 509. Private foundation defined


(a) General rule

    For purposes of this title, the term ``private foundation'' means a 
domestic or foreign organization described in section 501(c)(3) other 
than--
        (1) an organization described in section 170(b)(1)(A) (other 
    than in clauses (vii) and (viii));
        (2) an organization which--
            (A) normally receives more than one-third of its support in 
        each taxable year from any combination of--
                (i) gifts, grants, contributions, or membership fees, 
            and
                (ii) gross receipts from admissions, sales of 
            merchandise, performance of services, or furnishing of 
            facilities, in an activity which is not an unrelated trade 
            or business (within the meaning of section 513), not 
            including such receipts from any person, or from any bureau 
            or similar agency of a governmental unit (as described in 
            section 170(c)(1)), in any taxable year to the extent such 
            receipts exceed the greater of $5,000 or 1 percent of the 
            organization's support in such taxable year,

        from persons other than disqualified persons (as defined in 
        section 4946) with respect to the organization, from 
        governmental units described in section 170(c)(1), or from 
        organizations described in section 170(b)(1)(A) (other than in 
        clauses (vii) and (viii)), and
            (B) normally receives not more than one-third of its support 
        in each taxable year from the sum of--
                (i) gross investment income (as defined in subsection 
            (e)) and
                (ii) the excess (if any) of the amount of the unrelated 
            business taxable income (as defined in section 512) over the 
            amount of the tax imposed by section 511;

        (3) an organization which--
            (A) is organized, and at all times thereafter is operated, 
        exclusively for the benefit of, to perform the functions of, or 
        to carry out the purposes of one or more specified organizations 
        described in paragraph (1) or (2),
            (B) is operated, supervised, or controlled by or in 
        connection with one or more organizations described in paragraph 
        (1) or (2), and
            (C) is not controlled directly or indirectly by one or more 
        disqualified persons (as defined in section 4946) other than 
        foundation managers and other than one or more organizations 
        described in paragraph (1) or (2); and

        (4) an organization which is organized and operated exclusively 
    for testing for public safety.

For purposes of paragraph (3), an organization described in paragraph 
(2) shall be deemed to include an organization described in section 
501(c)(4), (5), or (6) which would be described in paragraph (2) if it 
were an organization described in section 501(c)(3).

(b) Continuation of private foundation status

    For purposes of this title, if an organization is a private 
foundation (within the meaning of subsection (a)) on October 9, 1969, or 
becomes a private foundation on any subsequent date, such organization 
shall be treated as a private foundation for all periods after October 
9, 1969, or after such subsequent date, unless its status as such is 
terminated under section 507.

(c) Status of organization after termination of private foundation 
        status

    For purposes of this part, an organization the status of which as a 
private foundation is terminated under section 507 shall (except as 
provided in section 507(b)(2)) be treated as an organization created on 
the day after the date of such termination.

(d) Definition of support

    For purposes of this part and chapter 42, the term ``support'' 
includes (but is not limited to)--
        (1) gifts, grants, contributions, or membership fees,
        (2) gross receipts from admissions, sales of merchandise, 
    performance of services, or furnishing of facilities in any activity 
    which is not an unrelated trade or business (within the meaning of 
    section 513),
        (3) net income from unrelated business activities, whether or 
    not such activities are carried on regularly as a trade or business,
        (4) gross investment income (as defined in subsection (e)),
        (5) tax revenues levied for the benefit of an organization and 
    either paid to or expended on behalf of such organization, and
        (6) the value of services or facilities (exclusive of services 
    or facilities generally furnished to the public without charge) 
    furnished by a governmental unit referred to in section 170(c)(1) to 
    an organization without charge.

Such term does not include any gain from the sale or other disposition 
of property which would be considered as gain from the sale or exchange 
of a capital asset, or the value of exemption from any Federal, State, 
or local tax or any similar benefit.

(e) Definition of gross investment income

    For purposes of subsection (d), the term ``gross investment income'' 
means the gross amount of income from interest, dividends, payments with 
respect to securities loans (as defined in section 512(a)(5)), rents, 
and royalties, but not including any such income to the extent included 
in computing the tax imposed by section 511.

(Added Pub. L. 91-172, title I, Sec. 101(a), Dec. 30, 1969, 83 Stat. 
496; amended Pub. L. 94-81, Sec. 3(a), Aug. 9, 1975, 89 Stat. 418; Pub. 
L. 95-345, Sec. 2(a)(1), Aug. 15, 1978, 92 Stat. 481.)


                               Amendments

    1978--Subsec. (e). Pub. L. 95-345 inserted provision relating to 
payments with respect to securities loans.
    1975--Subsec. (a)(2)(B). Pub. L. 94-81 designated existing 
provisions as cl. (i) and added cl. (ii).


                    Effective Date of 1978 Amendment

    Section 2(e) of Pub. L. 95-345, as amended by Pub. L. 99-514, 
Sec. 2, Oct. 22, 1986, 100 Stat. 2095, provided that: ``The amendments 
made by this section [enacting section 1058 of this title and amending 
sections 509, 512, 514, 851, and 4940 of this title] apply with respect 
to--
        ``(1) amounts received after December 31, 1976, as payments with 
    respect to securities loans (as defined in section 512(a)(5) of the 
    Internal Revenue Code of 1986 [formerly I.R.C. 1954]), and
        ``(2) transfers of securities, under agreements described in 
    section 1058 of such Code, occurring after such date.''


                    Effective Date of 1975 Amendment

    Section 3(b) of Pub. L. 94-81 provided that: ``The amendment made by 
this section [amending this section] shall apply to unrelated business 
taxable income derived from trades and businesses which are acquired by 
the organization after June 30, 1975.''


                             Effective Date

    Section effective Jan. 1, 1970, see section 101(k)(1) of Pub. L. 91-
172, set out as a note under section 4940 of this title.


                            Savings Provision

    Applicability of subsec. (a) of this section to testamentary trusts, 
see section 101(l)(7) 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, 501, 507, 508, 514, 
527, 542, 2055, 2503, 3121, 4940, 4942, 4945, 4947, 4958, 6033, 6043, 
6104, 6111, 7428 of this title; title 42 section 410.
