Final rules 1
(a) Initial taxes
Amended 2006
- 2006 Pub. L. 109-280 Pub. L. 109–280, § 1212(d)(1), substituted “10 percent” for “5 percent” in pars. (1) and (2). See Codification note above.
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(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 10 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.
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(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 10 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.
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(b) Additional taxes
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(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.
Amended 1980
- 1980 Pub. L. 96-596 Pub. L. 96–596, § 2(a)(1)(E), substituted “taxable period” for “correction period”.
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(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.
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(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.
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(d) Special rules For purposes of subsections (a) and (b)—
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(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 $10,000, and the maximum amount of the tax imposed by subsection (b)(2) shall not exceed $20,000.
Amended 2006
- 2006 Pub. L. 109-280 Pub. L. 109–280, § 1212(d)(2), substituted “$10,000,” for “$5,000,” and “$20,000.” for “$10,000.” See Codification note above.
(e) Definitions For purposes of this section—
Amended 1976, 1980
- 1980 Pub. L. 96-596 Pub. L. 96–596, § 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 Pub. L. 94-455 Pub. L. 94–455 struck out “or his delegate” after “Secretary”.
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(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—
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(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
Amended 1980
- 1980 Pub. L. 96-596 Pub. L. 96–596, § 2(a)(2)(D), added subpar. (B) and redesignated former subpar. (B) as (C).
(C) the date on which the amount so invested is removed from jeopardy.
Amended 1980
- 1980 Pub. L. 96-596 Pub. L. 96–596, § 2(a)(2)(D), added subpar. (B) and redesignated former subpar. (B) as (C).
(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.