# 26 U.S.C. § 4944: Taxes on investments which jeopardize charitable purpose Source: OLRC release point 119-134 . Cite pinpoints as 26 U.S.C. § 4944(a)(1). ## § 4944(a) Initial taxes **§ 4944(a)(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. **§ 4944(a)(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. ## § 4944(b) Additional taxes **§ 4944(b)(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. **§ 4944(b)(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. ## § 4944(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. ## § 4944(d) Special rules For purposes of subsections (a) and (b)— **§ 4944(d)(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. **§ 4944(d)(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. ## § 4944(e) Definitions For purposes of this section— **§ 4944(e)(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— **§ 4944(e)(1)(A)** the date of mailing of a notice of deficiency with respect to the tax imposed by subsection (a)(1) under section 6212, **§ 4944(e)(1)(B)** the date on which the tax imposed by subsection (a)(1) is assessed, or **§ 4944(e)(1)(C)** the date on which the amount so invested is removed from jeopardy. **§ 4944(e)(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. ## Regulations - [Treas. Reg. § 53.4944-1](/26/reg/53.4944-1.md): Initial taxes. (interprets § 4944) - [Treas. Reg. § 53.4944-2](/26/reg/53.4944-2.md): Additional taxes. (interprets § 4944) - [Treas. Reg. § 53.4944-3](/26/reg/53.4944-3.md): Exception for program-related investments. (interprets § 4944) - [Treas. Reg. § 53.4944-4](/26/reg/53.4944-4.md): Special rules. (interprets § 4944) - [Treas. Reg. § 53.4944-5](/26/reg/53.4944-5.md): Definitions. (interprets § 4944) - [Treas. Reg. § 53.4944-6](/26/reg/53.4944-6.md): Special rules for investments made prior to January 1, 1970. (interprets § 4944) ## Final rules - [81 FR 24014](https://www.federalregister.gov/documents/2016/04/25/2016-09396/examples-of-program-related-investments) (2016): Examples of Program-Related Investments ## Connections Cites: § 170 Charitable, etc., contributions and gifts; § 6212 Notice of deficiency Cited by: § 501 Exemption from tax on corporations, certain trusts, etc.; § 508 Special rules with respect to section 501(c)(3) organizations; § 4947 Application of taxes to certain nonexempt trusts; § 4963 Definitions; § 7454 Burden of proof in fraud, foundation man­ager, and transferee cases ## Amendments - 1969-12-30: [Pub. L. 91-172](/26/act/91-172.md), 83 Stat. 511 - 1976-10-04: [Pub. L. 94-455](/26/act/94-455.md), 90 Stat. 1834 - 1980-12-24: [Pub. L. 96-596](/26/act/96-596.md), 94 Stat. 3469 - 2006-08-17: [Pub. L. 109-280](/26/act/109-280.md), 120 Stat. 1074