26 U.S.C. § 4966 — Taxes on taxable distributions
submitted 20 years ago by Pub. L. 109-280 to r/title-26-INTERNAL-REVENUE-CODE · 975 words · no verdicts yet
A sponsoring organization owes 20 percent on each taxable distribution from a donor-advised fund. A fund manager who knowingly agrees to the distribution owes 5 percent, subject to a $10,000 limit, and the section defines the relevant organizations, funds, and distributions.
(a)(1) For each taxable distribution, the sponsoring organization must pay a tax equal to 20 percent of the distribution. (2) A fund* manager who agrees to make a distribution while knowing it is taxable must pay a tax equal to 5 percent of the distribution. (b)(1) If more than one person is liable under subsection (a)(2) for a taxable distribution, all those persons are jointly and severally liable. (2) For one taxable distribution, the subsection (a)(2) tax cannot exceed $10,000. (c)(1) “Taxable distribution” means any distribution from a donor-advised fund (A) to a natural person, or (B) to any other person if (i) it is for a purpose other than one listed in section 170(c)(2)(B), or (ii) the sponsoring organization does not exercise expenditure responsibility for it as required by section 4945(h). (2) The term does not include a distribution from a donor-advised fund (A) to an organization described in section 170(b)(1)(A), other than a disqualified supporting organization, (B) to the sponsoring organization of that donor-advised fund, or (C) to another donor-advised fund. (d)(1) “Sponsoring organization” means an organization that (A) is described in section 170(c), other than paragraph (1) of that section and without regard to paragraph (2)(A), (B) is not a private foundation* as defined in section 509(a), and (C) maintains one or more donor-advised funds. (2)(A) Except as provided in subparagraph (B) or (C), “donor-advised fund” means a fund or account (i) separately identified by contributions of one or more donors, (ii) owned and controlled by a sponsoring organization, and (iii) for which a donor, or a person the donor appoints or designates, has or reasonably expects to have advisory privileges about distributing or investing the amounts held in the fund or account because of the person’s status as a donor. (B) A donor-advised fund does not include a fund or account (i) that makes distributions only to one identified organization or governmental entity, or (ii) about which a person described in subparagraph (A)(iii) advises which individuals receive grants for travel, study, or similar purposes, if (I) that person exercises the advisory privileges only as a member of a committee whose every member is appointed by the sponsoring organization, (II) no combination of persons described in subparagraph (A)(iii), or persons related to them, directly or indirectly controls the committee, and (III) all grants from the fund or account are awarded on an objective and nondiscriminatory basis under a procedure approved in advance by the sponsoring organization’s board of directors, and the procedure is designed to ensure that every grant meets the requirements of paragraph (1), (2), or (3) of section 4945(g). (C) The Secretary* may exempt a fund or account not described in subparagraph (B) from being treated as a donor-advised fund (i) if a committee advises about it and is not directly or indirectly controlled by the donor, a person appointed or designated by the donor to advise about distributions, or any related parties, or (ii) if the fund benefits one identified charitable purpose. (3) “Fund manager,” for a sponsoring organization, means (A) an officer, director, or trustee of the organization, or an individual with similar powers or responsibilities, and (B) for a particular act or failure to act, an employee* of the organization with authority or responsibility for that act or failure. (4)(A) “Disqualified supporting organization,” for a distribution, means (i) any type III supporting organization, as defined in section 4943(f)(5)(A), that is not a functionally integrated type III supporting organization, as defined in section 4943(f)(5)(B), and (ii) an organization described in subparagraph (B) or (C) if (I) the donor, a person designated by the donor to advise about distributions from a donor-advised fund, or any related parties directly or indirectly controls a supported organization, as defined in section 509(f)(3), of that organization, or (II) the Secretary determines by regulation that a distribution to the organization is otherwise inappropriate. (B) An organization is described in this subparagraph if it meets the requirements of section 509(a)(3)(A) and (C) and is (i) operated, supervised, or controlled by one or more organizations described in section 509(a)(1) or (2), or (ii) supervised or controlled in connection with one or more such organizations. (C) An organization is described in this subparagraph if it is a functionally integrated type III supporting organization as defined in section 4943(f)(5)(B).
There is hereby imposed on each taxable distribution a tax equal to 20 percent of the amount thereof. The tax imposed by this paragraph shall be paid by the sponsoring organization with respect to the donor advised fund*.
There is hereby imposed on the agreement of any fund manager to the making of a distribution, knowing that it is a taxable distribution, a tax equal to 5 percent of the amount thereof. The tax imposed by this paragraph shall be paid by any fund manager who agreed to the making of the distribution.
For purposes of subsection (a)—
If more than one person is liable under subsection (a)(2) with respect to the making of a taxable distribution, all such persons shall be jointly and severally liable under such paragraph with respect to such distribution.
With respect to any one taxable distribution, the maximum amount of the tax imposed by subsection (a)(2) shall not exceed $10,000.
For purposes of this section—
The term “taxable distribution” means any distribution from a donor advised fund—
to any natural person, or
to any other person if—
such distribution is for any purpose other than one specified in section 170(c)(2)(B), or
the sponsoring organization does not exercise expenditure responsibility with respect to such distribution in accordance with section 4945(h).
Such term shall not include any distribution from a donor advised fund—
to any organization described in section 170(b)(1)(A) (other than a disqualified supporting organization),
to the sponsoring organization of such donor advised fund, or
to any other donor advised fund.
For purposes of this subchapter—
The term “sponsoring organization” means any organization which—
is described in section 170(c) (other than in paragraph (1) thereof, and without regard to paragraph (2)(A) thereof),
is not a private foundation* (as defined in section 509(a)), and
maintains 1 or more donor advised funds.
Except as provided in subparagraph (B) or (C), the term “donor advised fund” means a fund or account—
which is separately identified by reference to contributions of a donor or donors,
which is owned and controlled by a sponsoring organization, and
with respect to which a donor (or any person appointed or designated by such donor) has, or reasonably expects to have, advisory privileges with respect to the distribution or investment of amounts held in such fund or account by reason of the donor’s status as a donor.
The term “donor advised fund” shall not include any fund or account—
which makes distributions only to a single identified organization or governmental entity, or
with respect to which a person described in subparagraph (A)(iii) advises as to which individuals receive grants for travel, study, or other similar purposes, if—
such person’s advisory privileges are performed exclusively by such person in the person’s capacity as a member of a committee all of the members of which are appointed by the sponsoring organization,
no combination of persons described in subparagraph (A)(iii) (or persons related to such persons) control, directly or indirectly, such committee, and
all grants from such fund or account are awarded on an objective and nondiscriminatory basis pursuant to a procedure approved in advance by the board of directors of the sponsoring organization, and such procedure is designed to ensure that all such grants meet the requirements of paragraph (1), (2), or (3) of section 4945(g).
The Secretary* may exempt a fund or account not described in subparagraph (B) from treatment as a donor advised fund—
if such fund or account is advised by a committee not directly or indirectly controlled by the donor or any person appointed or designated by the donor for the purpose of advising with respect to distributions from such fund (and any related parties), or
if such fund benefits a single identified charitable purpose.
The term “fund manager” means, with respect to any sponsoring organization—
an officer, director, or trustee of such sponsoring organization (or an individual having powers or responsibilities similar to those of officers, directors, or trustees of the sponsoring organization), and
with respect to any act (or failure to act), the employees of the sponsoring organization having authority or responsibility with respect to such act (or failure to act).
The term “disqualified supporting organization” means, with respect to any distribution—
any type III supporting organization (as defined in section 4943(f)(5)(A)) which is not a functionally integrated type III supporting organization (as defined in section 4943(f)(5)(B)), and
any organization which is described in subparagraph (B) or (C) if—
the donor or any person designated by the donor for the purpose of advising with respect to distributions from a donor advised fund (and any related parties) directly or indirectly controls a supported organization (as defined in section 509(f)(3)) of such organization, or
the Secretary determines by regulations that a distribution to such organization otherwise is inappropriate.
An organization is described in this subparagraph if the organization meets the requirements of subparagraphs (A) and (C) of section 509(a)(3) and is—
operated, supervised, or controlled by one or more organizations described in paragraph (1) or (2) of section 509(a), or
supervised or controlled in connection with one or more such organizations.
An organization is described in this subparagraph if the organization is a functionally integrated type III supporting organization (as defined under section 4943(f)(5)(B)).
Source credit: (Added Pub. L. 109–280, title XII, § 1231(a), Aug. 17, 2006, 120 Stat. 1095.)
- 2006Enacted · Pub. L. 109-280 · 120 Stat. 1095
A history note hasn’t been published yet. The record shows enactment by Pub. L. 109-280 on 2006-08-17.
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