26 U.S.C. § 4966 — Taxes on taxable 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).