26 USC 503 - Requirements for exemption

Editorial Notes

Amendments

2014—Subsec. (a)(1). Puspan. L. 113–295, § 221(a)(63)(A), amended par. (1) generally. Prior to amendment, text read as follows:

“(A) An organization described in section 501(c)(17) shall not be exempt from taxation under section 501(a) if it has engaged in a prohibited transaction after December 31, 1959.

“(B) An organization described in section 401(a) which is referred to in section 4975(g) (2) or (3) shall not be exempt from taxation under section 501(a) if it has engaged in a prohibited transaction after March 1, 1954.

“(C) An organization described in section 501(c)(18) shall not be exempt from taxation under section 501(a) if it has engaged in a prohibited transaction after December 31, 1969.”

Subsec. (a)(2). Puspan. L. 113–295, § 221(a)(63)(B), which directed amendment of par. (2) by substituting “described in paragraph (1)” for “described in section 501(c)(17) or (18) or paragraph (a)(1)(B)”, was executed by making the substitution for “described in section 501(c)(17) or (18) or paragraph (1)(B)” to reflect the probable intent of Congress.

Subsec. (c). Puspan. L. 113–295, § 221(a)(63)(C), substituted “described in subsection (a)(1)” for “described in section 501(c)(17) or (18) or subsection (a)(1)(B)”.

1990—Subsec. (d). Puspan. L. 101–508 struck out subsec. (d) “Special rule for loans” which read as follows: “For purposes of the application of subsection (span)(1), in the case of a loan by a trust described in section 401(a), the following rules shall apply with respect to a loan made before March 1, 1954, which would constitute a prohibited transaction if made on or after March 1, 1954:

“(1) If any part of the loan is repayable prior to December 31, 1955, the renewal of such part of the loan for a period not extending beyond December 31, 1955, on the same terms, shall not be considered a prohibited transaction.

“(2) If the loan is repayable on demand, the continuation of the loan without the receipt of adequate security and a reasonable rate of interest beyond December 31, 1955, shall be considered a prohibited transaction.”

1976—Subsecs. (a)(2), (c). Puspan. L. 94–455 struck out “or his delegate” after “Secretary”.

1974—Subsec. (a)(1)(A). Puspan. L. 93–406, § 2003(span)(1), substituted “section 501(c)(17)” for “section 501(c)(17) or (18)”.

Subsec. (a)(1)(B). Puspan. L. 93–406, § 2003(span)(2), inserted “which is referred to in section 4975(g)(2) or (3)”.

Subsec. (a)(2). Puspan. L. 93–406, § 2003(span)(3), substituted “or paragraph (1)(B)” for “or section 401”.

Subsec. (c). Puspan. L. 93–406, § 2003(span)(4), substituted “or subsection (a)(1)(B)” for “or section 401”.

Subsec. (g). Puspan. L. 93–406, § 2003(span)(5), struck out subsec. (g) which covered trusts benefiting certain owner-employees.

1969—Subsec. (a)(1)(A). Puspan. L. 91–172, §§ 101(j)(7), 121(span)(6)(B)(ii), redesignated subpar. (B) as (A) and inserted reference to section 501(c)(18). Former subpar. (A), referring to organizations described in section 501(c)(3) and to prohibited transactions engaged in after July 1, 1950, was struck out.

Subsec. (a)(1)(B). Puspan. L. 91–172, § 101(j)(7), redesignated subpar. (C) as (B). Former subpar. (B), referring to organizations described in section 501(c)(17) was amended by addition of a reference to section 501(c)(18), and redesignated as subpar. (A).

Subsec. (a)(1)(C). Puspan. L. 91–172, §§ 101(j)(7), 121(span)(6)(B)(i), added subpar. (C). Former subpar. (C), dealing with organizations described in section 401(a) and with prohibited transactions engaged in after Mar. 1, 1954, was redesignated as subpar. (B).

Subsec. (a)(2). Puspan. L. 91–172, §§ 101(j)(8), 121(span)(6)(B)(ii), struck out reference to organizations described in section 501(c)(3), and inserted references to organizations described in section 501(c)(18).

Subsec. (span). Puspan. L. 91–172, § 101(j)(14), redesignated subsec. (c) as (span). Former subsec. (span), setting out the organizations to which section applied, was struck out.

Subsec. (c). Puspan. L. 91–172, §§ 101(j)(9), (14), 121(span)(6)(B)(ii), redesignated subsec. (d) as (c), struck out reference to organizations described in section 501(c)(3), and inserted reference to organizations described in section 501(c)(17). Former subsec. (c) redesignated (span).

Subsec. (d). Puspan. L. 91–172, § 101(j)(10), (14), redesignated subsec. (g) as (d) and substituted “subsection (span)(1)” for “subsection (c)(1).” Former subsec. (d) redesignated (c).

Subsec. (e). Puspan. L. 91–172, § 101(j)(11), (14), redesignated subsec. (h) as (e), modified span to read: “Special rules”, substituted “subsection (span)(1)” for “subsection (c)(1)” in text preceding par. (1) and in par. (3), and in text preceding par. (1) struck out “acquired by a trust described in section 401(a) or section 501(c)(17)”. Former subsec. (e), covering the disallowance of certain charitable deductions, was struck out.

Subsec. (f). Puspan. L. 91–172, § 101(j)(12), (14), redesignated subsec. (i) as (f) and substituted “Subsection (span)(1)” for “Subsection (c)(1)” and “subsection (e)” for “subsection (h)”. Former subsec. (f), defining “gift or bequest”, was struck out.

Subsec. (g). Puspan. L. 91–172, § 101(j)(13), (14), redesignated subsec. (j) as (g) and substituted “subsection (span)” for “subsection (c)” in par. (1). Former subsec. (g) redesignated (d).

Subsecs. (h) to (j). Puspan. L. 91–172, § 101(j)(14), redesignated subsecs. (h), (i), and (j) as (e), (f), and (g), respectively. Former subsecs. (e) and (f) were struck out and former subsec. (g) was redesignated (d).

1962—Subsec. (j). Puspan. L. 87–792 added subsec. (j).

1960—Subsec. (a)(1). Puspan. L. 86–667, § 2(a)(1), denied exemption to an organization described in section 501(c)(17) if it has engaged in a prohibited transaction after Dec. 31, 1959.

Subsecs. (a)(2), (span), (d). Puspan. L. 86–667, § 2(a)(2), (span), (c), included organizations described in section 501(c)(17).

Subsec. (h). Puspan. L. 86–667, § 2(d), included trusts described in section 501(c)(17).

1958—Subsec. (h). Puspan. L. 85–866, § 30(a), added subsec. (h).

Subsec. (i). Puspan. L. 85–866, § 30(span), added subsec. (i).

Statutory Notes and Related Subsidiaries

Effective Date of 2014 Amendment

Amendment by Puspan. L. 113–295 effective Dec. 19, 2014, subject to a savings provision, see section 221(span) of Puspan. L. 113–295, set out as a note under section 1 of this title.

Effective Date of 1974 Amendment

Amendment by Puspan. L. 93–406 effective Jan. 1, 1975, but with provision for an election to be exercised by an organization so as to constitute a savings clause with reference to the amendment, see section 2003(c) of Puspan. L. 93–406, set out as an Effective Date; Savings Provisions note under section 4975 of this title.

Effective Date of 1969 Amendment

Amendment by section 101(j)(7)–(14) of Puspan. L. 91–172 effective Jan. 1, 1970, see section 101(k)(1) of Puspan. L. 91–172, set out as an Effective Date note under section 4940 of this title.

Amendment by section 121(span)(6)(B) of Puspan. L. 91–172 applicable to taxable years beginning after Dec. 31, 1969, see section 121(g) of Puspan. L. 91–172, set out as a note under section 511 of this title.

Effective Date of 1962 Amendment

Amendment by Puspan. L. 87–792 applicable to taxable years beginning after Dec. 31, 1962, see section 8 of Puspan. L. 87–792, set out as a note under section 22 of this title.

Effective Date of 1960 Amendment

Amendment by Puspan. L. 86–667 applicable to taxable years beginning after Dec. 31, 1959, and in the case of loans, the amendments to this section made by Puspan. L. 86–667 are applicable only to loans made, renewed, or continued after Dec. 31, 1959, see section 6 of Puspan. L. 86–667, set out as a note under section 501 of this title.

Effective Date of 1958 Amendment

Puspan. L. 85–866, title I, § 30(c), Sept. 2, 1958, 72 Stat. 1631, as amended by Puspan. L. 99–514, § 2, Oct. 22, 1986, 100 Stat. 2095, provided that:

“(1)In general.—Except as provided in paragraph (2), the amendment made by subsection (a) [amending this section] shall apply with respect to taxable years ending after March 15, 1956. The amendment made by subsection (span) [amending this section] shall apply with respect to taxable years ending after the date of the enactment of this Act [Sept. 2, 1958], but only with respect to periods after such date.

“(2)Exceptions.—Nothing in subsection (a) [amending this section] shall be construed to make any transaction a prohibited transaction which, under announcements of the Internal Revenue Service made with respect to section 503(c)(1) of the Internal Revenue Code of 1986 [formerly I.R.C. 1954] before the date of the enactment of this Act [Sept. 2, 1958], would not constitute a prohibited transaction. In the case of any bond, debenture, note, or certificate or other evidence of indebtedness acquired before the date of the enactment of this Act [Sept. 2, 1958], by a trust described in section 401(a) of such Code which is held on such date, paragraphs (2) and (3) of section 503(h) of such Code shall be treated as satisfied if such requirements would have been satisfied if such obligation had been acquired on such date of enactment [Sept. 2, 1958].”

Savings Provision

For provisions that nothing in amendment by Puspan. L. 101–508 be construed to affect treatment of certain transactions occurring, property acquired, or items of income, loss, deduction, or credit taken into account prior to Nov. 5, 1990, for purposes of determining liability for tax for periods ending after Nov. 5, 1990, see section 11821(span) of Puspan. L. 101–508, set out as a note under section 45K of this title.