U.S. Code » Title 26 » Subtitle Subtitle D— Miscellaneous Excise Taxes › Chapter CHAPTER 42— PRIVATE FOUNDATIONS; AND CERTAIN OTHER TAX-EXEMPT ORGANIZATIONS › Subchapter Subchapter A— Private Foundations

26 U.S.C. § 4946

Definitions and special rules

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(a) Disqualified person(1) In generalFor purposes of this subchapter, the term “disqualified person” means, with respect to a private foundation, a person who is—(A) a substantial contributor to the foundation,(B) a foundation manager (within the meaning of subsection (b)(1)),(C) an owner of more than 20 percent of—(i) the total combined voting power of a corporation,(ii) the profits interest of a partnership, or(iii) the beneficial interest of a trust or unincorporated enterprise,which is a substantial contributor to the foundation,(D) a member of the family (as defined in subsection (d)) of any individual described in subparagraph (A), (B), or (C),(E) a corporation of which persons described in subparagraph (A), (B), (C), or (D) own more than 35 percent of the total combined voting power,(F) a partnership in which persons described in subparagraph (A), (B), (C), or (D) own more than 35 percent of the profits interest,(G) a trust or estate in which persons described in subparagraph (A), (B), (C), or (D) hold more than 35 percent of the beneficial interest,(H) only for purposes of section 4943, a private foundation—(i) which is effectively controlled (directly or indirectly) by the same person or persons who control the private foundation in question, or(ii) substantially all of the contributions to which were made (directly or indirectly) by the same person or persons described in subparagraph (A), (B), or (C), or members of their families (within the meaning of subsection (d)), who made (directly or indirectly) substantially all of the contributions to the private foundation in question, and(I) only for purposes of section 4941, a government official (as defined in subsection (c)).(2) Substantial contributors

For purposes of paragraph (1), the term “substantial contributor” means a person who is described in section 507(d)(2).

(3) Stockholdings

For purposes of paragraphs (1)(C)(i) and (1)(E), there shall be taken into account indirect stockholdings which would be taken into account under section 267(c), except that, for purposes of this paragraph, section 267(c)(4) shall be treated as providing that the members of the family of an individual are the members within the meaning of subsection (d).

(4) Partnerships; trusts

For purposes of paragraphs (1)(C)(ii) and (iii), (1)(F), and (1)(G), the ownership of profits or beneficial interests shall be determined in accordance with the rules for constructive ownership of stock provided in section 267(c) (other than paragraph (3) thereof), except that section 267(c)(4) shall be treated as providing that the members of the family of an individual are the members within the meaning of subsection (d).

(b) Foundation managerFor purposes of this subchapter, the term “foundation manager” means, with respect to any private foundation—(1) an officer, director, or trustee of a foundation (or an individual having powers or responsibilities similar to those of officers, directors, or trustees of the foundation), and(2) with respect to any act (or failure to act), the employees of the foundation having authority or responsibility with respect to such act (or failure to act).(c) Government officialFor purposes of subsection (a)(1)(I) and section 4941, the term “government official” means, with respect to an act of self-dealing described in section 4941, an individual who, at the time of such act, holds any of the following offices or positions (other than as a “special Government employee”, as defined in section 202(a) of title 18, United States Code):(1) an elective public office in the executive or legislative branch of the Government of the United States,(2) an office in the executive or judicial branch of the Government of the United States, appointment to which was made by the President,(3) a position in the executive, legislative, or judicial branch of the Government of the United States—(A) which is listed in schedule C of rule VI of the Civil Service Rules, or(B) the compensation for which is equal to or greater than the lowest rate of basic pay for the Senior Executive Service under section 5382 of title 5, United States Code,(4) a position under the House of Representatives or the Senate of the United States held by an individual receiving gross compensation at an annual rate of $15,000 or more,(5) an elective or appointive public office in the executive, legislative, or judicial branch of the government of a State, possession of the United States, or political subdivision or other area of any of the foregoing, or of the District of Columbia, held by an individual receiving gross compensation at an annual rate of $20,000 or more,(6) a position as personal or executive assistant or secretary to any of the foregoing, or(7) a member of the Internal Revenue Service Oversight Board.(d) Members of family

For purposes of subsection (a)(1), the family of any individual shall include only his spouse, ancestors, children, grandchildren, great grandchildren, and the spouses of children, grandchildren, and great grandchildren.

(Added Pub. L. 91–172, title I, § 101(b), Dec. 30, 1969, 83 Stat. 515; amended Pub. L. 95–227, § 4(c)(2)(B), Feb. 10, 1978, 92 Stat. 22; Pub. L. 98–369, div. A, title III, § 306(a), July 18, 1984, 98 Stat. 784; Pub. L. 99–514, title XVI, § 1606(a), Oct. 22, 1986, 100 Stat. 2771; Pub. L. 105–206, title I, § 1101(c)(1), July 22, 1998, 112 Stat. 696; Pub. L. 106–554, § 1(a)(7) [title III, § 319(16)], Dec. 21, 2000, 114 Stat. 2763, 2763A–647.)Editorial NotesAmendments

2000—Subsec. (c)(3)(B). Pub. L. 106–554 substituted “the lowest rate of basic pay for the Senior Executive Service under section 5382” for “the lowest rate of compensation prescribed for GS–16 of the General Schedule under section 5332”.

1998—Subsec. (c)(7). Pub. L. 105–206 added par. (7).

1986—Subsec. (c)(5). Pub. L. 99–514 substituted “$20,000” for “$15,000”.

1984—Subsec. (d). Pub. L. 98–369 amended subsec. (d) generally, substituting references to children, grandchildren, and great grandchildren for references to lineal descendants in two places.

1978—Subsecs. (a)(1), (b). Pub. L. 95–227 substituted “subchapter” for “chapter”.

Statutory Notes and Related SubsidiariesEffective Date of 1986 Amendment

Pub. L. 99–514, title XVI, § 1606(b), Oct. 22, 1986, 100 Stat. 2771, provided that: “The amendment made by this section [amending this section] shall apply to compensation received after December 31, 1985.”

Effective Date of 1984 Amendment

Pub. L. 98–369, div. A, title III, § 306(c), July 18, 1984, 98 Stat. 784, provided that: “The amendments made by this subsection [probably should be “section”, amending this section and section 6104 of this title] shall take effect on January 1, 1985.”

Effective Date of 1978 Amendment

Amendment by Pub. L. 95–227 applicable with respect to contributions, acts, and expenditures made after Dec. 31, 1977, in and for taxable years beginning after such date, see section 4(f) of Pub. L. 95–227, set out as an Effective Date note under section 192 of this title.

Notes of Decisions
Cited in 11 cases, 1979–2013 · leading case: Brown v. Ryan, 788 N.E.2d 1183 (Ill. App. Ct. 1st Dist. 2003).
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Brown v. Ryan, 788 N.E.2d 1183 (Ill. App. Ct. 1st Dist. 2003). · cites it 2× “Nor was there evidence presented that such costs were wasteful in light of the evidence that the asset value of the Foundation increased to $11.”
Deluxe Check Printers, Inc. v. United States, 15 Cl. Ct. 175 (Ct. Cl. 1988). · cites it 2× “§ 4941 for self-dealing as a “disqualified person” within the meaning of 26 U.S.C. § 4946 (a). 1 And in May 1979, plaintiff also filed Form 4720 for the calendar year 1978 further reporting self-assessed excise taxes based on the 1976 and 1977 transactions.”
Mark Twain Kansas City Bank v. Kroh Bros. Dev., 863 P.2d 355 (Kan. 1992). “”26 U.S.C. § 4946(a)(1) (1988). As previously stated, the district court determined the Trustee had ratified the transaction.”
Deluxe Check Printers, Inc. v. United States, 14 Cl. Ct. 782 (Ct. Cl. 1988). · cites it 2× “Since Deluxe Check admitted that it was a substantial contributor 2 to the Foundation, it filed a return (Form 4720) in May of 1978, regarding each of the taxable years 1976 and 1977, with the Internal Revenue Service (IRS) reporting excise taxes for self-dealing as a…”
Wilson v. Upreach Ministries (In Re Missionary Baptist Found. of Am., Inc.), 24 B.R. 973 (Bankr. N.D. Tex. 1982). “§ 4941 (d)(1) by a disqualified person as defined in 26 U.S.C. § 4946 . Upreach Ministries contends that it accepted the contributions in good faith without knowledge of any basis for avoidability.”
Sarkeys v. Indep. Sch. Dist. No. 40, Etc., 592 P.2d 529 (Okla. 1979). “were compromised and settled; and 2) The Internal Revenue Code 26 U.S.C. § 4946 (a)(1)(D), 26 U.S.C. § 4941 (d) precludes the visitor from being a beneficiary of the trust because he is a lineal descended of the settlor.”
Zampogna v. Law Enf't Health Benefits, Inc., 81 A.3d 1043 (Pa. Commw. Ct. 2013). “]” 26 U.S.C. § 4946 (a)(1)(B). The above prohibited transaction is analogous to Health Benefits which is managed by its paid Board whose positions are directly dependent upon the Union President, using health insurance funds to benefit the Union’s President by contributing to…”
Polm Fam. Found., Inc. v. United States, 655 F. Supp. 2d 125 (D.D.C. 2009). · cites it 2× “However, all directors, including the managing directors, are appointed by Richard Polm, a disqualified person under 26 U.S.C. § 4946 (2006), 5 who is not required *129 to be associated with any publicly supported beneficiary within the plaintiffs supported class.”
Armenian Assembly of Am., Inc. v. Cafesjian, 924 F. Supp. 2d 204 (D.D.C. 2013). “” 26 U.S.C. § 4946 (a)(1)(B), (b)(1). As previously noted by the Court, under certain circumstances, Treasury regulations provide that indemnification of former officers does not constitute self-dealing for purposes of section 4941(d).”
Polm Fam. Found., Inc. v. United States of Am., No. 2008-0514 (D.D.C. Sept. 14, 2009). · cites it 2× “However, all directors, 4 including the managing directors, are appointed by Richard Polm, a disqualified person under 26 U.S.C. § 4946 (2006), 5 who is not required to be associated with any publicly supported beneficiary within the plaintiff's supported class.”
Waters v. Armenian Genocide Museum & Mem'l, Inc., No. 2008-1254 (D.D.C. Feb. 20, 2013). “” 26 U.S.C. § 4946 (a)(1)(B), (b)(1). As previously noted by the Court, under certain circumstances, Treasury regulations provide that indemnification of former officers does not constitute self-dealing for purposes of section 4941(d).”
26 U.S.C. § 4946(a)(1): 1 case
Mark Twain Kansas City Bank v. Kroh Bros. Dev., 863 P.2d 355 (Kan. 1992). “”26 U.S.C. § 4946(a)(1) (1988). As previously stated, the district court determined the Trustee had ratified the transaction.”
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