[Congressional Bills 113th Congress]
[From the U.S. Government Publishing Office]
[S. 2710 Introduced in Senate (IS)]
113th CONGRESS
2d Session
S. 2710
To amend the Internal Revenue Code of 1986 to exempt private
foundations from the tax on excess business holdings in the case of
certain philanthropic enterprises which are independently supervised,
and for other purposes.
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IN THE SENATE OF THE UNITED STATES
July 30, 2014
Mr. Menendez (for himself and Mr. Thune) introduced the following bill;
which was read twice and referred to the Committee on Finance
_______________________________________________________________________
A BILL
To amend the Internal Revenue Code of 1986 to exempt private
foundations from the tax on excess business holdings in the case of
certain philanthropic enterprises which are independently supervised,
and for other purposes.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Philanthropic Enterprise Act of
2014''.
SEC. 2. EXCEPTION FROM PRIVATE FOUNDATION EXCESS BUSINESS HOLDING TAX
FOR CERTAIN PHILANTHROPIC BUSINESS HOLDINGS.
(a) In General.--Section 4943 of the Internal Revenue Code of 1986
is amended by adding at the end the following new subsection:
``(g) Exception for Certain Philanthropic Business Holdings.--
``(1) In general.--Subsection (a) shall not apply with
respect to the holdings of a private foundation in any business
enterprise which for the taxable year meets--
``(A) the exclusive ownership requirements of
paragraph (2),
``(B) the all profits to charity requirement of
paragraph (3), and
``(C) the independent operation requirements of
paragraph (4).
``(2) Exclusive ownership.--The exclusive ownership
requirements of this paragraph are met if--
``(A) all ownership interests in the business
enterprise are held by the private foundation at all
times during the taxable year, and
``(B) all the private foundation's ownership
interests in the business enterprise were acquired
under the terms of a will or trust upon the death of
the testator or settlor, as the case may be.
``(3) All profits to charity.--
``(A) In general.--The all profits to charity
requirement of this paragraph is met if the business
enterprise, not later than 120 days after the close of
the taxable year, distributes an amount equal to its
net operating income for such taxable year to the
private foundation.
``(B) Net operating income.--For purposes of this
paragraph, the net operating income of any business
enterprise for any taxable year is an amount equal to
the gross income of the business enterprise for the
taxable year, reduced by the sum of--
``(i) the deductions allowed by chapter 1
for the taxable year which are directly
connected with the production of such income,
``(ii) the tax imposed by chapter 1 on the
business enterprise for the taxable year, and
``(iii) an amount for a reasonable reserve
for working capital and other business needs of
the business enterprise.
``(4) Independent operation.--The independent operation
requirements of this paragraph are met if, at all times during
the taxable year--
``(A) no substantial contributor (as defined in
section 4958(c)(3)(C)) to the private foundation, or
family member of such a contributor (determined under
section 4958(f)(4)) is a director, officer, trustee,
manager, employee, or contractor of the business
enterprise (or an individual having powers or
responsibilities similar to any of the foregoing),
``(B) at least a majority of the board of directors
of the private foundation are not--
``(i) also directors or officers of the
business enterprise, or
``(ii) members of the family (determined
under section 4958(f)(4)) of a substantial
contributor (as defined in section
4958(c)(3)(C)) to the private foundation, and
``(C) there is no loan outstanding from the
business enterprise to a substantial contributor (as so
defined) to the private foundation or a family member
of such contributor (as so determined).
``(5) Certain deemed private foundations excluded.--This
subsection shall not apply to--
``(A) any fund or organization treated as a private
foundation for purposes of this section by reason of
subsection (e) or (f),
``(B) any trust described in section 4947(a)(1)
(relating to charitable trusts), and
``(C) any trust described in section 4947(a)(2)
(relating to split-interest trusts).''.
(b) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2013.
SEC. 3. EXCEPTION TO UNRELATED BUSINESS TAX ON SPECIFIED PAYMENTS FROM
CERTAIN CONTROLLED ENTITIES.
(a) In General.--Paragraph (13) of section 512(b) of the Internal
Revenue Code of 1986 is amended by adding at the end the following new
subparagraph:
``(G) Subparagraph not to apply to payments from
certain philanthropic controlled entities.--
Subparagraph (A) shall not apply to any payment not in
excess of fair market value to a private foundation
from an entity which is a business enterprise described
in section 4943(g)(1) with respect to such
foundation.''.
(b) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2013.
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