26 U.S.C. § 509: Private foundation defined

an organization described in section 170(b)(1)(A) (other than in clauses (vii) and (viii)); gifts, grants, contributions, or membership fees, and gross receipts from admissions, sales of merchandise, performance of services, or furnishing of facilities, in an activity which is not an unrelated trade or business (within the meaning of section 513), not including such receipts from any person, or from any bureau or similar agency of a governmental unit (as described in section 170(c)(1)), in any taxable year to the extent such receipts exceed the greater of $5,000 or 1 percent of the organization’s support in such taxable year, gross investment income (as defined in subsection (e)) and the excess (if any) of the amount of the unrelated business taxable income (as defined in section 512) over the amount of the tax imposed by section 511; is organized, and at all times thereafter is operated, exclusively for the benefit of, to perform the functions of, or to carry out the purposes of one or more specified organizations described in paragraph (1) or (2), operated, supervised, or controlled by one or more organizations described in paragraph (1) or (2), supervised or controlled in connection with one or more such organizations, or operated in connection with one or more such organizations, and is not controlled directly or indirectly by one or more disqualified persons (as defined in section 4946) other than foundation managers and other than one or more organizations described in paragraph (1) or (2); and an organization which is organized and operated exclusively for testing for public safety. For purposes of this title, if an organization is a private foundation (within the meaning of subsection (a)) on October 9, 1969 , or becomes a private foundation on any subsequent date, such organization shall be treated as a private foundation for all periods after October 9, 1969 , or after such subsequent date, unless its status as such is terminated under section 507. For purposes of this part, an organization the status of which as a private foundation is terminated under section 507 shall (except as provided in section 507(b)(2)) be treated as an organization created on the day after the date of such termination. gifts, grants, contributions, or membership fees, gross receipts from admissions, sales of merchandise, performance of services, or furnishing of facilities in any activity which is not an unrelated trade or business (within the meaning of section 513), net income from unrelated business activities, whether or not such activities are carried on regularly as a trade or business, gross investment income (as defined in subsection (e)), tax revenues levied for the benefit of an organization and either paid to or expended on behalf of such organization, and the value of services or facilities (exclusive of services or facilities generally furnished to the public without charge) furnished by a governmental unit referred to in section 170(c)(1) to an organization without charge. For purposes of subsection (d), the term “gross investment income” means the gross amount of income from interest, dividends, payments with respect to securities loans (as defined in section 512(a)(5)), rents, and royalties, but not including any such income to the extent included in computing the tax imposed by section 511. Such term shall also include income from sources similar to those in the preceding sentence. For each taxable year beginning after the date of the enactment of this subsection, the organization provides to each supported organization such information as the Secretary may require to ensure that such organization is responsive to the needs or demands of the supported organization. The organization is not operated in connection with any supported organization that is not organized in the United States. If the organization is operated in connection with an organization that is not organized in the United States on the date of the enactment of this subsection, clause (i) shall not apply until the first day of the third taxable year of the organization beginning after the date of the enactment of this subsection. operated, supervised, or controlled by any organization described in paragraph (1) or (2) of subsection (a), or operated in connection with any organization described in paragraph (1) or (2) of subsection (a), a person (other than an organization described in paragraph (1), (2), or (4) of section 509(a)) who directly or indirectly controls, either alone or together with persons described in clauses (ii) and (iii), the governing body of such supported organization, a member of the family (determined under section 4958(f)(4)) of an individual described in clause (i), or a 35-percent controlled entity (as defined in section 4958(f)(3) by substituting “persons described in clause (i) or (ii) of section 509(f)(2)(B)” for “persons described in subparagraph (A) or (B) of paragraph (1)” in subparagraph (A)(i) thereof). for whose benefit the organization described in subsection (a)(3) is organized and operated, or with respect to which the organization performs the functions of, or carries out the purposes of. The amendments made by subsections (a) and (b) [amending this section] shall take effect on the date of the enactment of this Act [ Aug. 17, 2006 ]. in the case of trusts operated in connection with an organization described in paragraph (1) or (2) of section 509(a) of the Internal Revenue Code of 1986 on the date of the enactment of this Act, on the date that is one year after the date of the enactment of this Act, and in the case of any other trust, on the date of the enactment of this Act.” amounts received after December 31, 1976 , as payments with respect to securities loans (as defined in section 512(a)(5) of the Internal Revenue Code of 1986 [formerly I.R.C. 1954]), and transfers of securities, under agreements described in section 1058 of such Code, occurring after such date.” it is a charitable trust under State law, the supported organization (as defined in section 509(f)(3) of such Code) is a beneficiary of such trust, and the supported organization (as so defined) has the power to enforce the trust and compel an accounting.” The Secretary of the Treasury shall promulgate new regulations under section 509 of the Internal Revenue Code of 1986 on payments required by type III supporting organizations which are not functionally integrated type III supporting organizations. Such regulations shall require such organizations to make distributions of a percentage of either income or assets to supported organizations (as defined in section 509(f)(3) of such Code) in order to ensure that a significant amount is paid to such organizations. For purposes of paragraph (1), the terms ‘type III supporting organization’ and ‘functionally integrated type III supporting organization’ have the meanings given such terms under subparagraphs (A) and (B) section 4943(f)(5) of the Internal Revenue Code of 1986 (as added by this Act), respectively.”