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TITLE 26-INTERNAL REVENUE CODE PART II-PRIVATE FOUNDATIONS Sec. 507. Termination of private foundation status. 508. Special rules with respect to section 501(c)(3) or- ganizations. 509. Private foundation defined. AMENDMENTS 1969-Pub. L. 91-172, title I, § 101(a), Dec. 30, 1969, 83 Stat. 492, added the Part heading and analysis for Part II. PART REFERRED TO IN OTHER SECTIONS This part is referred to in sections 501, 511, 4947 of this title. § 507. Termination of private foundation status (a) General rule Except as provided in subsection (b), the status of any organization as a private founda- tion shall be terminated only if- (1) such organization notifies the Secretary (at such time and in such manner as the Sec- retary may by regulations prescribe) of its intent to accomplish such termination, or (2)(A) with respect to such organization, there have been either willful repeated acts (or failures to act), or a willful and flagrant act (or failure to act), giving rise to liability for tax under chapter 42, and (B) the Secretary notifies such organization that, by reason of subparagraph (A), such or- ganization is liable for the tax imposed by subsection (c), and either such organizaticr pays the tax im- posed by subsection (c) (or any portion not abated under subsection (g)) or the entire amount of such tax is abated under subsection (g). (b) Special rules (1) Transfer to, or operation as, public charity The status as a private foundation of any organization, with respect to which there have not been either willful repeated acts (or failures to act) or a willful and flagrant act (or failure to act) giving rise to liability for tax under chapter 42, shall be terminated if- (A) such organization distributes all of its net assets to one or more organizations de- scribed in section 170(b)(1)(A) (other than in clauses (vii) and (viii)) each of which has been in existence and so described for a con- tinuous period of at least 60 calendar months immediately preceding such distri- bution, or (B)(i) such organization meets the re- quirements of paragraph (1), (2), or (3) of section 509(a) by the end of the 12-month period beginning with its first taxable year which begins after December 31, 1969, or for a continuous period of 60 calendar months beginning with the first day of any taxable year which begins after December 31, 1969, (ii) such organization notifies the Secre- tary (in such manner as the Secretary may by regulations prescribe) before the com- mencement of such 12-month or 60-month period (or before the 90th day after the day on which regulations first prescribed under this subsection become final) that it is ter- minating its private foundation status, and (iii) such organization establishes to the satisfaction of the Secretary (in such manner as the Secretary may by regula- tions prescribe) immediately after the expi- ration of such 12-month or 60-month period that such organizaticn has complied with clause (i). If an organization gives notice under subpara- graph (B)(ii) of the commencement of a 60- month period and such organization fails to meet the requirements of paragraph (1), (2), or (3) of section 509(a) for the entire 60- month period, this part and chapter 42 shall not apply to such organization for any tax- able year within such 60-month period for which it does meet such requirements. (2) Transferee foundations For purposes of this part, in the case of a transfer of assets of any private foundation to another private foundation pursuant to any liquidation, merger, redemption, recapitaliza. tion, or other adjustment, organization, or re- organization, the transferee foundation shall not be treated as a newly created organiza- tion. (c) Imposition of tax There is hereby imposed on each organization which is referred to in subsection (a) a tax equal to the lower of- (1) the amount which the private founda- tion substantiates by adequate records or other corroborating evidence as the aggregate tax benefit resulting from the section 501(c)(3) status of such foundation, or (2) the value of the net assets of such foun- dation. (d) Aggregate tax benefit (I) In general For purposes of subsection (c), the aggre- gate tax benefit resulting from the section 501(c)(3) status of any private foundation is the sum of- (A) the aggregate increases in tax under chapters 1, 11, and 12 (or the corresponding provisions of prior law) which wod]d have been imposed with respect to all substantial contributors to the foundation if deductions for all contributions made by such contribu- tors to the foundation after February 28, 1913, had been disallowed, and (B) the aggregate increases in tax under chapter 1 (or the corresponding provisions of prior law) which would have been im- posed with respect to the income of the pri- vate foundation for taxable years beginning after December 31, 1912, if (i) it had not been exempt from tax under section 501(a) (or the corresponding provisions of prior law), and (ii) in the case of a trust, deduc- tions under section 642(c) (or the corre- sponding provisions of prior law) had been limited to 20 percent of the taxable income of the trust (computed without the benefit of section 642(c) but with the benefit of sec- tion 170(b)(1)(A)), and (C) interest on the increases in tax deter- mined under subparagraphs (A) and (B) from the first date on which each Each in- Page 385