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TITLE 26-INTERNAL REVENUE CODE crease would have been due and payable to the date on which the organization ceases to be a private foundation. (2) Substantial contributor (A) Definition For purposes of paragraph (1), the term "substantial contributor" means any person who contributed or bequeathed an aggre- gate amount of more than $5,000 to the pri- vate foundation, if such amount is more than 2 percent of the total contributions and bequests received by the foundation before the close of the taxable year of the foundation in which the contribution or be- quest is received by the foundation from such person. In the case of a trust, the term "substantial contributor" also means the creator of the trust. (B) Special rules For purposes of subparagraph (A)- (i) each contribution or bequest shall be valued at fair market value on the date it was received, (ii) in the case of a foundation which is in existence on October 9, 1969, all contri- butions and bequests received on or before such date shall be treated (except for purposes of clause (I)) as if received on such date, (iII) an individual shall be treated as making all contributions and bequests made by his spouse, and (iv) any person who is a substantial con- tributor on any date shall remain a sub- stantial contributor for all subsequent pe- riods. (3) Regulations For purposes of this section, the determina- tion as to whether and to what extent there would have been any increase in tax shall be made in accordance with regulations pre- scribed by the Secretary. (e) Value of assets For purposes of subsection (c), the value of the net assets shall be determined at whichever time such value is higher: (1) the first day on which action is taken by the organization which culminates in its ceasing to be a private foundation, or (2) the date on which it ceases to be a private foundation. (f) Liability in case of transfers of assets from private foundation For purposes of determining liability for the tax imposed by subsection (c) in the case of assets transferred by the private foundation, such tax shall be deemed to have been imposed on the first day on which action is taken by the organization which culminates in its ceasing to be a private foundation. (g) Abatement of taxes The Secretary may abate the unpaid portion of the assessment of any tax imposed by sub- section (c), or any liability in respect thereof, if- (1) the private foundation 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 continuous period of at least 60 calendar months, or (2) following the notification prescribed in section 6104(c) to the appropriate State offi- cer, such State officer within one year noti- fies the Secretary, in such manner as the Sec- retary may by regulations prescribe, that cor- rective action has been initiated pursuant to State law to insure that the assets of such pri- vate foundation are preserved for such chari- table or other purposes specified in section 501(c)(3) as may be ordered or approved by a court of competent jurisdiction, and upon completion of the corrective action, the Sec- retary receives certification from the appro- priate State officer that such action has re- sulted in such preservation of assets. (Added Pub. L. 91-172, title I, § 101(a), Dec. 30, 1969, 83 Stat. 492, and amended Pub. L. 94-455, title XIX, § 1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1834.) AMENDMENTS 1976-Pub. L. 94-455 struck out "or his delegate" fol- lowing "Secretary" wherever appearing. EFFECTIVE DATE Section effective Jan. 1, 1970, see section 101(k)(1) of Pub. L. 91-172, set out as an Effective Date note under section 4940 of this title. SECTION REFEUl TO IN OTnER SECTIONS This section is referred to In sections 508, 509, 4946, 4947, 4948, 6056, 6104, 6214, 6501, 6503 of this title. § 508. Special rules with respect to section 501(c)(3) organizations (a) New organizations must notify Secretary that they are applying for recognition of section 501(c)(3) status Except as provided in subsection (c), an orga- nization organized after October 9, 1969, shall not be treated as an organization described in section 501(c)(3)- (1) unless it has given notice to the Secre- tary in such manner as the Secretary may by regulations prescribe, that it is applying for recognition of such status, or (2) for any period before the giving of such notice, if such notice is given after the time prescribed by the Secretary by regulations for giving notice under this subsection. (b) Presumption that organizations are private foun- dations Except as provided in subsection (c), any or- ganization (including an organization in exis- tence on October 9, 1969) which is described in section 501(c)(3) and which does not notify the Secretary, at such time and in such manner as the Secretary may by regulations prescribe, that it is not a private foundation shall be pre- sumed to be a private foundation. (c) Exceptions (1) Mandatory exceptions Subsections (a) and (b) shall not apply to- (A) churches, their integrated auxiliaries, and conventions or associations of churches, or (B) any organization which is not a pri- vate foundation (as defined in section 509(a)) and the gross receipts of which in § 508 Page 386