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TITLE 26-INTERNAL REVENUE CODE ganization exempt from taxation under sec- tion 501(a)), but not less than the amount determined in clause (I) or (ii), as the case may be, of subparagraph (A), both amounts computed without regard to amounts paid directly or indirectly to the controlling organization. There shall be al- lowed all deductions directly connected with amounts included in gross income under the preceding sentence. (14) Except as provided in paragraph (4), in the case of a church, or convention or associ- ation of churches, for taxable years beginning before January 1, 1976, there shall be ex- cluded all gross income derived from a trade or business and all deductions directly con- nected with the carrying on of such trade or business if such trade or business was carried on by such organization or its predecessor before May 27, 1969. (15) Except as provided in paragraph (4), in the case of a trade or business- (A) which consists of providing services under license issued by a Federal regulatory agency, (B) which is carried on by a religious order or by an educational organization de- scribed in section 170(b)(l)iA)(ii) main- tained by such religious order, and which was so carried on before May 27, 1959, and (C) less than 10 percent of the net income of which for each taxable year is used for activities which are not related to the pur- pose constituting the basis for the religious order's exemption, there shall be excluded all gross income de- rived from such trade or business and all de- ductions directly connected with the carrying on of such trade or business, so long as it is established to the satisfaction of the Secre- tary that the rates or other charges for such services are competitive with rates or other charges charged for similar services by per- sons not exempt from taxation. (c) Special rules applicable to partnerships If a trade or business regularly carried on by a partnership of which an organization is a member is an unrelated trade or business with respect to such organization, such organization in computing its unrelated business taxable income shall, subject to the exceptions, addi- tions, and limitations contained in subsection (b), include its share (whether or not distribut- ed) of the gross income of the partnership from such unrelated trade or business and its share of the partnership deductions directly connect- ed with such gross income. If the taxable year of the organization is different from that of the partnership, the amounts to be so included or deducted in computing the unrelated business taxable income shall be based upon the income and deductions of the partnership for any tax- able year of the partnership ending within or with the taxable year of the organization. (Aug. 16, 1954, ch. 736, 68A Stat. 170; Apr. 7, 1958, Pub. L. 85-367, § l(a), 72 Stat. 80; July 17, 1964, "ub. L. 88-380, § 1, 78 Stat. 333; Nov. 13, 1966, Pub. L. 89-809, title I, § 104(g), 80 Stat. 1559; Dec. 30, 1969, Pub. L. 91-172, title I, § 121(b)(1), (2), 83 Stat. 537, 538; Aug. 29, 1972, Pub. L. 92-418, § 1(b), 86 Stat. 656; Sept. 3, 1976, Pub. L. 94-396, § l(a), 90 Stat. 1201; Oct. 4, 1976, Pub. L. 94-455, title XIX, §§ 1901(b)(8)(F), 1906(b)(13)(A), 1951(b)(8)(A), 90 Stat, 1794, 1834, 1839; Oct. 20, 1976, Pub. L. 94-568, § l(b), 90 Stat. 2697.) AMENDMENTS 1976-Subsec. (a)(3)(A). Pub. L. 94-568 provided that for purposes of the general rule, the deductions pro- vided by sections 243, 244, and 245 (relating to divi- dends received by corporations) shall be treated as not directly connected with the production of gross income. Subsec. (b). Pub. L. 94-455, § 1906(b)(13)(A), struck out "or his delegate" following "Secretary". Subsec. (b)(5). Pub. L. 94-396 added provision relat. ing to exclusion of gains on the lapse or termination of options to buy or sell securities. Subsec. (b)(13). Pub. L. 94-455, § 1951(b)(8)(A), struck out pars. (13) and (14) relating to exceptions, additions, and limitations applicable in determining unrelated business taxable income, and redesignated pars. (15), (16), and (17) as pars. (13), (14), and (15), re- spectively. Subsec. (b)(14). Pub. L. 94-455, § 1951(b)(8)(A), struck out par. (14). Former par. (16) redesignated as (14). Subsec. (b)(15). Pub. L. 94-455, §§ 1901(b)(8)(F), 1906(b)(13)(A), 1951(b)(8)(A), redesignated former par. (17) as (15) and, as redesignated, substituted in subpar. (B) "educational organization described in section 170(b)(1)(A)(il)" for "educational institution (as de- fined in section 151(e)(4))" following "order or by an", and struck out "or his delegate" following "Secre- tary". Subsec. (b)(16). Pub. L. 94-455, § 1951(b)(8)(A), rede- signated former par. (16) as (14). Subsec. (b)(17). Pub. L. 94-455, § 1951(b)(8)(A), rede- signated former par. (17) as (15). 1972-Subsec. (a)(4). Pub. L. 92-418 added subsec. (a)(4). 1969-Subsec. (a). Pub. L. 91-172, § 121(b)(1), desig- nated existing provisions as pars. (1) and (2)(B), and added pars. (2)(A) and (3). Subsec. (b). Pub. L. 91-172, § 121(b)(2)(D), substitut- ed "Modifications" for "Exceptions, additions, and limitations", in subsec. catchline, and, in material pre- ceding par. (1) substituted "The modifications referred to in subsection (a)" for "The exceptions, additions, and limitations applicable in determining unrelated business taxable income". Subsec. (b)(3)(A). Pub. L. 91-172, § 121(b)(2)(A), added reference to exceptions set out In subsec. (b)(3)(B) in material preceding cl. (I), substituted "property described in section 1245(a)(3)(C)" for "per- sonal property leased with the real property" in the parenthetical material of cl. (I), and added cl. (ii). Subsec. (b)(3)(B). Pub. L. 91-172, § 121(b)(2)(A), added subsec. (b)(3)(B). Subsec. (b)(3)(C). Pub. L. 91-172, § 121(b)(2)(A), sub- stituted "rents excluded under subparagraph (A)" for "such rents". Subsec. (b)(4). Pub. L. 91-172, § 121(b)(2)(A), inserted reference to pars. (1), (3) and (5) of this subsec., and substituted "debt financed property" for "a business lease". Subsec. (b)(12). Pub. L. 91-172, § 121(b)(2)(B), made the allowance of the specific $1,000 deduction inappli- cable for the purposes of computing the net operating loss under section 172 of this title and par. (6) of this subsec., and provided for the allowance of specific de- ductions equal to the lower of $1,000 or the gross income derived from any unrelated trade or business carried on by a parish, individual church, district, or other local unit. Subsecs. (b)(15) to (17). Pub. L. 91-172, § 121(b)(2)(C) added subsecs. (b)(15) to (17). 1966-Subsec. (a). Pub. L. 89-809 substituted ". the unrelated business taxable income shall be its unrelat- ed business taxable Income which is effectively con- § 512 Page 393