AI-assisted research summary: Certain private foundations, charitable trusts, and split-interest trusts are barred from self-dealing and related transactions, and some trusts must distribute enough each taxable year to avoid a tax liability.
I. In the administration of any trust which is a "private foundation" as defined in section 509 of the United States Internal Revenue Code of 1954, or which is a "charitable trust" as defined in section 4947(a)(1) of the Internal Revenue Code of 1954, or which is a "split interest trust" as defined in section 4947(a)(2) of that code, the following acts are prohibited: (a) engaging in any act of "self-dealing" (as defined in section 4941(d) of the Internal Revenue Code of 1954) which would give rise to any liability for the tax imposed by section 4941(a) of the Internal Revenue Code of 1954; (b) retaining any "excess business holdings" (as defined in section 4943(c) of the Internal Revenue Code of 1954) which would give rise to any liability for the tax imposed by section 4943(a) of the Internal Revenue Code of 1954; (c) making any investments which would jeopardize the carrying out of any of the exempt purposes of the trust, within the meaning of section 4944 of the Internal Revenue Code of 1954, so as to give rise to any liability for the tax imposed by section 4944(a) of the Internal Revenue Code of 1954; and (d) making any "taxable expenditures" (as defined in section 4945(d) of the Internal Revenue Code of 1954) which would give rise to any liability for the tax imposed by section 4945(a) of the Internal Revenue Code of 1954. However, this paragraph does not apply to those split-interest trusts or to any amounts thereof which are not subject to the prohibitions applicable to private foundations by reason of the provisions of section 4947 of the Internal Revenue Code of 1954. II. In the administration of any trust which is a "private foundation" as defined in section 509 of the Internal Revenue Code of 1954, or which is a "charitable trust" as defined in section 4947(a)(1) of the Internal Revenue Code of 1954, there shall be distributed, for the purposes specified in the trust instrument, for each taxable year, amounts at least sufficient to avoid liability for the tax imposed by section 4942(a) of the Internal Revenue Code of 1954. III. The provisions of paragraphs I and II shall apply to any trust except to the extent that a court of competent jurisdiction determines that the application of those paragraphs to a trust would be contrary to the terms of the instrument governing the trust, and that the instrument cannot properly be changed to conform to those paragraphs. IV. Nothing in this section impairs the rights and powers of the courts or the attorney general with respect to any trust. V. All references to sections of the Internal Revenue Code of 1954 include amendments to those sections which are made after the effective date of this section, and include all corresponding provisions of any United States internal revenue laws which replace the Internal Revenue Code of 1954. Source: Source. 1971, 380:1, eff. Aug. 27, 1971.