NEW PRIVATE FOUNDATION SET-ASIDES.

SEC. 1302. NEW PRIVATE FOUNDATION SET-ASIDES. (a) In General.— Section 4942(g)(2) (relating to definition of qualifying distributions) is amended to read as follows: “(2) Certain set-asides.— “(A) In general.— For all taxable years beginning on or after January 1, 1975, subject to such terms and conditions as may be prescribed by the Secretary, an amount set aside for a specific project which comes within one or more purposes described in section 170(c)(2)(B) may be treated as a qualifying distribution if it meets the requirements of subparagraph (B). “(B) Requirements.— An amount set aside for a specific project shall meet the requirements of this subparagraph if at the time of the set-aside the foundation establishes to the satisfaction of the Secretary that the amount will be paid for the specific project within 5 years, and either— “(i) at the time of the set-aside the private foundation establishes to the satisfaction of the Secretary that the project is one which can better be accomplished by such set-aside than by immediate payment of funds, or “(ii) (I) the project will not be completed before the end of the taxable year of the foundation in which the set-aside is made, 90 STAT. 1714 “(II) the private foundation in each taxable year beginning after December 31, 1975 (or after the end of the fourth taxable year following the year of its creation, whichever is later), distributes amounts, in cash or its equivalent, equal to not less than the distributable amount determined under subsection (d)(without regard to subsection (i)) for purposes described in Section 170(c)(2)(B)(including but not limited to payments with respect to set-asides which were treated as qualifying distributions in one or more prior years), and “(III) the private foundation has distributed (including but not limited to payments with respect to set-asides which were treated as qualifying distributions in one or more prior years) during the four taxable years immediately preceding its first taxable year beginning after December 31, 1975, or the fifth taxable year following the year of its creation, whichever is later, an aggregate amount, in cash or its equivalent, of not less than the sum of the following: 80 percent of the first preceding taxable year’s distributable amount; 60 percent of the second preceding taxable year’s distributable amount; 40 percent of the third preceding taxable year’s distributable amount; and 20 percent of the fourth preceding taxable year’s distributable amount. “(C) Certain failures to distribute.— If, for any taxable year to which clause (ii)(II) of subparagraph (B) applies, the private foundation fails to distribute in cash or its equivalent amounts not less than those required by such clause and— “(i) the failure to distribute such amounts was not willful and was due to reasonable cause, and “(ii) the foundation distributes an amount in cash or its equivalent which is not less than the difference between the amounts required to be distributed under clause (ii)(II) of subparagraph (B) and the amounts actually distributed in cash or its equivalent during that taxable year within the initial correction period provided in subsection (j)(2), such distribution in cash or its equivalent shall be treated for the purposes of this subparagraph as made during such year. “(D) Reduction in distribution amount.— If, during the taxable years in the adjustment period for which the organization is a private foundation, the foundation distributes amounts in cash or its equivalent which exceed the amount required to be distributed under clause (ii)(IT) of subparagraph (B)(including but not limited to payments with respect to set-asides which were treated as qualifying distributions in prior years), then for purposes of this subsection the distribution required under clause (ii)(II) of subparagraph (B) for the taxable year shall be reduced by an amount equal to such excess. “(E) Adjustment period.— For purposes of subparagraph (D), with respect to any taxable year of a private foundation, the taxable years in the adjustment period are the taxable years (not exceeding 5) beginning after December 31, 1975, and immediately preceding the taxable year. In the case of a set-aside which satisfies the requirements of clause (i) of subparagraph (B), for good cause shown, the period for paying the amount set aside may be extended by the Secretary.” (b) Statute of Limitations.— Subsection (n) of section 6501 (relating to limitations on assessments and collections) is amended by adding at the end thereof the following new paragraph: 90 STAT. 1715 “(3) Certain setabides described in section 4042(g)(2).— In the case of a deficiency attributable to the failure of an amount set aside by a private foundation for a specific project to be treated as a qualifying distribution under the provisions of section 4942(g)(2)(B)(1)(II), such deficiency may be assessed at any time before the expiration of 2 years after the expiration of the period within which a deficiency may be assessed for the taxable year to which the amount set aside relates.” (c) Effective Date.— The amendments made by this section shall apply to taxable years beginning after December 31, 1974.