EXCEPTION FROM PRIVATE FOUNDATION EXCESS BUSINESS HOLDING TAX FOR INDEPENDENTLY-OPERATED PHILANTHROPIC BUSINESS HOLDINGS.

SEC. 41110. EXCEPTION FROM PRIVATE FOUNDATION EXCESS BUSINESS HOLDING TAX FOR INDEPENDENTLY-OPERATED PHILANTHROPIC BUSINESS HOLDINGS. (a) In General Section 4943 is amended by adding at the end the following new subsection: “(g) Exception for Certain Holdings Limited to Independently-operated Philanthropic Business “(1) In general Subsection (a) shall not apply with respect to the holdings of a private foundation in any business enterprise which meets the requirements of paragraphs (2), (3), and (4) for the taxable year. “(2) Ownership The requirements of this paragraph are met if— “(A) 100 percent of the voting stock in the business enterprise is held by the private foundation at all times during the taxable year, and “(B) all the private foundation’s ownership interests in the business enterprise were acquired by means other than by purchase. “(3) All profits to charity “(A) In general The requirements of this paragraph are met if the business enterprise, not later than 120 days after the close of the taxable year, distributes an amount equal to its net operating income for such taxable year to the private foundation. “(B) Net operating income For purposes of this paragraph, the net operating income of any business enterprise for any taxable year is an amount equal to the gross income of the business enterprise for the taxable year, reduced by the sum of— “(i) the deductions allowed by chapter 1 for the taxable year which are directly connected with the production of such income, “(ii) the tax imposed by chapter 1 on the business enterprise for the taxable year, and “(iii) an amount for a reasonable reserve for working capital and other business needs of the business enterprise. “(4) Independent operation The requirements of this paragraph are met if, at all times during the taxable year— “(A) no substantial contributor (as defined in section 4958(c)(3)(C)) to the private foundation or family member (as determined under section 4958(f)(4)) of such a contributor is a director, officer, trustee, manager, employee, or contractor of the business enterprise (or an individual having powers or responsibilities similar to any of the foregoing), “(B) at least a majority of the board of directors of the private foundation are persons who are not— “(i) directors or officers of the business enterprise, or “(ii) family members (as so determined) of a substantial contributor (as so defined) to the private foundation, and “(C) there is no loan outstanding from the business enterprise to a substantial contributor (as so defined) to the private foundation or to any family member of such a contributor (as so determined). “(5) Certain deemed private foundations excluded This subsection shall not apply to— “(A) any fund or organization treated as a private foundation for purposes of this section by reason of subsection (e) or (f), “(B) any trust described in section 4947(a)(1) (relating to charitable trusts), and “(C) any trust described in section 4947(a)(2) (relating to split-interest trusts).” . (b) [26 U.S.C. 4943 note] Effective Date The amendment made by this section shall apply to taxable years beginning after December 31, 2017.