Page:United States Statutes at Large Volume 98 Part 1.djvu/829

 PUBLIC LAW 98-369—JULY 18, 1984 (2) FOR SUBSECTION (b).—The amendment made by subsection (b) shall apply to grants made after December 31, 1984, in taxable years ending after such date. (3) CERTAIN EXISTING FOUNDATIONS.—A foundation which was an operating foundation (as defined in section 4942(j)(3) of the Internal Revenue Code of 1954) as of January 1, 1983, shall be treated as meeting the requirements of section 4940(d)(2)(B) of such Code (as added by subsection (a)).

98 STAT. 781 26 USC 4945 note. 26 USC 4940 ^°Ante, p. 779.

SEC. 303. REDUCTION IN EXCISE TAX ON INVESTMENT INCOME WHERE PRIVATE FOUNDATION MEETS CERTAIN DISTRIBUTION REQUIREMENTS. (a) GENERAL RULE.—Section 4940 (relating to excise tax based on 26 USC 4940. investment income) is amended by adding at the end thereof the following new subsection: "(e) REDUCTION IN TAX WHERE PRIVATE FOUNDATION MEETS CERTAIN DISTRIBUTION REQUIREMENTS.—

"(1) IN GENERAL.—In the case of any private foundation which meets the requirements of paragraph (2) for any taxable year, subsection (a) shall be applied with respect to such taxable year by substituting '1 percent' for '2 percent'. "(2) REQUIREMENTS.—A private foundation meets the requirements of this paragraph for any taxable year if— "(A) the amount of the qualifying distributions made by the private foundation during such taxable year equals or exceeds the sum of— "(i) an amount equal to the assets of such foundation for such taxable year multiplied by the average percentage payout for the base period, plus "(ii) 1 percent of the net investment income of such foundation for such taxable year, and "(B) the average percentage payout for the base period equals or exceeds 5 percent. In the case of an operating foundation (as defined in section 4942(j)(3)), subparagraph (B) shall be applied by substituting 'SVs percent' for '5 percent. "(3) AVERAGE PERCENTAGE PAYOUT FOR BASE PERIOD.—For purposes of this subsection— "(A) IN GENERAL.—The average percentage payout for the base period is the average of the percentage payouts for taxable years in the base period. "(B) PERCENTAGE PAYOUT.—The term 'percentage payout' means, with respect to any taxable year, the percentage determined by dividing— "(i) the amount of the qualifying distributions made by the private foundation during the taxable year, by "(ii) the assets of the private foundation for the taxable year. "(C) SPECIAL RULE WHERE TAX REDUCED UNDER THIS SUB-

SECTION.—For purposes of this paragraph, if the amount of the tax imposed by this section for any taxable year in the base period is reduced by reason of this subsection, the amount of the qualifying distributions made by the private foundation during such year shall be reduced by the amount of such reduction in tax. "(4) BASE PERIOD.—For purposes of this subsection—

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