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than 35 percent are owned by disqualified persons. Secs.
509(a)(3)(C), 4946(a); sec. 1.509(a)-4(j)(1), Income Tax Regs.
Regulations offer the following guidance with respect to this
control test:
An organization will be considered “controlled”, for
purposes of section 509(a)(3)(C), if the disqualified
persons, by aggregating their votes or positions or
authority, may require such organization to perform any
act which significantly affects its operations or may
prevent such organization from performing such act.
This includes, but is not limited to, the right of any
substantial contributor or his spouse to designate
annually the recipients, from among the publicly
supported organizations of the income attributable to
his contribution to the supporting organization. * * *
[Generally] a supporting organization will be
considered to be controlled directly or indirectly by
one or more disqualified persons if the voting power of
such persons is 50 percent or more of the total voting
power of the organization’s governing body or if one or
more of such persons have the right to exercise veto
power over the actions of the organization. Thus, if
the governing body of a foundation is composed of five
trustees, none of whom has a veto power over the
actions of the foundation, and no more than two
trustees are at any time disqualified persons, such
foundation will not be considered to be controlled
directly or indirectly by one or more disqualified
persons by reason of this fact alone. However, all
pertinent facts and circumstances including the nature,
diversity, and income yield of an organization’s
holdings, the length of time particular stocks,
securities, or other assets are retained, and its
manner of exercising its voting right with respect to
stocks in which members of its governing body also have
some interest, will be taken into consideration in
determining whether a disqualified person does in fact
indirectly control an organization. [Sec. 1.509(a)-
4(j)(1), Income Tax Regs.]
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