CHAPTER 10Limitation on Excess Business Holdings

  1. § 10.1 Introduction
  2. § 10.2 Excess Business Holdings: General Rules (Revised)
  3. § 10.3 Tax Imposed
  4. § 10.4 Exclusions

§ 10.1 INTRODUCTION

p. 697. Delete the regulations citation in footnote 2 and replace with the following:

Reg. § 1.501(c)(3)-1.

§ 10.2 EXCESS BUSINESS HOLDINGS: GENERAL RULES (REVISED)

p. 701. Add the following to the end of footnote 17:

See discussion in subsection 2.11(f) on contributions of LLC/partnership interest to charities.

pp. 703–704. Add the following to the end of footnote 29:

See also PLR 201414031(Apr. 4, 2014) (foundation permitted to correct excess business holdings by granting to public charities requisite amount of stock to bring foundation's holdings to 2 percent de minimis amount).

p. 704. Add the following at the end of the first paragraph on this page:

In February 2018 the Enterprise Act of 2017, as part of the Bi-Partisan Budget Act of 2018, added a provision that allows private foundations to retain 100 percent of a business under certain conditions. This will allow a private foundation to avoid the requirement to divest itself of at least 80 percent of its excess business holdings under § 4943.

New § 4943(g) permits a foundation to own 100 percent of a company provided:

  1. there are no other shareholders and the shares have been donated to the foundation or acquired in a manner other than purchase;
  2. the company must distribute all of its net operating income to the foundation within 120 ...

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