[Congressional Bills 104th Congress]
[From the U.S. Government Publishing Office]
[S. 793 Introduced in Senate (IS)]







104th CONGRESS
  1st Session
                                 S. 793

To amend the Internal Revenue Code of 1986 to provide an exemption from 
            income tax for certain common investment funds.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                 May 11 (legislative day, May 1), 1995

  Mr. Simpson (for himself, Mr. Moynihan, and Mr. Kyl) introduced the 
 following bill; which was read twice and referred to the Committee on 
                                Finance

_______________________________________________________________________

                                 A BILL


 
To amend the Internal Revenue Code of 1986 to provide an exemption from 
            income tax for certain common investment funds.
    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. COOPERATIVE SERVICE ORGANIZATIONS FOR CERTAIN FOUNDATIONS.

    (a) In General.--Section 501 of the Internal Revenue Code of 1986 
(relating to exemption from tax on corporations, certain trusts, etc.) 
is amended by redesignating subsection (n) as subsection (o) and by 
inserting after subsection (m) the following new subsection:
    ``(n) Cooperative Service Organizations for Certain Foundations.--
            ``(1) In general.--For purposes of this title, if an 
        organization--
                    ``(A) is organized and operated solely for purposes 
                referred to in subsection (f)(1),
                    ``(B) is composed solely of members which are 
                exempt from taxation under subsection (a) and are--
                            ``(i) private foundations, or
                            ``(ii) community foundations as to which 
                        section 170(b)(1)(A)(vi) applies,
                    ``(C) has at least 20 members,
                    ``(D) does not at any time after the second taxable 
                year beginning after the date of its organization or, 
                if later, beginning after the date of the enactment of 
                this subsection, have a member which holds more than 10 
                percent (by value) of the interests in the 
                organization,
                    ``(E) is organized and controlled by its members 
                but is not controlled by any one member and does not 
                have a member which controls another member of the 
                organization, and
                    ``(F) permits members of the organization to 
                require the dismissal of any of the organization's 
                investment advisors, following reasonable notice, if 
                members holding a majority of interest in the account 
                managed by such advisor vote to remove such advisor,
        then such organization shall be treated as an organization 
        organized and operated exclusively for charitable purposes.
            ``(2) Treatment of income of members.--If any member of an 
        organization described in paragraph (1) is a private foundation 
        (other than an exempt operating foundation, as defined in 
        section 4940(d)), such private foundation's allocable share of 
        the capital gain net income and gross investment income of the 
        organization for any taxable year of the organization shall be 
        treated, for purposes of section 4940, as capital gain net 
        income and gross investment income of such private foundation 
        (whether or not distributed to such foundation) for the taxable 
        year of such private foundation with or within which the 
        taxable year of the organization described in paragraph (1) 
        ends (and such private foundation shall take into account its 
        allocable share of the deductions referred to in section 
        4940(c)(3) of the organization).
            ``(3) Applicable excise taxes.--Subchapter A of chapter 42 
        (other than sections 4940 and 4942) shall apply to any 
        organization described in paragraph (1).''
    (b) Conforming Amendments.--
            (1) Section 4945(d) of such Code is amended by adding at 
        the end the following new flush sentence:
``Paragraph (4)(B) shall not apply to a grant to an organization 
described in section 501(n).''
            (2) Section 4942(g)(1)(A) of such Code is amended by 
        inserting ``or an organization described in section 501(n)'' 
        after ``subsection (j)(3))''.
    (c) Effective Date.--The amendment made by subsection (a) shall 
apply to taxable years ending on or after December 31, 1994.
                                 <all>