IRS - Excess Business Holdings of Private Foundation
governmentThis is a tax/legal compliance reference for private foundations; it has no direct relevance to AI safety but may appear in contexts involving AI safety nonprofit governance or philanthropic funding structures.
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Summary
This IRS guidance defines 'excess business holdings' for private foundations, setting limits on ownership stakes in business enterprises to prevent foundations from controlling commercial activities. Key thresholds include a 20% voting stock limit (reduced by disqualified persons' holdings), a 35% exception when third parties hold effective control, and a de minimis 2% safe harbor.
Key Points
- •Private foundations generally may not hold more than 20% of voting stock in a business enterprise, reduced by disqualified persons' holdings.
- •A 35% threshold applies if an unrelated third party effectively controls the business enterprise.
- •A de minimis exception permits holdings up to 2% without triggering excess business holdings rules.
- •Special attribution rules determine combined ownership across different entity structures and related parties.
- •Rules also address sole proprietorships and nonvoting stock in calculating permitted holdings.
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Excess business holdings of private foundation defined | Internal Revenue Service
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