§1221. Expansion of the base of tax on private foundation net investment income

Pension Protection Act of 2006

Title XII Provisions Relating to Exempt Organizations

Subtitle B Reforming Exempt Organizations

Part 1 General Reforms

(a) GROSS INVESTMENT INCOME.-

(a)(1) IN GENERAL.-Paragraph (2) of section 4940(c) (relating to gross investment income) is amended by adding at the end the following new sentence: "Such term shall also include income from sources similar to those in the preceding sentence. ".

(a)(2) CONFORMING AMENDMENT.-Subsection (e) of section 509 (relating to gross investment income) is amended by adding at the end the following new sentence: "Such term shall also include income from sources similar to those in the preceding sentence. ".

( b) CAPITAL GAIN NET INCOME.-Paragraph (4) of section 4940(c) (relating to capital gains and losses) is amended-

(b)(1) in subparagraph (A), by striking "used for the production of interest, dividends, rents, and royalties" and inserting "used for the production of gross investment income (as defined in paragraph (2))",

(b)(2) in subparagraph (C), by inserting "or carrybacks" after "carryovers", and

(b)(3) by adding at the end the following new subparagraph:

"(D) Except to the extent provided by regulation, under rules similar to the rules of section 1031 (including the exception under subsection (a)(2) thereof), no gain or loss shall be taken into account with respect to any portion of property used for a period of not less than 1 year for a purpose or function constituting the basis of the private foundation's exemption if the entire property is exchanged immediately following such period solely for property of like kind which is to be used primarily for a purpose or function constituting the basis for such foundation's exemption.".

(c) EFFECTIVE DATE.- The amendments made by this section shall apply to taxable years beginning after the date of the enactment of this Act.