PUBLIC LAW 91-172-DEC. 30, 1969
' ' (i) ADJUSTMENT OF DISTRIBUTABLE AMOUNT W H E R E DISTRIBUTIONS DURING PRIOR YEARS HAVE EXCEEDED INCOME.—
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"(1) IN GENERAL.—If, for the taxable years in the adjustment period for which an organization is a private foundation— " (A) the aggregate qualifying distributions treated (under subsection (h)) as made out of the undistributed income for such taxable year or as made out of corpus (except to the extent subsection (g)(3) with respect to the recipient private foundation or section 170(b)(1)(E) (ii) applies) during such taxable years, exceed " (B) the distributable amounts for such taxable years (determined without regard to this subsection), then, for purposes of this section (other than subsection (h)), the distributable amount for the taxable year shall be reduced by an amount equal to such excess. " (2) TAXABLE YEARS I N ADJUSTMENT PERIOD.—For purposes of
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paragraph (1), with respect to any taxable year of a private foundation the taxable years in the adjustment period are the taxable years (not exceeding 5) beginning after December 31, 1969, and immediately preceding the taxable year, "(j) OTHER DEFINITIONS.—For purposes of this section— "(1) TAXABLE PERIOD.—The term 'taxable period' means, with respect to the undistributed income for any taxable year, the period beginning with the first day of the taxable year and ending on the date of mailing of a notice of deficiency with respect to the tax imposed by subsection (a) under section 6212. " (2) CORRECTION PERIOD.—The term 'correction period'means,
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with respect to any private foundation for any taxable year, the period beginning with the first day of the taxable year and ending 90 days after the date of mailing of a notice of deficiency (with respect to the tax imposed by subsection (b)) under section 6212, extended by— " (A) any period in which a deficiency cannot be assessed under section 6213(a), and " (B) any other period which the Secretary or his delegate determines is reasonable and necessary to permit a distribution of undistributed income under this section. "(3) OPERATING FOUNDATION.—For purposes of this section, the term 'operating foundation' means any organization— " (A) which makes qualifying distributions (within the meaning of paragraph (1) or (2) of subsection (g)) directly for the active conduct of the activities constituting the purpose or function for which it is organized and operated equal to substantially all of its adjusted net income (as defined in subsection (f)); and " (B)(i) substantially more than half of the assets of which are devoted directly to such activities or to functionally related businesses (as defined in paragraph (5)), or to both, or are stock of a corporation which is controlled by the foundation and substantially all of the assets of which are so devoted, "(ii) which normally makes qualifying distributions (within the meaning of paragraph (1) or (2) of subsection (g)) directly for the active conduct of the activities constituting the purpose or function for which it is organized and operated in an amount not less than two-thirds of its minimum investment return (as defined in subsection (e)), or