83 STAT. ]
PUBLIC LAW 91-172-DEC. 30, 1969
which would pay such an amount but for the fact that the expenses of collecting its income exceed its income), and " (2) such corporation and such organization file a consolidated return for the taxable year, such corporation shall be treated, for purposes of the tax imposed by subsection (a), as being organized and operated for the same purposes as such organization, in addition to the purposes described in section 501(c)(2). ^ ^ (4) CONFORMING AMENDMENT.—Section 1504 (relating to definitions for purposes of consolidated returns) is amended by adding at the end thereof the following new subsection: "(e) INCLUDIBLE TAX-EXEMPT ORGANIZATIONS.—Despite the provisions of paragraph (1) of subsection (b), two or more organizations exempt from taxation under section 501, one or more of which is described in section 501(c)(2) and the others of which derive income from such 501(c)(2) organizations, shall be considered as includible corporations for the purpose of the application of subsection (a) to such organizations alone." (b)
DEFINITION OP UNRELATED BUSINESS TAXABLE INCOME.—
(1) IN GENERAL.—Section 512(a) (relating to definition of unrelated business taxable income) is amended to read as follows: " (a) DEFINITION.—For purposes of this title— " (1) GENERAL RULE.—Except as otherwise provided in this subsection, the term 'unrelated business taxable income' means the gross income derived by any organization from any unrelated trade or business (as defined in section 513) regularly carried on by it, less the deductions allowed by this chapter which are directly connected with the carrying on of such trade or business, both computed with the modifications provided in subsection (b). "(2) SPECIAL RULE FOR FOREIGN ORGANIZATIONS.—In the case of an organization described in section 511 which is a foreign organization, the unrelated business taxable income shall be— " (A) its unrelated business taxable income which is derived from sources within the United States and which is not effectively connected with the conduct of a trade or business within the United States, plus " (B) its unrelated business taxable income which is effectively connected with the conduct of a trade or business within the United States. "(3)
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SPECIAL RULES APPLICABLE TO ORGANIZATIONS DESCRIBED I N
S E C T I O N 5 0 1 (C)(7) OR (9).
" (A) GENERAL RULE.—In the case of an organization described in section 501(c)(7) or (9), the term 'unrelated business taxable income' means the gross income (excluding any exempt function income), less the deductions allowed by this chapter which are directly connected with the production of the gross income (excluding exempt function income), both computed with the modifications provided in paragraphs (6), (10), (11), and (12) of subsection (b). " (B) EXEMPT FUNCTION INCOME.—For purposes of subparagraph (A), the term 'exempt function income' means the gross income from dues, fees, charges, or similar amounts paid by members of the organization as consideration for providing such members or their dependents or guests goods, facilities, or services in furtherance of the purposes constituting the basis for the exemption of the organization.to which such income is paid. Such term also means all income (other than an amount equal to the gross income derived from any unrelated trade or business regularly carried on by such
Po^t, p. 541.