text: SECTION 1. EXCISE TAXES ON ACTS OF SELF-DEALING AND PRIVATE INUREMENT 
                BY CERTAIN TAX-EXEMPT ORGANIZATIONS.
  
      (a) In General.--Chapter 42 of the Internal Revenue Code of 1986 
  (relating to private foundations and certain other tax-exempt 
  organizations) is amended by redesignating subchapter D as subchapter E 
  and by inserting after subchapter C the following new subchapter:
  
   ``Subchapter D--Acts of Self-Dealing and Private Inurement by Certain 
                            Exempt Organizations
  
                                ``Sec. 4958. Taxes on certain acts of 
                                          self-dealing.
                                ``Sec. 4959. Taxes on private inurement.
                                ``Sec. 4960. Other definitions.
  
  ``SEC. 4958. TAXES ON CERTAIN ACTS OF SELF-DEALING.
  
      ``(a) Initial Taxes.--
              ``(1) On self-dealer.--There is hereby imposed a tax on 
          each act of self-dealing between a disqualified person and an 
          applicable tax-exempt organization. The amount of such tax 
          shall be 5 percent of the amount involved with respect to the 
          act of self-dealing for each year (or part thereof) in the 
          taxable period. The tax imposed by this paragraph shall be paid 
          by any disqualified person (other than an organization manager 
          acting only as such) who participates in the act of self-
          dealing.
              ``(2) On organization manager.--In any case in which a tax 
          is imposed by paragraph (1), there is hereby imposed on the 
          participation of any organization manager in any act of self-
          dealing between a disqualified person and an applicable tax-
          exempt organization, knowing that it is such an act, a tax 
          equal to 2.5 percent of the amount involved with respect to 
          such act of self-dealing for each year (or part thereof) in the 
          taxable period, unless such participation is not willful and is 
          due to reasonable cause. The tax imposed by this paragraph 
          shall be paid by any organization manager who participated in 
          the act of self-dealing.
      ``(b) Additional Taxes.--
              ``(1) On self-dealer.--In any case in which an initial tax 
          is imposed by subsection (a)(1) on any act of self-dealing 
          between a disqualified person and an applicable tax-exempt 
          organization and such act is not corrected within the taxable 
          period, there is hereby imposed a tax equal to 200 percent of 
          the amount involved. The tax imposed by this paragraph shall be 
          paid by any disqualified person (other than an organization 
          manager acting only as such) who participated in the act of 
          self-dealing.
              ``(2) On organization manager.--In any case in which an 
          additional tax is imposed by paragraph (1), if an organization 
          manager refused to agree to part or all of the correction, 
          there is hereby imposed a tax equal to 50 percent of the amount 
          involved. The tax imposed by this paragraph shall be paid by 
          any organization manager who refused to agree to part or all of 
          the correction.
      ``(c) Special Rules.--
              ``(1) Joint and several liability.--If more than one person 
          is liable under any paragraph of subsection (a) or (b) with 
          respect to any one act of self-dealing, all such persons shall 
          be jointly and severally liable under such paragraph with 
          respect to such act.
              ``(2) $10,0000 limit for management.--With respect to any 
          one act of self-dealing, the maximum amount of the tax imposed 
          by subsection (a)(2) shall not exceed $10,000, and the maximum 
          amount of the tax imposed by subsection (b)(2) shall not exceed 
          $10,000.
      ``(d) Self-Dealing.--For purposes of this section--
              ``(1) In general.--Except as provided by paragraph (2), the 
          term `self-dealing' means any direct or indirect--
                      ``(A) transfer, lease, or license of property 
                  between an applicable tax-exempt organization and a 
                  disqualified person, and
                      ``(B) lending of money or other extension of credit 
                  between an applicable tax-exempt organization and a 
                  disqualified person.
              ``(2) Exceptions.--The term `self-dealing' shall not 
          include--
                      ``(A) the lending of money by a disqualified person 
                  to an applicable tax-exempt organization if the loan is 
                  without interest or other charge (determined without 
                  regard to section 7872) and if the proceeds of the loan 
                  are used exclusively for exempt purposes,
                      ``(B) the furnishing of goods or facilities by a 
                  disqualified person to an applicable tax-exempt 
                  organization if the furnishing is without charge and if 
                  the goods or facilities so furnished are used 
                  exclusively for exempt purposes, and
                      ``(C) any transfer, lease, or license of property 
                  if--
                              ``(i) such transfer, lease, or license (as 
                          the case may be) is by a disqualified person in 
                          the ordinary course of such disqualified 
                          person's trade or business and such transaction 
                          is on a basis comparable to the basis on which 
                          similar transactions are made in the ordinary 
                          course of such trade or business with other 
                          parties, or
                              ``(ii) such transfer, lease, or license (as 
                          the case may be) is by an applicable tax-exempt 
                          organization in the ordinary course of its 
                          activities and such transaction is made on a 
                          basis comparable to the basis on which similar 
                          transactions are made in the ordinary course of 
                          such activities with other parties.
              ``(3) Exempt purpose.--For purposes of paragraph (2), the 
          term `exempt purpose' means--
                      ``(A) in the case of an organization described in 
                  section 501(c)(3), any purpose specified in section 
                  501(c)(3), and
                      ``(B) in the case of an organization described in 
                  section 501(c)(4), any purposes specified in section 
                  501(c)(4).
      ``(e) Other Definitions.--For purposes of this section--
              ``(1) Taxable period.--The term `taxable period' means, 
          with respect to any act of self-dealing, the period beginning 
          with the date on which the act of self-dealing occurs and 
          ending on the earliest of--
                      ``(A) the date of mailing a notice of deficiency 
                  under section 6212 with respect to the tax imposed by 
                  subsection (a)(1),
                      ``(B) the date on which the tax imposed by 
                  subsection (a)(1) is assessed, or
                      ``(C) the date on which correction of the act of 
                  self-dealing is completed.
              ``(2) Amount involved.--The term `amount involved' means, 
          with respect to any act of self-dealing, the greater of the 
          amount of money and fair market value of other property given, 
          or the amount of money and fair market value of other property 
          received. In the case of a lease or license, the amount 
          involved is the fair market value of the leased or licensed 
          property. For purposes of this paragraph--
                      ``(A) in the case of the taxes imposed by 
                  subsection (a), fair market value shall be determined 
                  as of the date on which the act of self-dealing occurs, 
                  and
                      ``(B) in the case of the taxes imposed by 
                  subsection (b), fair market value shall be the highest 
                  fair market value during the taxable period.
              ``(3) Correction.--The terms `correction' and `correct' 
          mean, with respect to any act of self-dealing transaction, 
          undoing the transaction to the extent possible, but in any case 
          place the applicable tax-exempt organization in a financial 
          position not worse than that in which it would be if the 
          disqualified person were dealing under the highest fiduciary 
          standards.
  
  ``SEC. 4959. TAXES ON PRIVATE INUREMENT.
  
      ``(a) Initial Taxes.--
              ``(1) On the organization.--There is hereby imposed on any 
          taxable inurement a tax equal to 10 percent of the amount 
          thereof. The tax imposed by this paragraph shall be paid by the 
          organization with respect to which such inurement occurred.
              ``(2) On the management.--There is hereby imposed on the 
          participation of any organization manager of an organization in 
          any taxable inurement which occurs with respect to such 
          organization, knowing that it is taxable inurement, a tax equal 
          to 2\1/2\ percent of the amount thereof, unless such 
          participation is not willful and is due to reasonable cause. 
          The tax imposed by this paragraph shall be paid by the 
          organization manager who participated in the taxable inurement.
              ``(3) On the beneficiary.--There is hereby imposed on any 
          taxable inurement a tax equal to 5 percent of the amount 
          thereof. The tax imposed by this paragraph shall be paid by the 
          beneficiary of such inurement.
      ``(b) Additional Taxes.--
              ``(1) On the organization.--In any case in which an initial 
          tax is imposed by subsection (a)(1) on any taxable inurement 
          and such inurement is not corrected within the taxable period, 
          there is hereby imposed a tax equal to 100 percent of the 
          amount of the taxable inurement. The tax imposed by this 
          paragraph shall be paid by the organization with respect to 
          which such inurement occurred.
              ``(2) On the management.--In any case in which an 
          additional tax is imposed by paragraph (1), if an organization 
          manager refused to agree to part or all of the correction, 
          there is hereby imposed a tax equal to 50 percent of the amount 
          of the taxable inurement. The tax imposed by this paragraph 
          shall be paid by any organization manager who refused to agree 
          to part or all of the correction.
              ``(3) On the beneficiary.--In any case in which an 
          additional tax is imposed by paragraph (1), there is hereby 
          imposed a tax equal to 200 percent of the amount of the taxable 
          inurement. The tax imposed by this paragraph shall be paid by 
          the beneficiary of such inurement.
      ``(c) Taxable Inurement.--For purposes of this section, the term 
  `taxable inurement' means any direct or indirect inurement of any part 
  of the net earnings of an applicable tax-exempt organization to the 
  benefit of any disqualified person. Such term shall not include any act 
  of self-dealing on which tax is imposed under section 4958.
      ``(d) Special Rules.--For purposes of this section--
              ``(1) Joint and several liability.--If more than one person 
          is liable under any paragraph of subsection (a) or (b) with 
          respect to any one taxable inurement, all such persons shall be 
          jointly and severally liable under such paragraph with respect 
          to such inurement.
              ``(2) Limit for management.--With respect to any 1 taxable 
          inurement, the maximum amount of the tax imposed by subsection 
          (a)(2) shall not exceed $10,000, and the maximum amount of the 
          tax imposed by subsection (b)(2) shall not exceed $10,000.
      ``(e) Other Definitions.--For purposes of this section--
              ``(1) Taxable period.--The term `taxable period' means, 
          with respect to any taxable inurement, the period beginning 
          with the date on which the inurement occurs and ending on the 
          earliest of--
                      ``(A) the date of mailing a notice of deficiency 
                  under section 6212 with respect to the tax imposed by 
                  subsection (a)(1), or
                      ``(B) the date on which the tax imposed by 
                  subsection (a)(1) is assessed.
              ``(2) Correction.--The terms `correction' and `correct' 
          mean, with respect to any taxable inurement, undoing the 
          inurement to the extent possible, establishing safeguards to 
          prevent future taxable inurement, and where fully undoing the 
          inurement is not possible, such additional corrective action as 
          is prescribed by the Secretary by regulations.
  
  ``SEC. 4960. OTHER DEFINITIONS.
  
      ``(a) Applicable Tax-Exempt Organization.--For purposes of this 
  subchapter, the term `applicable tax-exempt organization' means any 
  organization which (without regard to any act of self-dealing or 
  taxable inurement) would be described in paragraph (3) or (4) of 
  section 501(c) and exempt from tax under section 501(a). Such term 
  shall not include any private foundation.
      ``(b) Disqualified Person.--For purposes of this subchapter, the 
  term `disqualified person' means, with respect to any transaction--
              ``(1) any person who was an organization manager at any 
          time during the 5-year period ending on the date of such 
          transaction,
              ``(2) any member of a family (as defined in section 
          4946(d)) of any person described in paragraph (1), and
              ``(3) any 35-percent controlled entity of persons described 
          in paragraph (1) or (2).
      ``(c) Organization Manager.--For purposes of this subchapter, the 
  term `organization manager' means, with respect to any applicable tax-
  exempt organization, any officer, director, or trustee of such 
  organization (or any individual having powers or responsibilities 
  similar to those of officers, directors, or trustees of the 
  organization). Such term includes any person performing substantial 
  medical services as a physician for the applicable tax-exempt 
  organization pursuant to an employment or other contractual 
  relationship.
      ``(d) 35-Percent Controlled Entity.--For purposes of this section--
              ``(1) 35-percent controlled entity.--The term `35-percent 
          controlled entity' means--
                      ``(A) a corporation in which persons described in 
                  paragraph (1) or (2) of subsection (b) own more than 35 
                  percent of the combined voting power,
                      ``(B) a partnership in which such persons own more 
                  than 35 percent of the profits interest, and
                      ``(C) a trust or estate in which such persons own 
                  more than 35 percent of the beneficial interest.
              ``(2) Constructive ownership rules.--Rules similar to the 
          rules of paragraphs (3) and (4) of section 4946(a) shall apply 
          for purposes of this subsection.''
      (b) Application of Private Inurement Rule to Tax-Exempt Civic 
  Leagues.--Paragraph (4) of section 501(c) of such Code is amended to 
  read as follows:
              ``(4)(A) Civic leagues or organizations not organized for 
          profit but operated exclusively for the promotion of social 
          welfare and no part of the net earnings of which inures to the 
          benefit of any private shareholder or individual.
              ``(B) Local associations of employees--
                      ``(i) the membership of which is limited to the 
                  employees of a designated person or persons in a 
                  particular municipality, and
                      ``(ii) which is operated exclusively for 
                  charitable, educational, or recreational purposes.''
      (c) Technical and Conforming Amendments.--
              (1) Subsection (e) of section 4955 of such Code is 
          amended--
                      (A) by striking ``Section 4945'' in the heading and 
                  inserting ``Sections 4945 and 4959'', and
                      (B) by inserting before the period ``or a taxable 
                  inurement for purposes of section 4959''.
              (2) Subsections (a), (b), and (c) of section 4963 of such 
          Code are each amended by inserting ``4958, 4959,'' after 
          ``4955,''.
              (3) Subsection (e) of section 6213 of such Code is amended 
          by inserting ``4958 (relating to acts of self-dealing), 4959 
          (relating to private inurement),'' before ``4971''.
              (4) The table of subchapters for chapter 42 of such Code is 
          amended by striking the last item and inserting the following:
  
                                ``Subchapter D. Acts of self-dealing and 
                                          private inurement by certain 
                                          exempt organizations.
                                ``Subchapter E. Abatement of first and 
                                          second tier taxes in certain 
                                          cases.''
      (d) Effective Date.--The amendments made by this section shall 
  apply to transactions occurring on or after January 1, 1994.
target: Amends the Internal Revenue Code to impose an excise tax on:  (1) each act of self-dealing between a disqualified person and a tax-exempt organization; and (2) any direct or indirect inurement of net earnings of a tax-exempt organization to the benefit of any disqualified person. 
  Describes a disqualified person as:  (1) any organization manager; (2) any family member of an organization manager; or (3) any 35-percent controlled entity of such persons.
feat_title: To amend the Internal Revenue Code of 1986 to impose excise taxes on acts of self-dealing and private inurement by certain tax-exempt organizations.