26 U.S. Code § 502 - Feeder organizations

(a) General rule
An organization operated for the primary purpose of carrying on a trade or business for profit shall not be exempt from taxation under section 501 on the ground that all of its profits are payable to one or more organizations exempt from taxation under section 501.
(b) Special rule
For purposes of this section, the term “trade or business” shall not include—
(1) the deriving of rents which would be excluded under section 512 (b)(3), if section 512 applied to the organization,
(2) any trade or business in which substantially all the work in carrying on such trade or business is performed for the organization without compensation, or
(3) any trade or business which is the selling of merchandise, substantially all of which has been received by the organization as gifts or contributions.


(Aug. 16, 1954, ch. 736, 68A Stat. 166; Pub. L. 91–172, title I, § 121(b)(7),Dec. 30, 1969, 83 Stat. 542.)

1969—Pub. L. 91–172redesignated first sentence of existing provisions as subsec. (a), and substantial portion of second sentence as subsec. (b)(1), and, in subsec. (b)(1) as so redesignated, inserted reference to section 512 of this title, and added pars. (2) and (3).
Effective Date of 1969 Amendment

Amendment by Pub. L. 91–172applicable to taxable years beginning after Dec. 31, 1969, see section 121(g) ofPub. L. 91–172, set out as a note under section 511 of this title.

The table below lists the classification updates, since Jan. 3, 2012, for this section. Updates to a broader range of sections may be found at the update page for containing chapter, title, etc.

The most recent Classification Table update that we have noticed was Tuesday, August 13, 2013

An empty table indicates that we see no relevant changes listed in the classification tables. If you suspect that our system may be missing something, please double-check with the Office of the Law Revision Counsel.

26 USCDescription of ChangeSession YearPublic LawStatutes at Large


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