1 2 3 4 5 6 6 (4) The corporation shall not make any invest ments which would subject it to tax under section 4944 of the Code. (5) The corporation shall not make any taxable expenditures which would subject it to tax under section 4945 of the Code. 7 With respect to any such corporation organized prior to 8 January 1, 1970, subsection (a) shall apply only for its 9 taxable years beginning on or after January 1, 1972. 10 (b) The governing instrument of any corporation de11 scribed in subsection (a) may be amended, in the manner 12 provided by law for amendment of such governing instru13 ment, expressly to include the provisions required by section. 14 508 (e) of the Code. 15 (c) The provisions of subsection (a) shall not apply 16 to any corporation to the extent that its governing instru17 ment is amended, in the manner provided by law for amend18 ment of such governing instrument, expressly to exclude 19 the application of subsection (a). 20 (d) For purposes of this section, the term "corpora21 tion" includes an association (other than an association 22 treated as a trust described in section 21-1801). 23 (e) All references in this section to the "Internal 24 Revenue Code of 1954" or to the "Code" are to the Internal 7 1 Revenue Code of 1954 and corresponding provisions of any 2 subsequent Federal tax laws. 3 (f) In the case of a private foundation other than a 4 corporation, see section 21-1801. 5 SEC. 3. Except as otherwise provided herein, the pro 6 visions of this Act shall take effect commencing with tax 7 able years of trusts and corporations beginning on or after 8 January 1, 1970. Hon. THOMAS F. EAGLETON, THE DISTRICT OF COLUMBIA, Chairman, Committee on the District of Columbia, 1971. DEAR MR. CHAIRMAN: The Commissioner of the District of Columbia has for report S. 2409, a bill "To facilitate the amendment of the governing instruments of certain charitable trusts and corporations subject to the jurisdiction of the District of Columbia, in order to conform to the requirements of section 508 of the Internal Revenue Code of 1954, as added by the Tax Reform Act of 1969." The Tax Reform Act of 1969 (Public Law 91-172) made a number of changes with respect to the treatment for tax purposes of private foundations and other charitable corporations and trusts. Among those changes is a requirement that charitable trusts and corporations include in their governing instruments certain provisions specified in the 1969 Act, including provisions that the trust or corporation will distribute its income for "exempt" purposes on a reasonably current basis and will refrain from certain actions such as engaging in "selfdealing" transactions, retaining excess business holdings, making investments which jeopardize exempt purposes, and expending funds for lobbying. The Tax Reform Act specifies that charitable trusts and corporations must alter their governing instruments in the prescribed manner by December 31, 1971, or lose their right to full deductions for charitable distributions or their exemption from the Federal income tax. Subsequent to the enactment of the Tax Reform Act of 1969, the Internal Revenue Service published a Temporary Regulation declaring that the requirements for the governing instruments of charitable trusts and corporations could be met through the enactment of a statute which provides that such governing instruments are deemed to contain all of the provisions required by the Tax Reform Act of 1969. S. 2409 would make such a declaration with respect to trusts in the District of Columbia. Absent the enactment of the bill, many charitable trusts and corporations operating in the District would find it necessary to institute separate court proceedings to amend their individual governing instruments in conformity with the requirements of the 1969 Act. In addition to eliminating the need for numerous legal actions, enactment of S. 2409 would prevent any confusion with respect to legitimacy, from a tax standpoint, of the activities of charitable trusts and corporations operating in the District of Columbia. The provisions of S. 2409 would apply to those trusts (a) created by will of a resident of the District and admitted to probate in the District; (b) created by a resident of the District and executed in the District; (c) of which the trustee or a co-trustee is a bank or trust company doing business in the District; (d) of which a majority of the trustees are resident in the District; (e) involving real property located in the District; or (f) the governing instrument of which provides that it is governed by the laws of the District of Columbia. The bill also applies to any corporation organized under the laws of the District of Columbia which is treated as a private foundation under the Internal Revenue Code. It does not appear that the enactment of S. 2409 will result in any additional costs to the District of Columbia Government. The Commissioner of the District of Columbia has no objection to the enactment of S. 2409. Since the bill relates specifically to the operations of organizations subject to the Internal Revenue Code, the Commissioner suggests that the Committee may also wish to seek the views of the Secretary of the Treasury. Sincerely yours, CONGRESS 18T SESSION H. R. 10383 IN THE SENATE OF THE UNITED STATES OCTOBER 13, 1971 Read twice and referred to the Committee on the District of Colun bia AN ACT To enable professional individuals and firms in the District of Columbia to obtain the benefits of corporate organization, and to make corresponding changes in the District of Columbia Income and Franchise Tax Act. 1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 3 That this Act shall be known and may be cited as the 4 "District of Columbia Professional Corporation Act". 5 6 DEFINITIONS SEC. 2. As used in this Act, unless the context other 7 wise requires: 8 (a) The term "professional corporation" means a corpo 9 ration organized under this Act solely for the specific pur II 2 1 poses provided under this Act, and which has as its share2 holders only individuals who themselves are duly licensed 3 to render the same professional service as the corporation. 4 (b) The term "professional service" means any type 5 of personal service to the public which may be lawfully 6 rendered only pursuant to a license and which by law, cus7 tom, standards of professional conduct or practice in the 8 District of Columbia, before the effective date of this Act, 9 could not be rendered by a corporation, including without 10 limitation the services performed by certified public account11 ants, attorneys, architects, practitioners of the healing arts, 12 dentists, optometrists, podiatrists, and professional engineers. 13 (c) The term "license" or "licensed" refers to a license, 14 certification, certificate, or registration, or other legal au15 thorization required by law as a condition precedent to the 16 rendering of professional service within the District of 17 Columbia. 18 (d) The term "Council" means the District of Columbia 19 Council or the agent or agents designated by it to perform. 20 any function vested in the Council by this Act. 21 222 223 (e) The term "Commissioner" means the Commis 22 sioner of the District of Columbia or his designated agent. 24 EXEMPTION SEC. 3. This Act shall not apply to any corporation 25 now in existence or hereafter organized which may lawfully 26 render professional services other than pursuant to this Act, |