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386.355 Acts prohibited -- Policy of state regarding private foundations -- Splitinterest trusts -- Charitable trusts.
(1)
(2)
(3)
In the administration of any trust which is a "private foundation" as defined in
Section 509 of the Internal Revenue Code, a trust for charitable purposes described
in Section 4947(a)(1) of the Internal Revenue Code to the extent that it is treated for
federal tax purposes as such a private foundation, or a "split-interest trust" as
described in Section 4947(a)(2) of the Internal Revenue Code, the following acts are
prohibited:
(a) Engaging in any act of "self-dealing" (as defined in Section 4941(d) of the
Internal Revenue Code) which would give rise to any liability for any tax
imposed by Section 4941 of the Internal Revenue Code;
(b) Retaining any "excess business holdings" (as defined in Section 4943(c) of the
Internal Revenue Code) which would give rise to any liability for any tax
imposed by Section 4943 of the Internal Revenue Code;
(c) Making any investments which would jeopardize the carrying out of any of
the exempt purposes of the trust, within the meaning of Section 4944 of the
Internal Revenue Code, so as to give rise to any liability for any tax imposed
by Section 4944 of the Internal Revenue Code; and
(d) Making any "taxable expenditures" (as defined in Section 4945(d) of the
Internal Revenue Code) which would give rise to any liability for any tax
imposed by Section 4945 of the Internal Revenue Code; provided, however,
that the prohibitions of this subsection shall not apply to split-interest trusts or
to amounts thereof, to the extent that such prohibitions are made inapplicable
thereto by Section 4947 of the Internal Revenue Code.
In the administration of any trust which is a "private foundation" as defined in
Section 509 of the Internal Revenue Code, or a trust for charitable purposes
described in Section 4947(a)(1) of the Internal Revenue Code to the extent that it is
treated for federal tax purposes as such a private foundation, there shall, for the
purposes specified in the governing instrument, be distributed at such time and in
such manner, for each taxable year, amounts of income and principal at least
sufficient to avoid liability for any tax imposed by Section 4942 of the Internal
Revenue Code.
Subsections (1) and (2) of this section express the continuing policy of this state
with respect to charitable trust interests and are enacted to assist such trusts in
maintaining various tax benefits extended to them, and shall apply to all trusts
described therein; provided, however, that subsections (1) and (2) of this section
shall not apply to a trust in existence on July 1, 1972, to the extent that the Attorney
General of this state, the trustor, or any beneficiary of such trust, on or before
November 30, 1972, files with the trustee of such trust a written objection to the
application to such trust of one (1) or more provisions of subsections (1) and (2) of
this section and the trustee receiving such written objection commences an action
on or before December 31, 1972, in the court having jurisdiction over such trust to
reform its governing instrument or any other instrument in order to meet, or to
excuse such trust from compliance with the requirements of subsections (1) and (2)
(4)
(5)
(6)
of this section. If a trustee receiving such written objection shall commence such an
action, the one (1) or more provisions of subsections (1) and (2) of this section
specified in such written objection shall not apply to such trust unless and until such
court determines that their application to such trust is in the best interests of all
parties in interest.
No trustee of a trust to which subsection (1) or (2) of this section is applicable shall
be surcharged for a violation of a prohibition or requirement of said subsections
unless he participated in such violation knowing that it was a violation, nor shall
such a trustee be surcharged if such violation was not willful and was due to
reasonable cause; provided, however, that this subsection does not exonerate a
trustee from any responsibility or liability to which he is subject under any other
rule of law, whether or not duplicated in subsections (1) and (2) of this section.
Except as provided in subsection (4) of this section, nothing in this section shall
impair the rights and powers of the courts or the Attorney General with respect to
any trust.
In furtherance of the continuing policy of this state to assist charitable trust interests
in maintaining various tax benefits extended to them, the provisions of subsections
(1) and (2) of this section shall be deemed to have been in force and effect on
January 1, 1970; provided, however, the provisions of said subsections shall affect a
trust organized before January 1, 1970, only on and after the first day of its first
taxable year (for federal tax purposes) beginning on or after January 1, 1972.
History: Created 1972 Ky. Acts ch. 344, sec. 2.
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