§ 36C-4A-1. Prohibited transactions. - North Carolina Statutes

Article 4A.

Tax Status of CharitableTrusts.

§ 36C‑4A‑1. Prohibited transactions.

(a)        Notwithstanding anyprovisions in the laws of this State or in the governing instrument to thecontrary unless otherwise decreed by a court of competent jurisdiction exceptas provided in subsection (b) of this section, the trust instrument of eachtrust that is a private foundation described in section 509 of the InternalRevenue Code (including each nonexempt charitable trust described in section4947(a)(1) of the Internal Revenue Code that is treated as a privatefoundation) and the trust instrument of each nonexempt split‑interesttrust described in section 4947(a)(2) of the Internal Revenue Code (but only tothe extent that section 508(e) of the Internal Revenue Code is applicable tothe nonexempt split‑interest trust under section 4947(a)(2) of theInternal Revenue Code) is considered to contain the following provisions:"The trust shall make distributions at any time and in any manner as notto subject it to tax under section 4942 of the Internal Revenue Code; the trustshall not engage in any act of self‑dealing which would subject it to taxunder section 4941 of the Internal Revenue Code; the trust shall not retain anyexcess business holdings that would subject it to tax under section 4943 of theInternal Revenue Code; the trust shall not make any investments that wouldsubject it to tax under section 4944 of the Internal Revenue Code; and thetrust shall not make any taxable expenditures that would subject it to taxunder section 4945 of the Internal Revenue Code." With respect to anytrust created before January 1, 1970, this section shall apply only for itstaxable years beginning on or after January 1, 1972.

(b)        Notwithstanding anyprovisions in the laws of this State or in the governing instrument to thecontrary, unless otherwise decreed by a court of competent jurisdiction exceptas provided in subsection (a) of this section, the governing instrument of eachtrust that is a nonexempt charitable trust described in section 4947(a)(1) ofthe Internal Revenue Code is considered to contain the following provisions:

(1)        The trust shall beoperated exclusively for charitable, educational, religious, and scientificpurposes within the meaning of section 501(c)(3) and section 170(c)(2) of theInternal Revenue Code.

(2)        Upon anydissolution, winding up, or liquidation of the trust, its assets shall bedistributed for one or more exempt purposes within the meaning of section501(c)(3) of the Internal Revenue Code, or shall be distributed to the federalgovernment, or a state or local government for a public purpose.

(c)        The trustee of anytrust described in this section may do one of the following:

(1)        Without judicialproceedings, amend the trust to expressly exclude the application of thissection by executing a written amendment to the trust instrument and filing aduplicate original of the amendment with the Attorney General. Upon filing ofthe amendment, this section shall not apply to that trust.

(2)        Institute a proceedingunder Article 2 of this Chapter seeking reformation of the trust instrument. (1971, c. 1136, s. 4; 1977,c. 502, s. 2; 1981 (Reg. Sess., 1982), c. 1210, ss. 1‑3; 2005‑192,s. 2.)