### Question
How does EXEMPT ORGANIZATIONS define operating foundation?


### Answer
Under *26 U.S.C. § 4942*, **operating foundation** is defined as:

> any organization—


(A) which makes qualifying distributions (within the meaning of paragraph (1) or (2) of subsection (g)) directly for the active conduct of the activities constituting the purpose or function for which it is organized and operated equal to substantially all of the lesser of—


(i) its adjusted net income (as defined in subsection (f)), or


(ii) its minimum investment return

#### Citation:
  - *26 U.S.C. § 4942*
  - Heading: **Subtitle D-Miscellaneous Excise Taxes > CHAPTER 42-PRIVATE FOUNDATIONS; AND CERTAIN OTHER TAX-EXEMPT ORGANIZATIONS > Subchapter A-Private Foundations**

