### Question
How is the term operating foundation defined?


### Answer
The term **operating foundation** is defined in *26 U.S.C. § 4942* as the following:

> 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**

