(1) General rule A private foundation shall not be exempt from taxation under section
501 (a) unless its governing instrument includes provisions the effects of which are
(A) to require its income for each taxable year to be distributed at such time and in such manner as not to subject the foundation to tax under section
4942, and
(B) to prohibit the foundation from engaging in any act of self-dealing (as defined in section
4941 (d)), from retaining any excess business holdings (as defined in section
4943 (c)), from making any investments in such manner as to subject the foundation to tax under section
4944, and from making any taxable expenditures (as defined in section
4945 (d)).
(2) Special rules for existing private foundations In the case of any organization organized before January 1, 1970, paragraph (1) shall not apply
(A) to any period after December 31, 1971, during the pendency of any judicial proceeding begun before January 1, 1972, by the private foundation which is necessary to reform, or to excuse such foundation from compliance with, its governing instrument or any other instrument in order to meet the requirements of paragraph (1), and
(B) to any period after the termination of any judicial proceeding described in subparagraph (A) during which its governing instrument or any other instrument does not permit it to meet the requirements of paragraph (1).