{"data":{"id":"us/26-cfr-53.4965-1","jurisdiction":"us","citation":"26 CFR 53.4965-1","heading":"-1 Overview.","body":"(a) Entity-level excise tax. Section 4965 imposes two excise taxes with respect to certain tax shelter transactions to which tax-exempt entities are parties. Section 4965(a)(1) imposes an entity-level excise tax on certain tax-exempt entities that are parties to “prohibited tax shelter transactions,” as defined in section 4965(e). See § 53.4965-2 for the discussion of covered tax-exempt entities. See § 53.4965-3 for the definition of prohibited tax shelter transactions. See § 53.4965-4 for the definition of tax-exempt party to a prohibited tax shelter transaction. The entity-level excise tax under section 4965(a)(1) is imposed on a specified percentage of the entity's net income or proceeds that are attributable to the transaction for the relevant tax year (or a period within that tax year). The rate of tax depends on whether the entity knew or had reason to know that the transaction was a prohibited tax shelter transaction at the time the entity became a party to the transaction. See § 53.4965-7(a) for the discussion of the entity-level excise tax under section 4965(a)(1). See § 53.4965-6 for the discussion of “knowing or having reason to know.” See § 53.4965-8 for the definition of net income and proceeds and the standard for allocating net income and proceeds that are attributable to a prohibited tax shelter transaction to various periods.\n(b) Manager-level excise tax. Section 4965(a)(2) imposes a manager-level excise tax on “entity managers,” as defined in section 4965(d), of tax-exempt entities who approve the entity as a party (or otherwise cause the entity to be a party) to a prohibited tax shelter transaction and know or have reason to know, at the time the tax-exempt entity enters into the transaction, that the transaction is a prohibited tax shelter transaction. See § 53.4965-5 for the definition of entity manager and the meaning of “approving or otherwise causing,” and § 53.4965-6 for the discussion of “knowing or having reason to know.” See § 53.4965-7(b) for the discussion of the manager-level excise tax under section 4965(a)(2).\n(c) Effective/applicability dates. See § 53.4965-9 for the discussion of the relevant effective and applicability dates.","path":["Title 26—Internal Revenue","CHAPTER I—INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY","SUBCHAPTER D—MISCELLANEOUS EXCISE TAXES","PART 53—FOUNDATION AND SIMILAR EXCISE TAXES","Subpart K—Second Tier Excise Taxes"],"source_url":"https://www.ecfr.gov/api/versioner/v1/full/2026-08-25/title-26.xml","current_through":"2026-08-25","vintage":"","retrieved_at":"2026-08-27T02:25:11Z","sha256":"a120ec517f9968eb1d39589a4b4a7741efef48f7ada91b788600e00e622df01e","source_id":"us-cfr","stale":true,"prev":"us/26-cfr-53.4963-1","next":"us/26-cfr-53.4965-2"},"notice":"GroundRules: Original legal text. Not legal advice."}