The Commissioner of Internal Revenue appeals from a decision of the United States Tax Court, Herbert L. Chabot, Judge, 45 T.C.Mem. 280 (1982), holding that the taxpayers (appellees) were not liable for federal excise taxes under § 49451 as transferees of taxable expenditures made by a private foundation, i.e. by the board of trustees of a home for elderly men. A Louisiana state court had ordered the transfer of assets from the private foundation to the heirs of the résiduary legatees under a will in which the decedent originally had created the foundation. The Tax Court concluded, contrary to the arguments of the IRS, that the state court judgment operated to terminate the board’s private foundation status and that reports filed by the board subsequent to the transfer satisfied the statutory notice requirements.
For the reasons stated below, we hold that the decision of the Tax Court is not supported by the 1969 Act, particularly in light of its legislative history. We reverse and remand.
I.
The facts, having been stipulated, are not in dispute.
We shall summarize only those facts and prior proceedings believed necessary to an understanding of our rulings on the legal issues raised on this appeal.
Lelia Bonner Dwyer died testate on June 22, 1905. In her will, Mrs. Dwyer directed that the real estate she owned be sold. She further directed that a portion of the proceeds be used by a group of named individuals as trustees to found and maintain in New Orleans a home for aged and infirm men to be called the John M. Bonner Memorial Home (the Home). Mrs. Dwyer’s first cousins in due course became her substitute residuary legatees. They were placed in possession of all property remaining after payment of specific legacies named in Mrs. Dwyer's will. The heirs on this appeal are descendants of those first cousins.
On July 13, 1905, the surviving trustees named in the will organized a charitable corporation known as the Board of Trustees of the John M. Bonner Memorial Home (the Board). The surviving trustees under the will were the trustees of the Board. The Board completed construction of the Home in 1915. The Home operated at a capacity of about twenty resident men until the early 1950’s. During the 1950’s, the number of residents of the Home began to decrease. The Home at this time also experienced financial difficulties. It began to draw upon its endowment to pay operating expenses.
*958In 1963, the heirs sued the Board in the Louisiana Civil District Court. They alleged that the trust had been completely fulfilled and no longer could be operated as originally contemplated. They requested that the trust be dissolved and that the remaining assets be delivered to them. The court’s judgment in favor of the Board and against the heirs was affirmed on appeal. The Court of Appeal of Louisiana, Fourth Circuit, in affirming, pointed out that five men remained in the home and that funds were available to care for them, even though only for a few more years. Bonner v. Board of Trustees, 181 So.2d 255, 258 (La.App.1965), writ denied, 248 La. 915, 182 So.2d 664 (1966).2
In 1970, the Board responded to a letter from the IRS by filing a statement that the Board was a private foundation within the meaning of § 509(a) and claimed that it was an operating foundation within the meaning of § 4942(j)(3).
On July 1, 1971, the Board closed the Home because the cost of operations significantly exceeded the revenues of the trust fund. At that time the Home had only two residents.
In a letter dated July 9, 1971, the IRS notified the Board that it was waiting for promulgation of Treasury Regulations under § 509 before it could rule on the Board’s request for foundation status for the Home. In a letter dated October 5, 1971, the IRS informed the Board that it had been classified as a private foundation under § 509(a) and as an operating foundation under § 4942(j)(3).
On November 5, 1971, the heirs filed a petition in a declaratory judgment action in the Louisiana Civil District Court requesting that the trust be dissolved because of non-performance of the conditions imposed by the donor and that the heirs be declared entitled to the remaining assets. The Board responded that the Home had been closed, it was impractical to continue the trust, and the trust established by Mrs. Dwyer had been fulfilled satisfactorily. The Board left to the court the decision whether the remaining assets should be delivered to the heirs or diverted to another cause under the doctrine of cy pres.3 On December 23, 1971, the court entered its judgment. It agreed with the heirs and ordered the assets distributed to them. One of the trustees concluded and recommended to the Board that the judgment was based on a factual determination and thus there was no basis for an appeal. Accordingly, on January 18 and March 13, 1972, the Board delivered the remaining assets, valued at $200,596, to the heirs in equal parts. After delivery of the assets to the heirs, the Board carried on only minimum ministerial functions.
The Board filed with the IRS a form dated October 24, 1973. This form was known as “Form 966-E Liquidation, Dissolution, Termination or Substantial Contraction of Organizations Exempt or Formerly Exempt under Section 501(a)”. In this form, the Board stated that it had been dissolved and that final distribution of assets had been made. The Board made similar statements in subsequent filings with the IRS.
*959On March 21, 1977, the IRS mailed notices to each of the heirs asserting excise tax liability. The notices stated that the excise tax liability of the heirs resulted from their status as transferees of non-charitable expenditures by a private foundation as provided for in § 4945. The notices asserted liability in the amount of $30,081.28 against each heir-transferee, or a total of $210,568.96.4
In June 1977, the heirs filed petitions in the Tax Court5 challenging the Commissioner’s determination that the Board had incurred § 4945 excise tax liability and his assertion that the heirs were liable as transferees of the Board’s assets.
On December 6,1982, the Tax Court filed its memorandum decision holding that the heirs were not liable as transferees because the Board was not liable for the § 4945 excise tax. Gladney v. Commissioner, 45 T.C.M. 280 (1982).
The Tax Court held that the Board’s private foundation status was terminated upon the entry of the 1971 judgment of the Louisiana Civil District Court and that transfers of assets in accordance with that judgment did not give rise to tax liability. The Tax Court also held that any federal statutory notification requirements were satisfied by the Board’s filings after the distributions of the assets. The Commissioner’s post-decision motions were denied by the Tax Court. He now appeals from that decision and the Bonner heirs cross-appeal.
II.
We turn first to the question of whether the Board terminated its foundation status and notified the IRS so as to avoid liability under § 4945.
Under § 501(c)(3), organizations, like the Home, which provide desirable social and charitable functions, are exempt from federal income taxes. As in any other area where both people and taxes are involved, however, abuses did occur. Prior to the enactment of the 1969 Act, the sole penalty for abuse was the loss of an organization’s exempt status. In §§ 4940-4945 of the 1969 Act, Congress enacted a series of excise taxes designed to regulate the activities of tax exempt organizations.6 Section 4945, the provision before us in this case, imposes taxes on amounts expended by the foundation for other than specified (charitable or the like) purposes.7
*960Under § 507, an organization may terminate its status as a private foundation by notifying the IRS. Under that section, however, a tax is imposed on an organization which has terminated its private foundation status.8
The Tax Court concluded that the Board’s private foundation status was terminated in the instant case upon the entry of the 1971 judgment of the Louisiana Civil District Court. The Tax Court based its conclusion on three facts or circumstances:
“At the time the District Court judgment was entered and the Board determined not to appeal, (1) the Board’s charitable operation had been closed down for about six months, (2) the Board’s section 507(c) tax was zero,[9] and (3) respondent had not taken any public position in furtherance of his statutory obligation under section 507(a)(1) to prescribe by regulations the time and manner in which an organization was to notify respondent of an intention to terminate its private foundation status.”
Gladney v. Commissioner, supra, 45 T.C.M. at 288 (footnote added). In addition to these facts or circumstances, the Tax Court stated that its conclusion was “consistent with the Congress’ clear policy of imposing regulatory-type burdens in exchange for tax benefits”. Id. at 289.
In view of our interpretation of the statutory provisions in question and their underlying purposes, as explained below, we find the circumstances relied on by the Tax Court to be unconvincing, its statement of Congressional policy to be not altogether accurate, and its conclusion to be erroneous.
We shall consider first the facts and circumstances of the case relied on by the Tax Court. The fact that the Board’s charitable operation had been closed for six months prior to the judgment of the Louisiana Civil District Court in our view is irrelevant to the issue before us. We agree with the IRS that “termination” as used in § 507 is a statutory term of art which refers only to the organization’s legal sta*961tus, not to its operational status. The Tax Court ignored this critical distinction.
Turning next to the third factual circumstance relied on by the Tax Court, we hold that the failure of the IRS to promulgate regulations under § 507(a)(1) by the time the Board made the challenged distributions10 did not relieve the Board of its duty under the statutory notice requirement. The statute on its face clearly requires notice before termination of private foundation tax status can take place. The fact is that two years elapsed between the time of the alleged termination (the date of the state court judgment) and the time the Board gave any notice whatsoever. It might be different if the IRS were asserting that the Board’s notice of termination did not conform to regulations which were not as yet promulgated at the time of the notice. That is not this case. Here, by failing to give the Secretary timely notice, in any manner, the Board did not comply with the statutory requirement of § 507.
The final factual circumstance relied on by the Tax Court—that the Board had no § 507(c) tax benefits—dovetails with the court’s interpretation of the policy behind the notice requirement. The court concluded that the policy is to permit the IRS to compute the termination tax under § 507(c), i.e., to impose regulatory type burdens in exchange for tax benefits. That tax would have been zero in this case. If computation of the § 507(c) termination tax were the sole purpose of the notice, then it might be said that only the most slavish reading of the statute would require the taxpayers to pay the excise tax. We hold, however, that the notice requirement, as part of a larger statutory scheme, has other important purposes which the Tax Court wholly overlooked.
The approach of Congress in the private foundation provisions of the 1969 Act, as reflected in the various reporting and notice provisions, was “ ‘to locate and maintain contact with the foundations’ ”. Jackson v. Statler Foundation, 496 F.2d 623, 633 (2d Cir.1974), cert, denied, 420 U.S. 927 (1975), quoting Private Foundations under the Tax Reform Act of 1969, 7 ColumJ.Law & Soc.Prob. 240, 254 (1971). This is reinforced by our independent examination of the legislative history.
The Congressional materials clearly indicate that one purpose of the statutory scheme was to provide the IRS with more information. For example, in explaining the reasons for the change of status provisions, §§ 507-509, the Senate report stated:
“The House and the committee believe that the Internal Revenue Service has been handicapped in evaluating and administering existing laws by the lack of information with respect to many existing organizations.”
S.Rep. No. 552, 91st Cong., 1st Sess. 54, reprinted in 1969 U.S.Code Cong. & Ad. News 2027, 2081.
Another related purpose of the 1969 Act was to enhance regulation of private foundations by the States. For example, the House explained the reasons for the new disclosure and publicity requirements, §§ 6033, 6034, 6104, and 6652, as follows:
“The primary purpose of these requirements is to provide the Internal Revenue Service with information needed to enforce the tax laws. The experience of these past two decades has indicated to your committee that more information is needed, on a more current basis, from more organizations, and that this information must be made available to more people, especially State officials.”
H.R.Rep. No. 413, 91st Cong., 1st Sess. 36, reprinted in 1969 U.S.Code Cong. & Ad. News 1645, 1681. Toward this goal, Congress provided in § 6104(c)(1)(B) that the IRS shall “notify the appropriate State officer of the mailing of a notice of deficiency of tax imposed under section 507 or chapter 41 or 42”. Chapter 42 contains the excise tax provisions, including § 4945 for taxable *962expenditures. The House explained the notice requirement of these provisions as follows.
“In order to facilitate effective enforcement of State common law and statutory requirements regarding exempt organizations, the bill directs the Internal Revenue Service to notify the appropriate State officer (attorney general, tax officer, or other official charged with overseeing charitable organizations) of: ... (3) the mailing of a notice of deficiency regarding the tax described below in “Change of Status” or any of the taxes described above relating to self-dealing, income distributions, business holdings, jeopardizing of charitable purposes, and improper expenditures.”
H.R.Rep. No. 413, supra, at 37, reprinted in 1969 U.S.Code Cong. & Ad.News at 1682.11
In the instant case, the informational purpose of the Congressional plan was thwarted. Untimely notification to the IRS resulted in no notification to State officials that the Board was prepared to turn over its assets to private parties. If State officials had been notified, the State might have intervened in the state court action as parens patriae to protect the charity. Speculation as to what State officials might have done here is not essential to our holding. We find it is sufficient that (1) the Commissioner has shown that a taxable expenditure took place before the Board notified the IRS under § 507 and (2) there is a clear Congressional intent to require private foundations to comply with the information regulations — even a foundation which has no “termination tax” liability. The IRS was unaware of the dissolution of this foundation for two years. To affirm the Tax Court decision and therefore to allow foundations to act without the knowledge of the IRS or State officials would constitute a precedent striking a severe blow at the carefully articulated information purpose of the Congressional plan. We decline to do so.12
Appellees advance two additional arguments. First, they argue that the Board substantially complied with § 507. Second, they argue that the IRS was not prejudiced by the Board’s failure to notify the IRS of its intention to terminate. These closely related arguments are based for the most part on the same mistaken interpretation of the Congressional policy underlying § 507 which the Tax Court relied upon. They can be dismissed in light of the broader legislative history analysis set forth above. We nevertheless add a few comments.
On the issue of substantial compliance, appellees cite Rickey v. United States, 592 F.2d 1251 (5th Cir.1979) (substantial compliance doctrine applicable where taxpayer failed to comply with filing *963date requirements set forth in regulations relating to waiver of § 318 attribution rules). In Rickey, we rejected a “crabbed reading of the Code when the [Congressional] rationale for applying a rule is absent”. Id. at 1258. In the instant case, on the contrary, there is a clear Congressional rationale for applying the notice requirements. In light of the information gathering rationale, after-the-fact notification is not substantial compliance.
On the issue of prejudice, appellees argue that the procedural notification requirement does not relate to the substance of § 507. As explained above, failure to notify the IRS and, indirectly, State officials, does relate to the very heart of the Congressional plan to give these authorities sufficient information.
We find these two arguments, as well as appellees’ other related contentions regarding the applicability of § 4945, to be without merit.
III.
The Bonner appellees present two additional arguments which were not ruled upon by the Tax Court. They are urged upon us as alternative grounds for affirming the judgment of the Tax Court. First, appellees argue that the Bonner Home was a split-interest trust and therefore dissolution of the Home was not subject to the private foundation rules. Second, they argue that application of § 4945 would result in a denial of due process. We shall consider these arguments seriatim.
(A)
Section 4947(a)(2) provides that private foundation excise taxes, including those provided for in § 4945, shall apply to a split interest trust.13 Section 4947(a)(2)(C), however, carves out an exception, namely, that § 4947(a)(2) shall not apply to any amounts transferred to a split-interest trust prior to May 27, 1969. In the instant case, all of the amounts transferred to the Board were transferred prior to May 27, 1969. The Commissioner concedes that, if the Board were a split-interest trust, the private foundation excise taxes would not apply.
Clearly, however, the Board was an exempt organization and thus § 4947 does not apply. The Board represented itself to the IRS for over twenty years as an exempt organization. During that entire period, it was treated as such. For example, in 1950, the Board filed for and received a determination that it was exempt. In 1970, the Board represented that it was an exempt private foundation; in 1971, the IRS notified the Board that it had been classified as such. Moreover, the Board consistently filed reports and returns indicating that it was an exempt organization and a private foundation.
Based on this record, we hold that the Board was not eligible for a § 4947(a)(2) exemption because it was not a split-interest trust for the purposes of the Internal Revenue Code.14
(B)
The Bonner appellees further argue that application of § 4945 here would deprive *964them of vested rights they purportedly obtained in 1905 upon the probate of the Dwyer will. This type of retroactive application, they argue, would violate their Fifth Amendment due process rights.
Both sides assert that this type of private foundation excise tax case is similar to federal estate tax cases and that the reasoning of the federal estate tax cases in the Supreme Court involving the retroactivity issue is relevant. We agree. The federal estate tax case of Fernandez v. Wiener, 326 U.S. 340 (1945), is especially illuminating. In that ease, the Court upheld the inclusion in the husband’s gross estate of the entire value of the community property owned by him and his wife. The Court so held despite the fact that the couple had married and the wife’s rights to the property had “vested” in 1907 — well before the federal estate tax provisions covering community interests were enacted. The wife argued that application of the estate tax provision constituted denial of due process by adding to the concededly valid tax on decedent’s share of the community property a further tax on the one-half interest of the surviving spouse. The Court’s answer, applicable by analogy to the instant case, was as follows:
- “This redistribution of powers and restrictions upon power is brought about by death notwithstanding that the rights in the property subject to these powers and restrictions were in every sense “vested” from the moment the community began. It is enough that death brings about changes in the legal and economic relationships to the property taxed, and the earlier certainty that those changes would occur does not impair the legislá-tive power to recognize them, and to levy a tax on the happening of the event which was their generating source.”
Id. at 356-57. See also United States v. Jacobs, 306 U.S. 363 (1939) (rejecting a similar attack on the constitutionality of a statute imposing estate taxes on the entire property held in joint tenancy).15
With these decisions in mind, we turn now to the constitutional attack on the application of § 4945. Assuming arguendo that appellees did have vested property rights created in 1905 when the Dwyer will was probated,16 their constitutional challenge fails. The dissolution of the trust shifted the interests in the trust assets just as the death of the decedents did to the community property in Fernandez and to the joint tenancy in Jacobs. As in Fernandez and Jacobs, the shift in the instant case took place after enactment of the relevant excise tax statute, i.e., after the enactment of the 1969 Act.
Following the reasoning of the Supreme Court, we hold that the fact that the creation of the “vested” property right took place prior to enactment does not make application of the statute retroactive so as to violate due process.
To summarize: we agree with the Commissioner’s contention that appellees are subject to transferee liability. The mandatory language of the applicable statutes, the overall statutory scheme of private foundation regulation under the 1969 Act, and the Congressional articulation of the policies behind that scheme all require that government officials should have been notified of these transfers.
*965For the reasons set forth above, we reverse the decision of the Tax Court and remand the case to that court for further proceedings according to law.
REVERSED AND REMANDED.